HSBC, PHH Hit With Class Action Over Unnecessary Mortgage Fees

Last Wednesday in New York, a mortgage borrower filed a class action lawsuit against HSBC Bank USA NA, PHH Mortgage Corp and their affiliates. The plaintiff alleges that the companies made use of an automatic system to charge customers in default unfair mortgage fees for that they deemed as “property protection.”

Lead plaintiff Dawn Tardibuono-Quigley claims that HSBC and PHH worked together with third-party vendors to tack on unauthorized and unnecessary charges as part of the services related to the defaulted loans. Such charges were assessed for broker price opinions (BPOs) as well as property assessments.

Rather than labeling the charges honestly, the plaintiff claims the mortgage companies used vague descriptions on the fees designed to conceal the inappropriate fees from consumers as well as from the courts. They labeled these charges, “New Fees and Charges,” “Other Fees,” Assessed Expenses,” and Tardibuono-Quigley says she found hers named “Auto Ppy Inspec,” “BPOO FLIP” and “BPO Cost.” The plaintiff claims she was charged dozens of times and the fees ranged from $10 to over $100.

When a loan normally does into default, the mortgage contract states that the mortgage servicer will pay for default-related services as needed and it is the buyer’s responsibility to reimburse the servicer. Fees are not permitted to be assessed when they are considered unreasonable or inappropriate, the class action lawsuit says.

According to the HSBC class action lawsuit, the third-party automatic software used by the defendants was essentially programmed to assess various fees at regular intervals as soon as the loan had gone into default. This may have been after a single missed payment.

Taribuono-Quigley claims that after default status is noted on an account, a property inspection is ordered and fees are assessed to the customer. Then, for every 20 to 45 days after the initial inspection, another property inspection will be triggered and assessed to the customer until the borrower is no longer in default.

The Federal Housing Administration says that only one property inspection should occur if payment is not received within 45 days of the due date and the borrower is unable to be contacted. If the inspection shows the property is occupied or confirmed as occupied via another means, then the mortgage servicer will not be reimbursed for further inspections and they are not required.

A similar process is undertaken for BPOs, according to the class action lawsuit. BPOs are conducted every several months, despite the fact that such appraisals quickly become outdated and irrelevant at the time the property is actually facing a foreclosure sale.

With the additional assessment of mortgage fees once the borrower is in default, the borrower becomes deeper and deeper into default and it makes it even harder for borrowers to get current with their loan, the class action lawsuit alleges.

Tardibuono-Quigley, on behalf of all putative Class Members represented by the class action lawsuit, requests an immediate cease of the unwarranted fees practice by the defendants as well as reimbursement for the allegedly illegally-assessed mortgage fees.

Tardibuono-Quigley is represented by Douglas Gregory Blankinship of Finkelstein Blankinship Frei, Pearson & Garber LLP.

The HSBC and PHH Mortgage Fees Class Action Lawsuit is Tardibuono-Quigley v. HSBC Mortgage Corporation (USA), et al., Case No. 7:17-cv-06940, in the U.S. District Court for the Southern District of New York.