Onity Group, the parent of mortgage servicer Onity Mortgage, has taken a dispute over optional expedited-payment fees to federal court, arguing that New York has not adequately explained how servicers should determine whether those charges meet the state’s cost standard.
The company said it filed a declaratory judgment action Oct. 20 in the U.S. District Court for the Northern District of New York. In a same-day SEC filing, Onity disclosed that regulators have requested information about its optional-payment fee practices and that discussions with New York regulators are ongoing.
The New York filing adds to a broader dispute over when mortgage servicers may charge borrowers to make payments. Earlier FHA enforcement and federal appellate litigation involving PHH Mortgage and Ocwen Loan Servicing addressed different legal requirements governing similar charges.
Onity’s latest challenge centers on language requiring servicing fees to be “reasonably related to the cost of rendering that service.” The company says the standard lacks the definition and guidance needed to provide constitutionally adequate notice.
For lenders retaining servicing and executives overseeing subservicing relationships, the business issue extends beyond disclosing a fee: how to substantiate the amount charged for a service.
What New York Requires
Under Section 419.5(b) of New York’s mortgage servicing rules, a fee must cover a service actually rendered to the borrower, bear a reasonable relationship to the cost of providing it, and satisfy one of three additional conditions.
Those conditions address fees authorized and disclosed by the loan documents, fees expressly permitted by law, or fees for a specific service requested by the borrower. For the third category, the fee cannot be prohibited by law or the loan documents, and the borrower must receive disclosure and expressly consent to pay.
The cost requirement therefore operates separately from the disclosure and consent provisions. A borrower’s agreement to pay does not, by itself, establish that the amount meets the rule.
Onity’s challenge focuses on whether the state has supplied sufficiently clear standards for applying that cost requirement.
Onity Emphasizes Borrower Choice
Onity said borrowers have several free payment methods. Customers selecting an expedited option receive advance fee disclosure, notice of free alternatives, and a request for consent.
Onity also said it has reduced the charges and eliminated them for online and automated telephone payments.
“Because that standard remains undefined, we believe a court is the appropriate place to resolve the issue,” the company said.
Earlier Disputes Put Payment Fees In Context
The filing follows other disputes involving payment fees charged by PHH Mortgage and Ocwen Loan Servicing, predecessor businesses within Onity’s corporate history.
In January 2025, HUD announced a settlement with PHH resolving allegations that certain telephone and online mortgage payment fees violated FHA requirements. The agreement provided approximately $3.465 million in restitution to about 51,500 borrowers, plus a $245,000 administrative payment to HUD.
HUD said accepting and processing payments was an ordinary servicing activity for which the mortgagee was already compensated, and that PHH had not obtained the approval required for the additional fees. The settlement included no admission of fault or liability.
A separate February 2025 Eleventh Circuit decision in Glover v. Ocwen Loan Servicing addressed optional expedited-payment charges under the Fair Debt Collection Practices Act.
The court held that Ocwen, which qualified as a debt collector in the case, violated the statute by collecting fees neither expressly authorized by the agreements creating the debts nor permitted by law. Ocwen had acquired servicing rights after the borrowers defaulted, and their mortgages and notes did not mention the payment-method fees.
The court rejected the argument that the fees’ optional nature made them permissible.
Those matters involved different legal requirements from the New York standard Onity is now challenging. They demonstrate, however, why payment-fee reviews must address the applicable loan program, contract terms, and law alongside borrower consent.
Why Lenders Outside New York Have A Stake
The current lawsuit concerns New York’s regulation. The earlier FHA settlement and FDCPA ruling illustrate the separate federal requirements that can govern payment charges, depending on the loan and the servicer’s role.
For lenders operating across states and loan programs, a single disclosure and consent process cannot answer every fee-compliance question. Reviews also need to address contractual authority, program restrictions, and any applicable state limits on the amount charged.
For lenders using subservicers, that makes borrower payment fees a concrete oversight topic: which channels carry a charge, which loans are subject to it, and what supports the fee’s authorization and amount.
For originators fielding post-closing questions, the practical role is to help clients find the servicer’s free payment options and route disputed charges to the appropriate servicing team.
