The settlement marks the largest reimbursement in HUD history for FHA borrowers, with nearly $3.5 million distributed to over 50,000 individuals.

WASHINGTON - The U.S. Department of Housing and Urban Development (HUD) has announced a landmark settlement with PHH Mortgage Corporation to address allegations of improper fees charged to borrowers. The agreement resolves claims that PHH violated Federal Housing Administration (FHA) regulations by imposing additional charges when borrowers made mortgage payments, resulting in the largest reimbursement to FHA borrowers in HUD’s history.

“Ensuring fair and inclusive access to housing is among HUD’s top priorities, which includes safeguarding FHA borrowers from unnecessary fees,” said HUD Deputy Secretary Adrianne Todman. “This settlement underscores our commitment to holding FHA mortgage servicers accountable and ensuring that families are treated fairly.”

Details of the Settlement

The settlement, which does not constitute an admission of fault by either party, addresses allegations that PHH charged “pay-to-pay” or “convenience” fees to borrowers under the following conditions:

• When making payments over the phone through a representative
• When using an interactive voice response telephone system
• When paying online without enrolling in PHH’s paperless statement program

Under FHA guidelines, mortgage servicers are prohibited from charging such fees unless explicitly approved by HUD. Since processing mortgage payments is considered a routine servicing activity, imposing additional charges without HUD authorization violates FHA regulations.

Restitution and Administrative Payments

Approximately 51,500 borrowers affected by nearly 490,000 transactions between May 2021 and February 2023 will receive restitution totaling an estimated $3,465,000. Additionally, PHH will make a $245,000 administrative payment to HUD. Borrowers who incurred these fees will automatically receive credits to their mortgage accounts or, for those who no longer have a PHH-serviced mortgage, a check.

Broader Implications

This settlement is part of a larger HUD initiative to address and eliminate improper “junk fees” in the mortgage industry. HUD is currently investigating other servicers for similar practices and is working to secure reimbursements for affected borrowers nationwide.

This case highlights HUD’s ongoing efforts to enforce FHA regulations and ensure that borrowers are treated equitably by mortgage servicers.