Mortgage Servicer Must Refund Consumers $48M For Array Of Deceptive Practices

Every once in a while government agencies team up to take down unscrupulous operations that prey on financially vulnerable consumers. Such was the case this week when the Consumer Financial Protection Bureau and the Federal Trade Commission took action against a mortgage servicer that engaged in a assortment of deceptive practices often resulting in consumers losing their homes.

The CFPB and FTC announced Tuesday that Minnesota-based Green Tree Servicing agreed to pay $48 million in restitution to victims and a $15 million civil penalty to resolve allegations the company mistreated borrowers.

According to the CFPB complaint [PDF], Green Tree – a national mortgage servicing company specializing in servicing delinquent loans purchased from other lenders – failed to honor modifications for loans transferred from other servicers, demanded payments before providing loss mitigation options, delayed decisions on short sales and harassed and threatened overdue borrowers.

On a number of occasions, the FTC and CFPB allege that Green Tree – which markets itself as a “high touch” servicer making frequent collection calls –  failed to honor loan modifications that consumers had entered into with their prior servicers and insisted that the consumer pay their original, higher monthly payment.

The company also purportedly failed to obtain the information and documentation from the prior servicer that was needed to accurately collect payments from consumers, the complaint states.

Additionally, the servicer allegedly demanded payments before providing loss mitigation options, delayed decisions on short sales, and resorted to illegal practices to collect mortgage payments from consumers who fell behind on their loans, including the use of false threats, repeated calls, and revealing debts to third parties, like employers.

The Bureau and FTC also allege that Green Tree engaged in deceptive tactics to charge consumers convenience fees, such as $12 for a pay-by-phone service called Speedpay.

Green Tree representatives would pressure consumers to use the service by telling consumers that Speedpay was the only available payment method to ensure the payment would be received on time, the complaint states. However, in reality, Green Tree accepted other payment methods that did not involve a fee, such as checks and ACH payments, which consumers could have used to make a timely payment.

In many cases, Green Tree’s failures ultimately led consumers to lose the ability to save or sell their homes.

In addition to providing consumers with $48 million in redress and paying a $15 million civil fine, Green Tree must engage in other efforts to help consumers affected by its illegal practices.

For certain borrowers affected by Green Tree’s unlawful practices who were not foreclosed on, Green Tree must convert in-process loan modifications into permanent modifications and engage in outreach, including telephone and mail campaigns and translation services, to contact borrowers and offer them loss mitigation options. Green Tree must halt the foreclosure process, if one is happening, during the outreach and qualification process for these borrowers.

Under the proposed settlement the company must also create a detailed data integrity program that tests, identifies, and corrects errors in loans transferred to Green Tree to ensure that Green Tree has accurate information about consumers’ loans.

CFPB and Federal Trade Commission Take Action Against Green Tree Servicing for Mistreating Borrowers Trying to Save Their Homes [Consumer Financial Protection Bureau]