$45M Settlement to Benefit PHH Mortgage Borrowers

PHH Mortgage Corp. has agreed to pay $45 million to resolve claims that it improperly serviced thousands of single-family residential mortgages.

The PHH Mortgage lawsuit was brought by the attorneys general of 49 states and the District of Columbia over allegations that the New Jersey-based mortgage servicer violated the federal Consumer Financial Protection Act and the consumer protection laws of several states.

Among other allegations, the plaintiffs claim that from 2009 through 2012, PHH Mortgage failed to correctly apply borrowers’ payments, charged unauthorized fees, made improper threats of foreclosure, and conveyed mixed messages to borrowers engaged in loss mitigation.

The states further allege PHH Mortgage failed to maintain proper records, failed to properly oversee third-party vendors, and mishandled the preparation, execution and notarization of official documents.

The complaint says PHH Mortgage’s alleged misconduct resulted in “premature and unauthorized foreclosures, violation of homeowners’ rights and protections, and the use of false and deceptive affidavits and other documents.”

Under terms of the settlement, PHH will pay a total amount in excess of $45 million. Of that amount, about $31.5 million will be transferred to a settlement administrator to be distributed among qualifying mortgage debtors who were affected by the mortgage servicing practices at issue.

The rest of the fund will cover the plaintiff states’ attorney fees and costs related to the investigation and litigation, plus an administrative penalty.

According to the consent judgment, payments to qualifying mortgage borrowers will be distributed by a settlement administrator in a manner similar to the way class action settlements are distributed. Claimants will need to file a claim with the settlement administrator to receive payment.

Qualifying borrowers will include those whose homes were sold or taken in foreclosure from Jan. 1, 2009 through Dec. 31, 2012 and whose mortgages were serviced at the time by PHH Mortgage. Other criteria for payment may be established later by an executive committee comprised of government signatories to the settlement.

Settlement benefits will also be available for a few hundred borrowers in New Hampshire, the one U.S. state that was not a plaintiff. That state’s banking commissioner contributed to a review of PHH Mortgage’s servicing practices, according to Law360.

PHH has also agreed to be bound to new mortgage servicing standards that require the company to amend its internal practices. Among the new requirements are compliance testing, internal audits, root cause analyses and corrective action when problems are found, and reports to the executive committee.

The new servicing standards are effective immediately and remain in effect for three years.

PHH Mortgage notes that the settlement does not require the company to admit to any wrongdoing or violations of applicable law.

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The PHH Mortgage Corp. Unlawful Mortgage Servicing Practices Lawsuit is State of Alabama, et al. v. PHH Mortgage Corp., Case No. 1:18-cv-00009, in the U.S. District Court for the District of Columbia.