PHH liable for $2M for denying loan modification in divorce case

PHH Mortgage Services is liable for $1.86 million following an arbitrator’s ruling finding that it denied a consumer loss mitigation and failed to follow Freddie Mac’s guidelines assisting homeowners going through a divorce.

“Divorcing couples have a right to loss mitigation and loan modifications in the name of the borrower retaining the home,” said Nick Wooten, lead trial attorney for plaintiff Kim Albeck, in a press release. “PHH ignores and tramples on those rights.”

The case, Albeck v. PHH Mortgage Corp., has been returned to Judge Franklin U. Valderrama of the U.S. District Court for the Northern District of Illinois to confirm the award.

However, attorneys for Ocwen Financial, PHH’s parent company, filed a response on Oct. 20, stating that it opposed confirmation and plans to ask Judge Valderrama to vacate the award in a future legal filing.

“We strongly disagree with the arbitration award and plan to contest this judgment,” a statement from Ocwen said. “We believe the decision made by the arbitrator was not consistent with the law or the facts of this case.”

Ocwen’s conduct was proper in considering this particular borrower for a loan modification, and it followed all procedures consistent with the investor guidelines, the company asserted.

“We are reviewing all available options including appealing the arbitration decision,” the Ocwen statement continued. “Furthermore, the inflammatory comments made by the plaintiff’s attorney regarding our servicing practices are baseless, defamatory, and only made to try to harm our reputation for their financial benefit.”

“Ocwen engaged in tactics that made it impossible for our client to get the relief she was entitled to, eventually suing her for foreclosure in early 2018,” said Rusty Payton, another one of Albeck’s attorneys, in the press release. “Ocwen then dangled an offer of help, received payments intended for loss mitigation only to later snatch the offer away.”

Susan Zwick, a retired judge, held that PHH/Ocwen had offered plaintiff Kim Albeck a mortgage modification under terms she completed in February 2019, but then reneged.

“This procedure, although appearing to be fair and in compliance with federal guidelines, was never going to result in the claimant maintaining her mortgage or home,” Zwick wrote. “Ocwen, now PHH, initially rescinded the approval, then reversed its decision to require additional costs and conditions on the loan.”

But company policy required the original co-borrower’s approval for a modification. As a result, “The offer to claimant was false,” Zwick said.

As a result, Zwick’s decision included $500,000 in punitive damages against PHH/Ocwen.

“Ocwen’s counsel has represented that they will contest entry of judgment, at least in part, on the grounds that the arbitrator was guilty of misconduct or misbehavior, an allegation that is both baseless and repugnant to her reputation and the professional manner in which she conducted the hearing,” Payton said in the release.

Besides the punitive damages, Zwick awarded $24,240.36 in pecuniary damages and $750,000 in compensatory damages for violations of the Illinois Consumer Fraud Act. In addition, PHH/Ocwen is liable for over $574,000 in attorneys’ fees.