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HUD Reaches Historic Settlement with PHH Mortgage Corporation to Refund Wrongfully Charged Junk Fees

January 13, 2025 / Source: HUD

WASHINGTON – Today, the U.S. Department of Housing and Urban Development (HUD) reached a historic settlement with PHH Mortgage Corporation (PHH) to resolve allegations that PHH unlawfully charged fees to borrowers when the borrower made a mortgage payment – a violation of HUD’s Federal Housing Administration (FHA) requirements. The settlement 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” 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.”

The settlement, which did not constitute an admission of fault or liability by either party, resolves allegations that PHH charged fees to borrowers when the borrower made a mortgage payment: (1) over the phone through a representative: (2) by telephone through an interactive voice response telephone system; or (3) 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. 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 settlement provides restitution to approximately 51,500 borrowers for 490,000 transactions between May 2021 and February 2023, when PHH ceased charging these fees. HUD estimates the total amount of restitution to be approximately $3,465,000. In addition, PHH will make an administrative payment of $245,000 to HUD. 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.

The settlement with PHH is occurring within the context of a broader HUD enforcement effort against junk fees across the industry. HUD 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.

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