The US Department of Housing and Urban Development (HUD) announced a settlement with PHH Mortgage Corporation to resolve allegations that the company violated Federal Housing Administration (FHA) requirements by charging fees to borrowers when the borrower made a mortgage payment.
HUD alleged that PHH charged fees to borrowers when mortgage payments were either made by telephone or online, if the borrower was not enrolled in PHH’s paperless statement program. These required payments were sometimes referred to as “pay-to-pay” or “convenience” fees, but HUD noted that violated FHA requirements because accepting and processing mortgage payments is considered part of a mortgagee’s ordinary servicing activities for which it is already paid. Thus, charging a borrower such additional fees is prohibited without approval from HUD, which the department did not provide to PHH.
While HUD noted the settlement did not constitute an admission of fault or liability by PHH, it nonetheless stated the company will provide restitution of approximately $3.46 million to approximately 51,500 borrowers for 490,000 transactions between May 2021 and February 2023. 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, which is also making an administrative payment of $245,000 to HUD.
