The U.S. Department of Housing and Urban Development (HUD) reached a historic settlement with PHH Mortgage Corp. (PHH) to resolve allegations that PHH unlawfully charged fees to borrowers when they made a mortgage payment, in violation of Federal Housing Administration (FHA) requirements.

The settlement’s nearly $3.5 million reimbursement to more than 50,000 people is the largest reimbursement amount to the most FHA borrowers in HUD’s history.

“One of the most sacred responsibilities we have at HUD is to ensure inclusive and fair access to housing for all, which includes protecting families with FHA mortgage payments from junk fees,” acting HUD Secretary Adrianne Todman said. “This settlement serves as a reminder that HUD will always hold FHA mortgage companies accountable to ensure the people we serve are treated fairly.”

The settlement, which did not constitute an admission of fault, resolves allegations that PHH charged fees to borrowers when the borrower made a mortgage payment by phone or online. These so-called “convenience fees” violate FHA requirements because accepting and processing mortgage payments is considered part of a mortgagee’s ordinary servicing activities for which it is already paid. 

In addition to the $3.47 million in restitution. PHH will make an administrative payment of $245,000 to HUD.