Attorneys General Keith Ellison of Minnesota and Letitia James of New York are leading a unified delegation of 33 attorneys general in rejecting a proposed lawsuit settlement that would allow PHH Mortgage Corporation and its predecessor corporation, Ocwen Loan Servicing, LLC (collectively “PHH”) to continue profiting from often-illegal payment-processing fees charged to borrowers.
For years, PHH has charged more than 17,000 Minnesota borrowers and over a million borrowers nationally a premium – ranging from $7.50 to $17.50 per payment – exclusively for making their monthly payment by telephone or via their online portal. There is no provision for such payments under any of these borrowers’ mortgage arrangements. When consumers pay by check or set up automated debit transfers, PHH does not impose “processing” charges.
However, PHH will be allowed to charge these payments, up to $19.50 a month, for the remainder of the mortgage, which for certain Minnesotans could be another 20 to 30 years, under the provisions of the negotiated class settlement, which was reached just five months after the suit was filed. Borrowers will receive a pathetic, and for others, intangible, one-time cash reward in return. Furthermore, the alleged settlement aims to sanction these illegal payments by an unwritten, mass modification of the loans, which will be a breach of most states’ laws of scams, a centuries-old legal doctrine that allows land transactions to be written down and signed.
As if turning consumers into benefit centers in defiance of state laws wasn’t bad enough, the current deal ensures that a majority of the cash relief meant for homeowners would now go to PHH. The only recourse for borrowers whose mortgages are already serviced by PHH would be a refund to their account, with late payments being charged before any refund is added to the mortgage’s outstanding total amount. As a consequence, these late fee credits are more of a self-dealing payout to PHH than a means of relieving for the borrower.
Finally, PHH will receive all compensation proceeds that are not allocated to class members’ homeowners. A provision like this in a class-action settlement can give the impression to the courts that the agreement is just in the best interests of the lawyers concerned, not the affected class participants.
In Morris et al. v. PHH Mortgage Corporation, et al., Attorney General Ellison and the coalition filed an amicus brief in U.S. federal court in Florida challenging the planned deal.
