Pay-to-Pay Class Action Against PHH Mortgage Corp. Bumped to Texas Fed. Court

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A proposed class action filed in July against PHH Mortgage Corporation has been transferred from New Jersey to the U.S. District Court for the Southern District of Texas.

Filed July 17 and transferred on November 24, the 18-page lawsuit alleges PHH, as the successor by merger to Ocwen Loan Servicing, ran afoul of Texas debt collection law and breached its contracts with borrowers by charging between $10 and $19.50 for making mortgage payments online or by phone. 

Per the case, “only a small fraction” of this extracurricular fee is passed on to a third-party payment processor, with the rest pocketed as profit by PHH, one of the largest mortgage originators and servicers in the country. 

“PHH abuses its position as a mortgage servicer by charging Pay-to-Pay fees, despite those fees not being expressly authorized in the terms of standard mortgage agreements, in violation of the [Texas Fair Debt Collection Act],” the complaint alleges, claiming PHH’s contractual breaches are “routine” and “systematic.” 

Moreover, PHH, as a servicer of Federal Housing Administration-backed loans, is bound by the rules and regulations set by the Secretary of Housing and Urban Development (HUD), with those rules incorporated by reference into all FHA-insured mortgages, the lawsuit says. Under FHA servicing regulations, a mortgage servicer may not charge a borrower any fee not authorized by the FHA, the suit states. 

“The FHA has not authorized Pay-to-Pay fees,” the complaint says. “Each time Plaintiffs made a mortgage payment online or over the phone, PHH collected fees of approximately $7.50-$19.50.” 

The lawsuit looks to cover those who have or had a residential mortgage loan, secured by their residence located in Texas, that is or was serviced by PHH and who were charged one or more pay-to-pay fees and whose security instrument did not expressly authorize the collection of such a fee. The suit also looks to represent a similar class comprised of those who had an FHA-insured mortgage and fit the same criteria. 

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