HUD settles with PHH over alleged mortgage payments that violated FHA rules

I US Department of Housing and Urban Development (HUD) on Monday announced that it has reached a settlement with Company PHH Mortgage Corp.separation of The Onity Groupover allegations of charging fees to borrowers who default on their loans, which violates the law Federal Housing Administration (FHA) requirements.

Describing the agreement as “historic,” HUD said in a statement that it “provides the largest amount of repayment 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 people, including protecting families with FHA mortgage payments from junk payments,” said HUD Acting Secretary Adrianne Todman. “This settlement is a reminder that HUD will always hold FHA loan companies accountable to ensure that the people we serve are treated fairly.”

HousingWire reached out to PHH representatives but did not receive an immediate response.

The settlement is not an admission of fault by either party, HUD explained. Resolves allegations that PHH charged borrowers fees when they made a mortgage payment – either over the phone through an agent or interactive voice system, or online if the borrower is not enrolled in PHH’s paperless statement program.

“These required payments are sometimes called ‘pay-to-pay’ or ‘convenience money’,” HUD said. “Charging these ‘assistance fees’ violates FHA requirements because accepting and processing mortgage payments is considered part of the normal duties of servicing a mortgagee that has already been paid off. Therefore, charging the borrower such additional fees is prohibited without HUD’s express approval – which PHH never sought or received.”

The $3.7 million total payment will provide refunds to “approximately 51,500 borrowers for 490,000 transactions between May 2021 and February 2023, when PHH stops charging these fees,” HUD said. Included in the entire $245,000 is that PHH will reimburse HUD for administrative costs.

“Eligible borrowers charged these unfair fees will automatically receive a credit to their mortgage or checking account if they no longer have a mortgage serviced by PHH,” HUD explained.

The settlement is part of Biden’s broader priority to address so-called “junk funds” in the financial services industry. HUD added that it has “identified other mortgage servicers that may have charged borrowers fees similar to PHH’s fees, and the Department is pursuing the recovery of 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 have his own The Senate A confirmation hearing is scheduled for Thursday, where he will answer questions from Democratic and Republican lawmakers.

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