The U.S. Department of Housing and Urban Development (HUD) on Monday announced that it has reached a settlement with PHH Mortgage Corp., a division of the Onity Group, over the alleged imposition of fees for borrowers making payments on their mortgages, which is in violation of Federal Housing Administration (FHA) requirements.
Describing the settlement as “historic,” HUD said in a statement that it “provides the largest reimbursement amount to the most FHA borrowers in HUD’s history.”
“One of the most sacred responsibilities we have at HUD is to ensure inclusive and fair access to housing for all, which includes protecting families with FHA mortgage payments from junk fees,” HUD acting secretary Adrianne Todman said. “This settlement serves as a reminder that HUD will always hold FHA mortgage companies accountable to ensure the people we serve are treated fairly.”
HousingWire reached out to representatives of PHH but did not receive an immediate response.
The settlement does not constitute an admission of fault by either party, HUD explained. It settles allegations that PHH charged fees to borrowers at the time they made a mortgage payment — either over the phone through a representative or through an interactive voice system, or online if the borrower was not enrolled in PHH’s paperless statement program.
“These required payments are sometimes referred to as ‘pay-to-pay’ or ‘convenience’ fees,” HUD said. “Charging these ‘convenience fees’ violates FHA requirements because accepting and processing mortgage payments is considered part of a mortgagee’s ordinary servicing activities for which it is already paid. Therefore, charging a borrower such additional fees is prohibited absent explicit HUD approval — which PHH never sought or obtained.”
The total payout of about $3.7 million will provide restitution to “approximately 51,500 borrowers for 490,000 transactions between May 2021 and February 2023, when PHH ceased charging these fees,” HUD said. Included in the total is $245,000 that PHH will pay HUD for administrative expenses.
“Eligible borrowers who were charged these improper fees will automatically receive either credit to their mortgage account or a check if they no longer have a mortgage serviced by PHH,” HUD explained.
The settlement is part of a broader Biden administration priority to tackle so-called “junk fees” across the financial services industry. HUD added that it “has identified multiple other mortgage servicers that may have charged borrowers fees similar to the PHH fees, and the Department is pursuing reimbursement for those borrowers as well.”
The inauguration of President-elect Donald Trump next week may change some of HUD’s regulatory and enforcement priorities. Trump’s nominee to lead the agency, Scott Turner, will have his Senate confirmation hearing on Thursday, where he will field questions from Democratic and Republican lawmakers.
