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IN THE SUPERIOR COURT OF NEW JERSEY
MONMOUTH COUNTY, LAW DIVISION
ROBERT AND KIM SUMMERS, individually )
and on behalf of all others similarly situated, )
) Case No.
PHH MORTGAGE CORPORATION, )
) Complaint and Jury Demand
CLASS ACTION COMPLAINT
Plaintiffs Robert and Kim Summers, bring this complaint against Defendant PHH
Mortgage Corporation ("PHH" or the "Defendant") on behalf of themselves and all persons
similarly situated, and allege as follows:
I. GENERAL FACTUAL ALLEGATIONS
1. The Federal Housing Administration ("FHA"), a part of the United States
Department of Housing and Urban Development ("HUD"), provide loans backed by the federal
government, offering advantages to the lender. For example, FHA lending requirements are
more flexible than traditional real estate lending requirements, which allows lenders to approve
loans with lower down payments or for borrowers with lower credit scores. This allows lenders
to approve additional loans, leading to additional profits for the lender.
2. Lenders also enjoy the protection of the federal government: if a borrower is
unable to make payments under a loan's terms, the FHA insures the lender against financial loss
resulting from that default.
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3. In exchange for those benefits, FHA lenders must agree to certain HUD
regulations governing their relationships with borrowers. These regulations provide various
protections to the borrowers.
4. Standard FHA-guaranteed loans reference these HUD regulations in both the Note
and the Mortgage. See, e.g., Ex. A (Summers Mortgage), ?? 8 ("Lender may collect fees and
charges authorized by the Secretary [of Housing and Urban Development]), 9(d) ("Regulations
of HUD Secretary: In many circumstances regulations issued by the Secretary will limit
Lender's rights"); Ex. B (Summers Note), ? 6(B) ("If Borrower defaults by failing to pay in fully
any monthly payment, then Lender may, except as limited by regulations of the Secretary in the
case of payment defaults, require immediate payment in full of the principal balance remaining
due and all accrued interest) (emphasis added).
5. As noted in the Mortgage, these HUD regulations put limits on the fees lenders
are permitted to charge borrowers, and such fees are permissible only if "authorized by the
Secretary." This standard language is common to all FHA-backed mortgages.
6. One such fee governed by the HUD regulations is a property inspection fee.
HUD regulations permit a lender to charge a borrower a property inspection fee only when the
lender has been unsuccessful in contacting the homeowner by telephone and has obtained
knowledge that the property is vacant:
The mortgagee, upon learning that a property is subject to a
mortgage insured under this part is vacant or abandoned, shall be
responsible for the inspection of such property at least monthly, if
the loan thereon is in default. When a mortgage is in default and a
payment thereon is not received within 45 days of the due date,
and efforts to reach the mortgagor by telephone within that period
have been unsuccessful, the mortgagee shall be responsible for a
visual inspection of the security property to determine whether the
property is vacant.
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24 C.F.R. ? 203.377 (emphasis added).
7. This regulation prevents lenders from charging property inspection fees if the
lender has no reason to believe a borrower's home is unoccupied. See HUD Handbook, 4330.1
REV-5 9-9(A)(c)(2)(d) ("If 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, such charges are inappropriate and must not be
charged to the mortgagor or included on a claim for insurance benefits").
8. Contrary to HUD regulations, PHH has a policy of indiscriminately charging
borrowers property inspection fees regardless of whether the home is actually vacant or
abandoned. Prior to charging these fees, PHH takes no steps to confirm whether a borrower's
property is in fact vacant or abandoned. PHH uses these unnecessary and illegal property
inspection fees to enhance its profits.
9. The HUD Servicing Guidelines place the onus on the mortgagee to establish
vacancy. HUD Servicing Guidelines, Chapter 9, ? 4330.1, 9-9 Inspection, Preservation and
Protection Requirements, A. Inspections (a) (1) ("When the mortgage is in default and a payment
is not received within 45 days of the due date and efforts to reach the mortgagor or occupant at
least by telephone have been unsuccessful, the mortgagee must perform a visual inspection of the
mortgaged property to determine if it has become vacant or abandoned.") (emphasis added); see
also 24 C.F.R. ? 203.377. Only then may such inspections occur.
10. In addition, "[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, such charges are inappropriate and must not be
charged to the mortgagor or included on a claim for insurance benefits." HUD Servicing
Title: Summers v. PHH Mortgage Corporation - 3:22-cv-06726-GC-TJB
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