Green Tree fails 8 servicing compliance tests

Monitor: BofA, Chase, Citi, Ocwen, Wells Fargo pass all tests

(Updated with a statement from Green Tree's parent company, Walter Investment)

The five servicers that were part of the National Mortgage Settlement may have fulfilled their consumer relief obligations in March, but the companies are still required to comply with the settlement’s servicing rules.

The mortgage servicing activities of Bank of America (BAC), JPMorgan Chase (JPM), Citigroup (C), Wells Fargo (WFC), and Ocwen Financial (OCN) and Green Tree Servicing (the two companies that purchased servicing rights from ResCap after the company was reorganized through bankruptcy), are still monitored by the Office of Mortgage Settlement Oversight.

On Wednesday, the monitor of the NMS released the results of its third- and fourth-quarter compliance reports for the six companies that are now under its oversight.

According to the compliance testing results, Bank of America, Chase, Citi, Ocwen and Wells Fargo passed all 29 of the settlement’s required metrics for servicing.

The news wasn’t as good for Green Tree, which failed eight of the tests.

“After extensive testing, I can confirm that Green Tree failed eight metrics,” said Joseph Smith, monitor of the NMS. “These results show that Green Tree must make significant changes to improve its practices and comply with the Settlement.”

Green Tree implemented the settlement’s servicing standards after it acquired approximately 18.5% of the ResCap servicing rights. The NMS compliance testing took place during the fourth quarter of 2013.

According to the report from the monitor, Green Tree failed the following servicing metrics:

Metric 4, which tests whether the servicer accurately stated amounts due from borrowers in proofs of claims filed in bankruptcy proceedings

Metric 5, which tests whether the servicer accurately stated amounts due from borrowers in affidavits filed in support for relief from stay in bankruptcy proceedings

Metric 6, which tests whether loans were delinquent at the time foreclosure was initiated and whether the servicer provided borrower with accurate information in a pre-foreclosure letter

Metric 7, which tests whether the servicer provided borrower with required notifications no later than 14 days prior to referral to foreclosure and whether required notification statements were accurate

Metric 10, which tests whether the servicer waived post-petition fees, charges or expenses when required by the Settlement

Metric 12, which tests whether the servicer has documented policies and procedures in place to oversee third party vendors

Metric 18, which tests whether the servicer responded to government submitted complaints and inquiries from borrowers within 10 business days and provided an update within 30 days

Metric 19, which tests whether the servicer notified the borrower of any missing documents in a loan modification application within five days of receipt

Smith said that his office is currently reviewing actions plans to remedy Green Tree’s failures and will report on the company’s progress in his next report.

Walter Investment Managment Corp. (WAC), which owns Green Tree, issued a statement after the compliance test results were released, saying that it has already begun to address the root causes of the non-compliance. "Green Tree is committed to maintaining a highly compliant environment that focuses on high standards of customer service," Mark O'Brien, chairman and chief executive officer of Walter Investment said. "We are dedicated to addressing these issues in a timely manner and are confident that the implementation of our corrective action plans will result in a positive outcome during our next review cycle."

Overall, Smith said that is office is pleased with the progress made by the other five servicers. Bank of America, Chase, Citi and Wells Fargo all failed between one and three compliance tests during 2013, but all the companies have implemented “corrective action plans” and remedied the root causes of the problems.

“I believe that these results, when compared to my previous reports, show that, under the Settlement, servicers are addressing problems quickly and effectively through focused corrective action plans,” Smith said.

Each of those four companies passed the third- and fourth-quarter tests in all areas. According to Smith, Ocwen has passed all 29 compliance tests in each of its testing periods since taking over for ResCap.

“In February 2014, Ocwen entered into a new consent judgment with the Consumer Financial Protection Bureau and 49 states requiring Ocwen to comply with the NMS servicing standards for its entire loan portfolio. Ocwen has begun to implement NMS servicing standards, and I plan to report on Ocwen’s compliance as it relates to its entire portfolio beginning in the third quarter of 2014,” Smith said in his report.

Smith’s report also noted that his office is currently testing on four new compliance metrics that went into effect in 2014. The four metrics “address concerns related to the loan modification process, single points of contact and billing statement accuracy.”

Smith said that those four metrics “are designed to ensure that the servicers better treat their customers in areas that had not been adequately measured under the original metrics.”

According to Smith’s report, his office reviewed consumer complaints that were filed with the servicer’s executive offices from July 1 to December 31, 2013. Consumers’ complaining that they lacked a single point of contact at their servicer was the issue that received the most total complaints, with nearly 14,000 complaints out of a total of 55,000.

He said that his office’s report results on these four metrics will also be released in the next report.

“While these results are encouraging, work still remains to ensure that the servicers treat their customers fairly,” Smith said. “The majority of my findings suggest that the Settlement is working to hold the servicers accountable to the servicing reforms they agreed to in the NMS. My testing results also show that there is still more work to be done, especially in the case of Green Tree. I look forward to sharing these results in the coming months.”

The entire report can be read here.

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