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TAMPA -- Walter Investment Management Corp. says it will pay $63 million in fines and restitution related to a federal investigation that claims its mortgage servicer affiliate, Green Tree Servicing, “mistreated” mortgage borrowers trying to save their homes from foreclosure.
Tampa-based Walter, which trades on the NYSE under the symbol WAC, did not admit or deny any of the allegations levied by the Federal Trade Commission and the Consumer Financial Protection Bureau on Tuesday. However, the company says it will pay $48 million to impacted borrowers and a $15 million fine to end the nearly five-year investigation.
“We believe this resolution is in the best interest of Green Tree, our consumers, our clients and our shareholders,” says Mark O'Brien, chair and CEO of Walter Investment, in a filing with the U.S. Securities and Exchange Commission. “As a company, we have been and continue to be committed to properly serving homeowners and helping them remain in their homes. We continue to develop and deploy our best practices in our servicing operations, and believe these standards will serve us well as we partner with our consumers to support them in their goal to achieve sustainable homeownership.”
The FTC and CFPB claims Green Tree 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.
“Green Tree failed consumers who were struggling by prioritizing collecting payments over helping homeowners,” says CFPB Director Richard Cordray in a release. “When homeowners in distress had their mortgages transferred to Green Tree, their previous foreclosure relief plans were not maintained.”
Green Tree is headquartered in St. Paul, Minn., and specializes in servicing delinquent loans, according to federal officials. Besides not providing loss mitigation options -- like short sale service and foreclosure relief -- Green Tree also was accused of calling borrowers whose accounts were delinquent at least two weeks with seven to 20 phone calls per day.
Green Tree also told customers the only way they could pay overdue amounts was through its pay-by-phone service, federal officials say, for which the company collected a $12 fee per transaction.
The $48 million part of the settlement will go to “thousands of consumers” whose loan modifications were not honored, who had short sale decisions delayed, or who were charged convenience fees when paying their mortgage without being told of other no-fee payment options, officials say. Green Tree also must convert in-process loan modifications into permanent modifications, and reach out to those customers to offer loss mitigation options. During that time, Green Tree cannot continue foreclosing on a home until loss mitigation options have been exhausted.
Walter originally disclosed the existence of the settlement in its annual financial filings with the SEC in February. Although it didn't release how much money it would cost the company, it did say those funds would count against its 2014 financials.
Last year Walter reported a loss of $110.3 million, or $2.93 per share, based on revenue of $1.5 billion. That compared to a $253.5 million, or $6.75 per share profit in 2013, on revenue of $1.8 billion.
The settlement was announced Tuesday just before the end of trading. Shares dropped 2 cents to $18, with average trade volume. Share values have ranged between $14.16 and $30.78 over the past year.
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