As the name suggests, Green Tree Servicing was supposed to service homeowners’ mortgages by collecting and crediting monthly payments. But according to a $63 million settlement announced by the FTC and CFPB, rather than service, Green Tree gave many homeowners the business.

Mortgages are often transferred during the life of a loan, so consumers may find themselves locked in a relationship with a servicer they didn’t select – and with no opportunity to shop around. Green Tree was a big name in servicing loans for manufactured housing, but recently made a major move into the residential market. It billed itself as a “high-touch servicer” – a euphemism for a company that places frequent collection calls in an effort to get people to make timely payments. With that strategy, it’s not surprising that Green Tree acquired the mortgages of a proportionally higher percentage of people already in financial trouble. For many of those cash-strapped consumers, that’s when things went from bad to worse.

According to the lawsuit, when homeowners were even just one day late with their payments, Green Tree’s collectors often unleashed a barrage of phone calls, some starting as early as 5 in the morning or continuing until as late as 11PM. The collectors didn’t limit themselves to home phones, getting some people in trouble by calling them at work. They illegally threatened them with arrest or imprisonment, used obscene language, and mocked the problems that led to their financial distress. (One collector said to a woman, “You should leave your husband if he can’t provide for you.”) Green Tree’s loose-lipped collectors were known to discuss people’s debts with bosses, co-workers, neighbors, and family.

When borrowers sought options like loan modifications or short sales, Green Tree allegedly mishandled many of those requests, leaving consumers in even worse straits. For example, some homeowners were in the process of finalizing loan modifications with other servicers when their mortgages were suddenly transferred to Green Tree. Rather than honoring those arrangements, Green Tree often yanked that lifeline from people struggling to stay afloat. Others were told they’d have to pony up payment before they could even be considered for certain loan modification programs – an illogical (and often illegal) requirement for folks who had already sent out a financial SOS. In addition, the lawsuit charges that when homeowners tried to get a short sale approved, Green Tree said it would respond within a set period – say, 30 days. But Green Tree dragged its feet, sometimes taking as long as six months to respond. As a result, people faced foreclosures that could have been avoided.

According to the complaint, even when managing homeowners’ accounts and payments – the bread and butter of a mortgage servicer – Green Tree often overcharged people. For example, Green Tree knew or had reason to know that some borrowers had received loan modifications from their former servicers, but went ahead and insisted on the original amount. And in numerous cases, Green Tree pressured people to use a method called Speedpay, which the company falsely claimed or implied was the only way to make a payment or the sole choice to avoid a late fee. Using Speedpay cost a $12 “convenience” fee per transaction – but convenient for whom? Not necessarily consumers, many of whom could have used free methods and still avoided late fees.

The lawsuit also alleges Green Tree helped itself to payments from consumers’ bank accounts without their authorization. For example, homeowners who gave Green Tree their account numbers to set up a one-time payment through Speedpay later discovered the company had used the information to arrange for additional payments without their consent.

Green Tree also was aware that specific portfolios it acquired from other servicers contained unreliable data. But when homeowners spoke up to dispute the misinformation, Green Tree left them in collections without adequately investigating discrepancies. In a similar vein, Green Tree reported unfavorable information about homeowners to credit bureaus, even when the company had reason to know the data was inaccurate.

The $63 million settlement is a start, but what’s being done to protect consumers from underhanded tactics from here on in? Among other things, the order requires Green Tree to implement a home preservation plan to offer options to consumers whose loans were transferred to the company during the time covered by the complaint. In the future, when Green Tree is involved in the sale or transfer of servicing rights, requests for help – like short sales or assistance with loan modification programs – will have to be properly reviewed and agreements honored. What about those long delays? The company has to have people and technology in place to respond quickly to customer inquiries, including questions about options for avoiding foreclosure. Green Tree also has to stop collections of disputed amounts until it investigates and provides consumers with verification of what they owe.

When the company has reason to believe that information in newly transferred loan portfolios is iffy, Green Tree has to get proof of what consumers really owe. In addition, Green Tree will maintain a comprehensive data integrity program to help ensure the accuracy of information about customers’ accounts. The settlement also prohibits material misrepresentations about loans, payments, and fees, and mandates compliance with the Fair Debt Collection Practices Act, the Fair Credit Reporting Act, and the Real Estate Settlement Procedures Act.

What’s the message for others in the industry?

• There’s a reason it’s called servicing. Mortgage servicers have an obligation to provide service to homeowners. That rules out misleading statements about what people owe, deceptive delays, and unauthorized withdrawals from their accounts.

• The loan servicing process depends on accuracy at all stages. Inaccurate servicing practices can throw homeowners into a spin cycle with far-reaching consequences, including errors on their credit reports that can haunt them for years. The Green Tree case underscores that accuracy is essential at every step of the process.
• Deceptive, unfair and abusive debt collection practices are out of bounds. The law provides procedures for collecting debts, but high-pressure tactics, baseless threats, incessant phone calls, and the disclosure of information to employers, relatives, and friends are on the DON’T list.
• The FTC and CFPB are united in their commitment to protect consumers in financial distress. It’s no coincidence that the action against Green Tree was brought through the cooperative efforts of the FTC and CFPB. The agencies coordinate their activities to make efficient use of resources. In appropriate cases – for example, the $63 million Green Tree settlement – that may include joint law enforcement.