PHH Mortgage Corporation Charges Improper Property Inspection Fees, Class Action Alleges

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A proposed class action against PHH Mortgage Corporation claims the lender improperly charged property inspection fees to a New Jersey homeowner.

Under U.S. Department of Housing and Urban Development (HUD) regulations, an FHA lender can impose a property inspection fee only after a mortgage payment is 45 days overdue and it has been unsuccessful in contacting the homeowner by telephone, the case relays. The filing explains that the lender must also perform a "visual inspection of the security property to determine whether the property is vacant" before conducting a property inspection.

The 12-page case alleges that PHH, a mortgagee that provides loans backed by the Federal Housing Administration (FHA), has breached federal regulations by "indiscriminately" charging borrowers for property inspection fees regardless of whether a home is vacant or abandoned.

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The plaintiff, a New Jersey mortgagor who received a property loan from PHH in April 2009, claims that the company unlawfully billed him for at least 19 separate property inspection fees from March through December 2016 while he still occupied the house.

"Prior to charging these fees, PHH takes no steps to confirm whether a borrower's property is in fact vacant or abandoned," the complaint argues.

Additionally, HUD guidelines state that it is improper to charge a mortgagor for inspection fees "[i]f there is evidence that the mortgagee knew the mortgagor was still in occupancy, such as documented communication with the mortgagor, counseling agency, the mortgagor's attorney or the local HUD Office," the suit says.

The lawsuit argues that PHH knew the plaintiff was occupying the house since the parties had communicated regularly via mail since April 2009. In 2016, the parties engaged in litigation regarding a loan modification, proceedings in which the plaintiff’s occupancy of the home was further solidified, the case adds.

Moreover, the case charges that the plaintiff was assessed inspection fees more frequently than what is permitted by the FHA, inflating the amount claimed as due.

"PHH uses these unnecessary and illegal property inspection fees to enhance its profits," the filing states. "These unconscionable and intentional practices are designed to maximize fees assessed on borrowers' accounts when they are already struggling with a potential default and cause the borrowers to suffer an ascertainable loss.”

The lawsuit looks to represent New Jersey residents who, during the applicable statute of limitations period, obtained an FHA-guaranteed loan from PHH and were charged property inspection fees while occupying the property serving as collateral for said loan, and/or were charged property inspection fees more frequently than once every 30 days, after a determination of the occupancy status of the property was ascertained regardless of the occupancy status of the subject property.

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