Problem Solver: Mortgage switch leads to confusion, foreclosure order

After GMAC sold Lisa Encarnacion's mortgage to Green Tree Servicing, things went wrong

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In the almost two decades GMAC serviced Lisa Encarnacion's mortgage, the Hoffman Estates resident never had a problem.

Then her mortgage was sold to Green Tree Servicing in February. Things quickly began to unravel.

Encarnacion said she sent Green Tree proof of her homeowners insurance and was told not to worry. Green Tree would put her insurance payments in escrow then directly pay her policy with American Family Insurance.

In April, she received a letter from American Family saying Green Tree hadn't paid. Encarnacion said she called Green Tree again and was told she had been given the wrong information — she should pay American Family directly for her homeowners insurance.

Once again, she was asked for proof that her condominium was insured. Once again, her insurance agent faxed it to Green Tree, she said.

In early July, Green Tree sent her a letter saying her mortgage was in default. The letter said Green Tree was going to initiate foreclosure procedures. Immediately, Encarnacion called Green Tree, she said.

She was told that her last three mortgage payments were considered partial payments because Green Tree did not have proof that her townhouse was insured. Without proof of insurance, Green Tree began charging an additional $500 per month for a "force-placed policy," an insurance policy set up through Green Tree to make sure the property was protected.

In the months that followed, Encarnacion spoke repeatedly to Green Tree, she said. Each time she was asked to provide proof of insurance, and each time she or her insurance agent faxed over the requested documents, she said.

To avoid foreclosure, she paid Green Tree an additional $1,000 for insurance. Encarnacion said she was told the $1,000 would be refunded once she provided the proper proof of coverage.

Encarnacion said she faxed Green Tree proof that her condo was covered at least eight times.

By mid-August, her account remained in disarray, so she emailed What's Your Problem?

She said she had no idea if Green Tree had the document it needed, or whether she would receive her $1,000 back.

"This is just insane," she said. "From a financial standpoint, you want to know what your mortgage payment is going to be."

The Problem Solver contacted Whitney Finch, vice president of investor relations for Walter Investment Management Corp., which owns Green Tree Servicing.

Finch quickly got to the bottom of things.

She said there seemed to some confusion over the type of insurance Encarnacion was being asked to verify.

Because Encarnacion's home is a condominium, there are two insurance policies on the property — a policy that covers the contents of the unit, and another that covers the structure itself. The second policy is purchased by the condo association, which Encarnacion pays for through her association fees.

Repeatedly, Encarnacion sent proof of the first policy, covering the contents, when Green Tree needed proof of the second policy, called a "group master policy," Finch said.

Finch forwarded the Problem Solver four letters that Green Tree sent to Encarnacion in March and April asking for proof of insurance. One of the letters states she sent proof of the wrong insurance, the other three refer to the group master policy in a footnote.

After the Problem Solver inquired about the case, Green Tree asked its third-party insurance vendor to do some additional research, Finch said.

The vendor searched its database and found a group master policy for Encarnacion's building, Finch said. The vendor then called the insurer to confirm the policy covered Encarnacion's unit.

"As a result, the force-placed policy is being canceled in its entirety," Finch said. "The cancellation and corresponding removal of charges is being processed and a refund of amounts paid will be credited to Ms. Encarnacion's account. Green Tree truly regrets any inconvenience this misunderstanding may have caused Ms. Encarnacion."

Encarnacion said she is relieved the situation has been resolved but said she was told repeatedly by Green Tree representatives to fax a copy of her American Family insurance policy, not the group policy.

"All they were asking me for … was the homeowners insurance," she said. "They always told me they lost it or didn't have it."

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