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Fitch: Green Tree Servicing Moved to ‘Rating Watch Negative’

One of the country's biggest credit ratings agencies has put Green Tree Servicing on negative watch following a report that the company failed several compliance metrics established by the 2012 National Mortgage Settlement (NMS).

In a releaseFitch Ratings announced it is changing Green Tree's servicer grades to "Rating Watch Negative," citing "ongoing concerns with Green Tree's rapid growth and portfolio integration" as well as the results of the latest compliance update from the Office of the Mortgage Settlement Oversight (OSMO), which showed the servicer failed to meet some of the minimum requirements agreed to by some of the nation’s biggest outfits.

Green Tree joined those ranks last year when parent company Walter Investment Management Corp. acquired servicing rights on part of a portfolio formerly held by Residential Capital.

In a statement at the time, Mark J. O'Brien, CEO of Walter Investment, said the firm "is committed to maintaining a highly compliant environment that focuses on high standards of customer service," adding that the servicer will work to address and correct any problem areas in a timely manner.

However, Fitch still has its doubts, saying the OSMO report "indicates some procedures and controls challenges in [Green Tree's] servicing of the recently acquired Residential Capital LLC (ResCap) loans."

Fitch's update follows an April announcement in which the agency assigned Green Tree a Negative Outlook based partly on the company's growth and on higher servicing expectations from regulators.

At the same time, Fitch notes that Green Tree's implementation of the NMS standards happened on an accelerated schedule compared to the other firms reviewed, which may have contributed to any failures on its part.

As of the end of the first quarter, Fitch estimates Green Tree's servicing portfolio consisted of nearly 1.9 million loans with an unpaid principal balance of $196 billion. Approximately 14 percent of that portfolio is subject to OSMO oversight, according to Fitch.

The rating watch was applied to six of Green Tree's products, including prime and subprime, and indicates “that there is a heightened probability of a rating change and the likely direction of such a change,” Fitch says.

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