HUD, PHH Mortgage Settle Junk Fees Accusation
PHH Mortgage Corp. settled with the U.S. Department of Housing and Urban Development to resolve allegations of illegal “pay-to-pay” charges.
HUD accused PHH of unlawfully charging fees to borrowers making a mortgage payment, violating requirements laid out by the Federal Housing Administration.
Specifically, HUD says PHH charged borrowers making a payment over the phone (both with a representative and through automated systems) and online if the borrower was not enrolled in the company’s paperless program.
These kinds of charges are known as “pay-to-pay” or “convenience” fees, which the FHA prohibits because processing mortgage payments is considered part of a mortgagee’s ordinary servicing activities.
PHH will distribute nearly $3.5 million to more than 51,000 people.
This is the largest reimbursement in HUD’s history, impacting more FHA borrowers than ever before. Impacted borrowers will automatically receive either credit to their mortgage account or a check if they no longer have a mortgage serviced by PHH.
PHH will also make an administrative payment of $245,000 to HUD.
“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,” said HUD Agency Head Adrianne Todman.
“This settlement serves as a reminder that HUD will always hold FHA mortgage companies accountable to ensure the people we serve are treated fairly.”
PHH does not admit fault or liability with this settlement but it resolves the allegations.
Mortgage “junk fees” have been under close scrutiny recently.
The Consumer Financial Protection Bureau began investigating them in May 2024, saying they violate the law and push homeownership farther out of reach at a time of extreme unaffordability.
“The CFPB is looking for ways to reduce anti-competitive fees that harm both homebuyers and lenders,” CFPB director Rohit Chopra commented.
The Mortgage Bankers Association has suggested that, while it supports eliminating excessive fees, many of the services they cover are legally required.
“Many of those disclosed costs, such as title, appraisal, and credit reports are required by federal statutes, safety and soundness guidelines, and the Federal Housing Administration, Department of Veterans Affairs, and Fannie Mae and Freddie Mac as a condition of buying and insuring a mortgage,” MBA wrote in reaction to the CFPB’s investigation.
“Moreover, the services these fees cover mitigate risk for taxpayers and borrowers alike.”
PHH Mortgage Corp. is a national mortgage lender offering government-backed loans, conventional loans, and home equity lines of credit, plus 90-day rate locks and a close-on-time guarantee. It is a division of the Onity Group.