Minnesota Attorney General Keith Ellison and New York Attorney General Letitia James today led a bipartisan coalition of 33 attorneys general in opposing a proposed class action settlement that would permit PHH Mortgage Corporation and its predecessor corporation, Ocwen Loan Servicing, LLC (collectively “PHH”), to continue to profit from often-illegal payment-processing fees that they charge to homeowners.
For years, PHH has been charging more than 17,000 homeowners in Minnesota and close to a million homeowners nationwide, a fee – anywhere from $7.50 to $17.50 each time – solely to make their monthly mortgage payment if that payment is made by phone or through the homeowner’s online account. Nowhere in these homeowners’ mortgage contracts is there authorization for such fees. In fact, PHH does not charge “processing” fees when its customers pay by check or set up automatic debit payments.
But under the terms of the proposed class settlement — a settlement that was hastily entered into only five months after the complaint was filed — PHH would be permitted to continue to charge these fees, up to $19.50 per month, for the remaining life of the loan, which for many Minnesotans could be another 20 to 30 years. In exchange, homeowners will receive a paltry, and for some, illusory, one-time monetary payment. In addition, the proposed settlement seeks to authorize these unlawful fees through an unwritten, mass amendment of the mortgages, a violation of most states’ statutes of frauds, a centuries-old legal doctrine that requires contracts related to property be in writing and signed by the parties.
As if transforming homeowners into a profit center in violation of states’ laws was not enough, the proposed settlement is designed to ensure that a portion of the monetary relief intended for homeowners will actually end up in PHH’s hands. For homeowners whose loans are still serviced by PHH, the only relief will be a credit to their account, with late fees being paid before any credit is applied to the unpaid principal balance of the mortgage. As a result, these credits toward late fees are more of a self-dealing payment to PHH rather than any kind of relief to the homeowner.
Finally, any settlement funds not distributed to the class member homeowners will be returned to PHH. Such a feature in a class-action settlement often suggests to courts that the settlement simply benefits the attorneys involved and is not in the best interest of the impacted class members.
Attorneys General Ellison and the coalition filed an amicus brief in U.S. district court in Florida opposing the proposed settlement in Morris et al. v. PHH Mortgage Corporation, et al.
“Affording your life is tough enough — and for years, PHH has made it tougher on 17,000 Minnesotans by charging them outlandish, unnecessary, and possibly illegal fees just for the privilege of paying their mortgage. Now, this hastily settled class action lawsuit will allow PHH to continue this harmful practice, in some cases for decades. This doesn’t pass the smell test,” Attorney General Ellison said. “The job of attorneys general is to protect the residents of our states against abuse. I’m proud that more than 30 of us have rallied to stand up for our homeowners and push back on this proposed settlement that benefits the abuser.”
Joining Attorneys General Ellison and James in filing today’s amicus request are the attorneys general of Alaska, Arizona, California, Colorado, Connecticut, Delaware, the District of Columbia, Florida, Hawaii, Idaho, Illinois, Indiana, Iowa, Maine, Maryland, Massachusetts, Michigan, Nebraska, Nevada, New Hampshire, New Mexico, North Carolina, Ohio, Oklahoma, Oregon, Pennsylvania, Rhode Island, Vermont, Virginia, Washington, and West Virginia.