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Servicing

CFPB sets enforcement sights on Green Tree

Servicer discloses potential bureau action in securities filing

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Green Tree, a specialty servicer operating under Walter Investment Management Corp. (WAC), faces a potential Consumer Financial Protection Bureau enforcement action, according to a securities filing from its parent company.

WAC noted in its quarterly update that the CFPB sent a notice saying the bureau's staff is contemplating a potential action against Green Tree over alleged violations of federal consumer laws.

The disclosure shared nothing about the nature of the potential violations, and the CFPB was not immediately available to comment. But given Green Tree's role as a servicer — and the CFPB's clear intent to watch servicing transfers closely — the move came at a time when the bureau is gaining its enforcement legs.

WAC told investors that because it was not provided with specific information about the allegations, it's unable to assess the potential impact of the claims at this time. 

Green Tree is the unit reportedly in the CFPB’s sights though.

Walter Investment has already provided documents and other information about its operations to the CFPB and the Federal Trade Commission in response to two civil investigation demands filed in 2010 and 2012.

Walter Investment Management Corp. acquired Green Tree back in July 2011, capturing all of its servicing and origination functions.  

As Walter outlined some of its concerns in the latest filing, Green Tree’s name surfaced frequently when assessing areas of risk. Walter Investment told HousingWire it could not elaborate on any of the firm's regulatory risks beyond what's already disclosed in the quarterly filing.

The firm pointed out that the Federal Housing Finance Agency published a proposal that could eventually restrict certain lender-placed insurance practices on loans purchased by the GSEs. The rules would prevent servicers, such as Green Tree, "from receiving, directly or indirectly, remuneration associated with placing insurance coverage on serviced loans," WAC said.

The proposal also would prevent Green Tree’s insurance agency from obtaining future commissions when placing insurance on GSE loans serviced by the company, the firm added.

"If Green Tree’s insurance agency was prohibited from receiving such sales commissions, the revenues from its insurance businesses could be significantly reduced or eliminated," WAC explained in the filing.

The notice of a potential CFPB enforcement action comes at a time when Walter Investment is already well aware of the risks facing servicers during the loan transfer process.

The company warns investors that the CFPB "is becoming more active in the monitoring of the mortgage origination and servicing sectors."

The Department of Housing and Urban Development Inspector General also subpoenaed documents from WAC related to interest payments on Home Equity Conversion Mortgage loans, or reverse mortgages. The loans in question are serviced or subserviced by Reverse Mortgage Solutions, the firm WAC acquired in 2012.

WAC is responding to that request, but has no further information at this time.

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