PHH Corp will pay a $28 million fine after examiners uncovered "persistent shortcomings" in its mortgage origination and servicing practices, New York Governor Andrew Cuomo announced on Wednesday.
Under a consent order with the New York State Department of Financial Services, the company's PHH Mortgage Corp unit and its PHH Home Loans LLC affiliate will also employ an outside auditor for one year, to help identify and make refunds to borrowers who were overcharged on closing costs.
Following examinations conducted between 2010 and 2014, PHH was accused of mishandling foreclosures, including by failing to provide relief to qualified borrowers, and letting employees sign foreclosure-related documents after "perfunctory" reviews.
The Mount Laurel, New Jersey-based company was also accused of imposing larger-than-expected fees on unwary borrowers, and using a compensation plan that would reward employees for steering borrowers into risky or unnecessarily costly loans.
"New Yorkers deserve peace of mind when shopping for a mortgage and this administration has zero tolerance for lenders who seek to cut corners and disregard the law" at borrowers' expense, Cuomo said in a statement.
In a statement, PHH said it settled to avoid the cost and distraction of litigation, and has made "substantial strides" in improving its servicing operations. It previously said it had set aside money for the accord in this year's third quarter.
New York said PHH closed roughly 6,600 residential mortgage loans in the state from 2010 to 2014, and ended the period servicing 205,561 loans there on which borrowers still owed nearly $39 billion.
The company's nationwide servicing portfolio totaled more than $227 billion at the time, New York said.
PHH Home Loans is a joint venture between PHH and Realogy Holdings Corp, PHH said.
In afternoon trading, PHH shares were down 51 cents, or 3.5 percent, at $14.06 on the New York Stock Exchange.
(Reporting by Jonathan Stempel in Washington, D.C.; Editing by Marguerita Choy)