A national mortgage servicing company will pay $63 million to resolve Federal Trade Commission and Consumer Financial Protection Bureau charges that it harmed homeowners with illegal loan servicing and debt collection practices.
The FTC and CFPB allege that Green Tree Servicing LLC made illegal and abusive debt collection calls to consumers, misrepresented the amounts people owed and failed to honor loan modification agreements between consumers and their previous servicers.
Under the proposed settlement, Green Tree will pay $48 million to affected consumers and a $15 million civil penalty. The company also will stop its alleged illegal practices, create a home preservation plan for some distressed homeowners, and take rigorous steps to ensure that it collects the correct amounts from consumers.
Green Tree has become the servicer for a large number of consumers who were behind on their mortgage payments at the time their loans were transferred to Green Tree. Because homeowners cannot choose their servicer, they are locked into a relationship with the company for as long as it services their loans.
According to the FTC and the CFPB, Green Trees collectors called consumers who were late on mortgage payments many times per day, including at 5 a.m. or 11 p.m., or at their workplace, every day, week after week, and left many voicemails on the same day.
They also allegedly unlawfully threatened consumers with arrest or imprisonment, seizure of property, garnishment of wages, foreclosure and used abusive language. The company also allegedly revealed debts to consumers employers, co-workers, neighbors and family members, and encouraged them to tell the consumers to pay the debt or help them pay it. The complaint further alleges that Green Tree took payments from some consumers bank accounts without consent.
The agencies allege that Green Tree pressured consumers to make payments via Speedpay, a third-party service that charges a $12 convenience fee per transaction, claiming it was the only way to pay, or that consumers had to use the service to avoid a late fee.
According to the complaint, in many cases, Green Tree failed to honor loan modifications that were in the process of being finalized when consumers loans were transferred from other servicers to Green Tree. This resulted in consumers making higher monthly payments, receiving collection calls, and even losing their homes to foreclosure. Green Tree also allegedly misled consumers about their loss mitigation options.
The company told some consumers who were behind on their mortgages that they needed to make a payment to be considered for a loan modification, even for programs that prohibited the company from requiring up-front payments. In addition, Green Tree took up to six months to respond to consumers short sale requests despite telling them it would respond much more quickly. These delays caused consumers to lose potential buyers, miss other loss mitigation options, and face foreclosures they could have avoided.
Green Tree officials were not immediately available for comment on the settlement.
Misrepresented Account Status to Consumers and Credit Reporting Agencies
According to the complaint, Green Tree also misrepresented the amounts consumers owed or the terms of their loans. This included telling consumers they owed fees they did not owe, or that they had to make higher monthly payments than their mortgage contracts required.
The company often knew or had reason to believe that specific portfolios of loans it acquired from other servicers contained unreliable or missing information. In many instances, it should have known that consumers had loan modifications from prior servicers and therefore owed lower amounts. And when consumers disputed the amounts owed or terms of their loans, Green Tree failed to investigate the disputes before continuing collections.
Green Tree also allegedly furnished consumers credit information to consumer reporting agencies when it knew, or had reasonable cause to believe, that the information was inaccurate, and failed to correct the information after determining that it was incomplete or inaccurate often when consumers told Green Tree about it.
Proposed Settlement Order
In addition to the $63 million in monetary payments, the settlement order includes provisions that require Green Tree to:
- establish and maintain a comprehensive data integrity program to ensure the accuracy and completeness of data and other information about consumers accounts, before servicing them;
- cease collection of amounts disputed by consumers until Green Tree investigates the dispute and provides consumers with verification of the amounts owed;
- meet certain loan servicing requirements to ensure that whenever Green Tree is involved in the sale or transfer of servicing rights, the buyer or transferee will honor loss mitigation agreements and properly review outstanding loss mitigation requests;
- ensure that it has enough personnel and the technical capacity to handle loss mitigation requests and respond to consumer inquiries in a timely fashion, and make its loss mitigation application available to consumers at no cost and on its website;
- implement a Home Preservation Requirement to provide loss mitigation options to consumers whose loans were transferred to Green Tree during the time period covered by the complaint; and
- obtain substantiation for any amounts collected when consumers have in-process loan modifications, and for purported amounts due when there is reason to believe a newly transferred loan portfolio is seriously flawed.
The settlement also prohibits Green Tree from making material misrepresentations about loans, processing procedures, payment methods, and fees, from taking unauthorized withdrawals from consumer accounts, and from violating the Fair Debt Collection Practices Act, the Fair Credit Reporting Act and the Real Estate Settlement Procedures Act.