PHH Mortgage and Servicing Fees
Many homeowners assume that any fees associated with their mortgage will have been outlined in their contract from the get-go — but, as it turns out, this is not always the case. Sometimes mortgage servicing firms end up charging extra fees that were not existent in the original contract, potentially costing homeowners hundreds of extra dollars over time.
Such a case is unfolding in real time, as more than 30 state attorneys general filed a motion in early 2021 against PHH Mortgage and Ocwen Loan Servicing, alleging the company has been charging excessive servicing fees to more than a million consumers.
Here’s more about the situation with PHH Mortgage, as well as some information on what consumers can and should expect when it comes to servicing fees.
What Are Servicing Fees on a Mortgage?
First, it helps to have an understanding of mortgage servicing fees. According to Investopedia, this is a monthly payment — usually around one-fourth to one-half of a percent of the total balance — homeowners make to their mortgage servicer to cover administrative costs like:
- Recording payments
- Collecting payments
- Making escrow payments
- Facilitating payments to the loan owner
The Federal Trade Commission advises borrowers to read each billing statement closely to understand these fees — and to ensure they are legitimate and have been authorized by you or laid out in your mortgage contract. If you come across any fees about which you’re unsure, it’s wise to write to your mortgage servicer to ask about their exact purpose.
PHH Mortgage and Servicing Fees: The Controversy
So, why are 33 states currently involved in a motion against PHH Mortgage and Ocwen Loan Servicing? The attorneys general are pushing back against a proposed class-action lawsuit that would permit the company to make additional money from these payment processing fees, which the office of Keith Ellison — one of the co-sponsors of the motion — alleges are often illegal.
One major takeaway from this ongoing situation is how important it is for homeowners to do their research on mortgage servicers — whether they work with PHH mortgage loans or any one of the many other loan servicing firms out there — and to read their monthly bills closely, keeping an eye open for inexplicable fees. Monthly fees can really add up over time, so it’s important for borrowers to understand where their money is going each month.
PHH Mortgage has already been charging thousands of homeowners in the U.S. monthly fees between $7.50 and $17.50 — even on payments made by phone or online. The states involved in the motion point out that these fees are not spelled out in the mortgage contracts, meaning home buyers could not properly authorize them.
Furthermore, a proposed class action settlement would allow the company to keep charging these fees, or even raise them, for the duration of homeowners’ loans. In exchange, homeowners would get only a small one-time payment that would be applied as a credit to their account — possibly covering late fees rather than actually reducing the principal amount owed.
To put it simply, a bipartisan group of state attorneys general are alleging PHH may have violated the Fair Debt Collection Practices Act by collecting fees not disclosed in homebuyers’ mortgage contracts. This situation affects more than one million borrowers around the country.
The legal situation involving the states attorneys and PHH/Ocwen is currently ongoing, with the company planning to file a brief to refute allegations that they have violated any laws in the process of charging consumers who pay by phone or internet a “convenience fee.” If you are one of the many Americans potentially affected by the outcome of this dispute, stay tuned to understand its impact on your mortgage expenses.