33 states go after Ocwen/PHH Mortgage over servicing fees
Brief alleges servicer charged illegal fees to 1 million homeowners
FEB 2, 2021 | REPUBLISHED BY LIT: FEB 3, 2021
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.”
Attorney General James Leads Bipartisan Coalition Fighting to Protect Nearly One Million Homeowners from Unlawful Fees
Mortgage Servicing Class Action Settlement Violates Most States’ Laws and
Provides Windfall for Mortgage Servicer Instead of Homeowners
NEW YORK – New York Attorney General Letitia James today co-led a bipartisan coalition of 33 attorneys general in opposing a proposed class action settlement that would permit a mortgage servicer to profit from illegal payment processing fees charged to homeowners making normal mortgage payments online or by phone.
Attorney General James co-leads the coalition in filing a motion for leave to file an amicus brief, opposing the proposed settlement in Morris et al. v. PHH Mortgage Corporation, et al., where mortgage servicer PHH Mortgage Corporation and its predecessor corporation, Ocwen Loan Servicing, LLC (collectively PHH), would be able to continue to profit from illegal processing fees the company has been charging to nearly one million homeowners nationwide, including more than 74,000 homeowners residing in New York state alone.
“When Americans utilize online or phone payments to pay off their monthly mortgages, PHH benefits, but instead of passing those savings on to homeowners PHH charged illegal fees and increased costs for nearly one million Americans,” said Attorney General James.
“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. A bipartisan coalition is standing up and fighting back against this backwards settlement because we will always fight to protect the wallets of our states’ residents.”
For years, PHH charged nearly one million homeowners an illegal fee — ranging from $7.50 to $17.50 — each time a homeowner made a monthly mortgage payment online or by phone, despite most Americans paying their mortgages one of these two ways.
Nowhere in these homeowners’ mortgage contracts is there authorization for such fees and PHH does not charge “processing” fees for any other customers, including those who pay by check or those who set up automatic debit payments.
Charging fees not mentioned in the mortgage contract is illegal and, under New York’s mortgage servicing regulations, explicitly forbidden.
Under the terms of PHH’s proposed settlement — which was hastily entered into only five months after the complaint was filed — PHH will not only be permitted to continue to charge these illegal fees, but will be able to actually increase fees — up to $19.50 per month — for the remaining life of the loan, which, for many homeowners, could be another 20 to 30 years.
In exchange, homeowners will receive a paltry, and for some, illusory, one-time monetary payment. Further, the proposed settlement seeks to authorize these unlawful fees through an unwritten, mass amendment of the mortgages — a violation of most states’ statutes of frauds, a centuries old legal doctrine that requires contracts related to property to be in writing and signed by the parties.
This unwritten, mass amendment also means PHH will evade many states’ recording requirements for modified mortgages, resulting in confusion and enabling PHH to avoid state and local recording fees.
Additionally, Attorney General James leads the coalition in objecting to the inadequacy of the monetary relief, as the proposed settlement is designed to ensure that a portion of the monetary relief intended for homeowners will actually end up in PHH’s hands.
Homeowners whose loans are still serviced by PHH will not receive any direct monetary payments for prior unlawful payments received by PHH. Instead, these homeowners will only receive a credit to their account that will only be applied to the unpaid principal balance of the mortgage after any late fees are first paid — costing homeowners more in the end.
Moreover, any settlement funds not distributed to the class member homeowners will be returned to PHH, ensuring the settlement further benefits PHH and not impacted class members.
Joining Attorney General James in co-leading today’s filing is Minnesota Attorney General Keith Ellison.
Joining Attorneys General James and Ellison in filing today’s amicus request is a bipartisan coalition of attorneys general from Alaska, Arizona, California, Colorado, Connecticut, Delaware, Florida, Hawaii, Idaho, Illinois, Indiana, Iowa, Maine, Maryland, Massachusetts, Michigan, Nebraska, Nevada, New Hampshire, New Mexico, North Carolina, Ohio, Oklahoma, Oregon, Pennsylvania, Rhode Island, Vermont, Virginia, Washington, West Virginia, and the District of Columbia.
This matter was handled by Assistant Attorney General Elizabeth M. Lynch, under the supervision of Consumer Frauds and Protection Bureau Chief Jane M. Azia and Deputy Bureau Chief Laura J. Levine, as well as Deputy Solicitor General Steven C. Wu of the Division for Appeals and Opinions. The Consumer Frauds and Protection Bureau is a part of the Division for Economic Justice, which is overseen by Chief Deputy Attorney General Chris D’Angelo and First Deputy Attorney General Jennifer Levy.