HUD settles with PHH over alleged mortgage payment charges that violate FHA rules

The U.S. Department of Housing and Urban Development (HUD) announced Monday that it has reached a settlement PHH Mortgage Corp.a department of the Onity groupabout the alleged imposition of fees on borrowers making payments on their mortgages, in violation of Federal Housing Administration (FHA) Requirements.

HUD described the settlement as “historic” and said in a statement that it “provides the largest repayment amount to the most FHA borrowers in HUD history.”

“One of the most sacred responsibilities we have at HUD is to ensure inclusive and equitable access to housing for all, including protecting families with FHA mortgage payments from junk costs,” said HUD Acting Secretary Adrianne Todman. “This settlement serves as a reminder that HUD will always hold FHA mortgage companies accountable to ensure that the people we serve are treated fairly.”

HousingWire contacted PHH representatives but did not immediately receive a response.

The settlement does not involve an admission of guilt by either party, HUD explained. It settles allegations that PHH charged borrowers fees at the time they made a mortgage payment – ​​either over the telephone 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 regular servicing activities that have already been paid for. Therefore, charging such additional fees to a borrower is prohibited without explicit HUD approval – which PHH has never requested or obtained.”

The total payout of about $3.7 million will provide refunds to “approximately 51,500 borrowers for 490,000 transactions between May 2021 and February 2023, when PHH stopped charging these fees,” according to HUD. Included in the total is $245,000 that PHH will pay HUD for administrative costs.

“Eligible borrowers who have been charged these improper fees will automatically receive credit to their mortgage account or a check if they no longer have a mortgage serviced by PHH,” HUD explains.

The settlement is part of a broader Biden administration priority to address so-called “junk fees” in the financial services industry. HUD added that it has “identified several other mortgage servicers that may have charged borrowers fees similar to PHH fees, and the Department is also pursuing reimbursement for those borrowers.”

The inauguration of President-elect Donald Trump next week could change some of HUD’s regulatory and enforcement priorities. Trump’s nominee to lead the agency, Scott Turner, will get his Senate He will face a confirmation hearing on Thursday, where he will answer questions from Democratic and Republican lawmakers.