MoodyÕ warns on Green Tree after servicing failures

Performance could hamper business with GSEs

When the Office of Mortgage Settlement Oversight released its latest compliance report, the news wasn’t good for Green Tree Servicing. According to the report from Joseph Smith, the monitor of the National Mortgage Settlement, Green Tree failed eight of the settlement’s 29 metrics for mortgage servicing.

By contrast, Bank of America (BAC), JPMorgan Chase (JPM), Citigroup (C), Wells Fargo (WFC), and Ocwen Financial (OCN) each passed all 29 of the mortgage servicing metrics. Further, the impact on residential mortgage-backed security pools is expected to be minimal.

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

Analysts from Moody’s Investors Service now say that those changes need to happen quickly or Green Tree’s business will suffer. “The test results could hamper Green Tree’s ability to grow its business through mortgage servicing rights purchases in the short term and could also give the government-sponsored enterprises pause when approving future transfers of servicing to Green Tree, depending on the success of its corrective action plan,” Moody’s analysts say.

Green Tree, which is owned by Walter Investment Management Corp. (WAC), obtained approximately 18.5% of ResCap’s servicing rights when the company was reorganized through bankruptcy.

When the OMSO compliance report was released, Walter’s chairman and CEO Mark O’Brien said, “Green Tree is committed to maintaining a highly compliant environment that focuses on high standards of customer service. 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."

Smith said that his office will work with Green Tree to remedy its servicing failures through corrective action plans.

But Moody's says that the test results could stall Green Tree’s business growth in the next six to nine months if it doesn't address the failures quickly. Moody's notes that the servicing failures “will not directly affect RMBS cash flows or credit quality” because the OMSO review only covers mortgage servicing rights obtained from ResCap in 2013.  


“However, from operational and regulatory perspectives, Green Tree’s failures raise concerns about its ability to service loans subject to the NMS,” Moody’s says. Moody’s notes that Green Tree could face fines if it fails to “adequately address the issues.”

Moody’s also notes that the other servicers failed some of the settlement’s requirements in previous testing periods but were able to address their respective issues and subsequently pass all of the required metrics in later testing periods. 

Read the full report from the OMSO here

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