Onity sues New York to clarify servicing fee charge rules

• Key Insight: Discover why Onity Group is suing New York regulators to clarify servicing fee rules.
• What's at Stake: Onity Group faces $15,000 daily penalties and fee refunds if New York regulators prevail.
• Expert Quote: "...that phrase has not been defined in the rulemaking record..." — Onity 
  Overview bullets generated by AI with editorial review.   

Onity Group is going to federal court to force New York regulators to clarify regulations over the collection of optional expedited payment fees.

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The company filed in the U.S. District Court for the Northern District of New York looking for clarity on how a New York mortgage servicing regulation applies to charging consumers for allowing them to make payments by telephone, a press release said.

"The regulation permits fees if they are 'reasonably related to the cost of rendering that service,' but in the nearly seven years since it was adopted, that phrase has not been defined in the rulemaking record, published guidance, or in response to our questions," the statement continued.

Onity is not asking whether the fees are legal or illegal. New York's rule allows for the borrower to be charged an amount reasonably related to the optional service's cost. The company is looking for judicial clarification of this part of the rule.

Named as defendants are Letitia James in her role as New York Attorney General and Kailin Asrow as the acting superintendent of the New York Department of Financial Services, which regulates non-bank mortgage companies.

National Mortgage News reached out to the defendants; NYDFS policy is not to comment on pending litigation.

In the complaint, Onity alleges NYAG and NYDFS are threatening it with an enforcement action seeking the refund of all of these fees collected since October 2019, which is nine months prior to the effective date of compliance, June 15, 2020. The state is also apparently looking for "substantial civil penalties," the filing said.

Specifically, Onity could be subject to civil money penalties of up to $15,000 per day, the full restitution of every fee collected since October 2019 and an end to "a modest, optional, fully disclosed service that borrowers choose for themselves," the case paperwork said.

But this fee charge is "neither novel or hidden," the filing said. Providing telephone options for borrowers to make their payments, either through an automated system or a live agent has a cost, so Onity charged for them.

"But no borrower had to pay: borrowers were frequently reminded that they could pay nothing at all by mailing a check, as their mortgage documents allow, or by signing up online to receive electronic statements," the filing said.

Onity stopped making these fee charges starting in July 2025 for payments made online or through its automated telephone system. But borrowers are charged $12.50 for making payments through a live agent.

Onity has tangled with state regulators over this type of fees in the past.

In 2025, Onity, whose servicing business was previously known as PHH Mortgage, settled a Federal Housing Administration case for $3.5 million for fees applied to payments borrowers paid by phone, or online without enrolling in a paperless statement program. The Department of Housing and Urban Development considered such fee charges to be improper.

(PHH Mortgage was rebranded in March to reflect the new identity of its parent company, which itself was formerly called Ocwen.)

Prior to this, in 2021, New York was one of 33 state attorney generals led by Minnesota who objected to a PHH class action settlement over similar fee charges.

A federal judge in Florida approved a $2.8 million settlement in this earlier case in October 2022.

Onity claimed in its filing the first time New York informed the fee collections were supposedly not permissible was in 2024, five years after the rule went into effect and three years following regulators demanded documents from the servicing business.

The company said it was willing to adjust its fee schedule to whatever the regulators identify but they refuse to say what is permissible.

Even with the legal battle, Onity is currently engaged in discussions with New York regulators, a related Securities and Exchange Commission filing said.

"Throughout this process we have cooperated fully with the State and remain prepared to meet any clearly defined standard," Onity's press release said. "Because that standard remains undefined, we believe a court is the appropriate place to resolve the issue."