The mortgage company will pay the fine – and engage a third-party auditor – as part of a consent order for violations of state and federal laws designed to protect homeowners. According to the NYDFS, multiple examinations of PHH “uncovered persistent shortcomings in their mortgage origination and servicing practices, including discrepancies in how mortgage foreclosures were documented and processed.”
“New Yorkers deserve peace of mind when it comes to shopping for a mortgage, and this administration has zero tolerance for lenders who seek to cut corners and disregard the law at the expense of those seeking the American Dream in the Empire State,” said New York Gov. Andrew Cuomo. “We remain committed to rooting out unscrupulous practices in the mortgage industry, and will continue to act vigorously to protect homeowners in every corner of New York.”
The NYDFS examinations of PHH found discrepancies in loan originations, including failure to give borrowers accurate good-faith estimates, imposing larger fees on “unwary” borrowers at closings, and sometimes failing to provide documentation showing that mortgage borrowers had actually received discounts to which they had bargained.
The investigation also revealed that the company lacked “formal and comprehensive policies and processes” for executing foreclosure documents.
“Examiners found certain employees who executed foreclosure documents conducted little more than perfunctory reviews of materials prior to execution,” according to a release from the NYDFS. “Some employees lacked personal knowledge of facts to which they had sworn.”
The agency also found that PHH didn’t adequately monitor outside vendors it hired to perform servicing-related tasks – or even establish adequate controls to keep employees “whose mortgage loan originator licenses had expired or been withdrawn” from taking mortgage applications.
The NYDFS also found that some borrowers had been charged “improper” closing costs. PHH has been ordered to engage an independent third-party auditor to identify those borrowers so refunds can be made. The auditor will also review the company’s business practices to ensure compliance with regulations.
“Over the last decade, too many homeowners have suffered as a result of servicers placing profit above compliance with consumer protection laws,” said NYDFS Superintendent Maria T. Vullo. “Today’s action demonstrates New York’s commitment to making sure that consumers who have been wronged receive restitution and the parties that are responsible pay appropriate penalties and take necessary remedial action to ensure such behavior does not occur in the future.”
PHH Mortgage Corporation will pay a $28 million fine for shoddy mortgage origination and servicing practices, according to the New York Department of Financial Services.