A coalition of 33 state attorneys general filed a motion against PHH Mortgage and its predecessor Ocwen Loan Servicing for allegedly charging unlawful servicing fees to nearly 1 million borrowers.
The attorneys general, co-led by New York’s Letitia James and Minnesota’s Keith Ellison, are opposing a proposed class action settlement that would permit PHH to profit from mortgage payment processing fees made by phone or online and would allow PHH to increase the fees for the remaining life of the loan.
The motion states the proposed settlement was carried out too quickly, under the pandemic’s extenuating circumstances and estimates PHH charged the 1 million homeowners somewhere between $7.50 to $17.50 in each monthly statement. If allowed, PHH could raise this fee to $19.50 per month.
In a Friday brief, the coalition alleged the charges by PHH are “illegal” and “improper” because the authorization of these fees cannot be found in the mortgage contracts. With that scrutiny, PHH would be violating the Fair Debt Collection Practices Act (FDCPA) were the CFPB to conclude that PHH is essentially a “debt collector.”
“PHH’s sole purpose is to collect and process homeowners’ payments, which it already makes millions of dollars from each year. In the 21st century, when most Americans pay their bills online or by phone, to charge fees on top of what they are already being paid is not only unethical, but unlawful,” James said in a statement.
Both Ocwen and PHH have come under legal fire in recent years, after a 2017 cease-and-desist order prohibited the acquisition of new mortgage servicing rights and the origination of mortgage loans by subsidiary Ocwen Loan Servicing until the company was “able to prove it can appropriately manage its consumer mortgage escrow accounts.”
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Then, the CFPB announced that it was suing Ocwen for “failing borrowers at every stage of the mortgage servicing process.”
Ocwen then spent the next several months settling lawsuits with the 31 states that took action against it. The cumulation of legal action from the states and the CFPB nearly put Ocwen out of business.
PHH denied the allegation made by the 33 AGs.
“We strongly disagree with the arguments raised by the Attorneys General, and we look forward to filing our responsive brief to refute those arguments and to assert our belief that PHH has not violated any applicable laws, ” a spokesperson from Ocwen told HousingWire
“PHH’s actions are in compliance with a 2018 consent order (executed by 32 of the 33 Attorneys General joining the amicus brief), which sets forth the specific requirements PHH was to follow to charge borrowers convenience fees for using optional expedited payment methods.
These one-time payment methods are optional and, prior to making a payment, PHH discloses to the borrower the fee amount as well as other payment methods available that do not require a fee or require a lesser fee. We believe that the proposed settlement, which is substantially similar to a prior class action settlement approved by a federal court less than two years ago, resolves the disputed legal claims and is in the best interests of the borrower class,” the spokesperson said.