PHH allegedly moved toward foreclosure despite receiving state assistance funds
A lawsuit accuses PHH Mortgage Corporation of pushing toward foreclosure after receiving $60,000 in state assistance funds it allegedly never applied to the loan.
The case, filed February 3, 2026, in the United States District Court for the District of Oregon, puts a spotlight on how mortgage servicers handle funds from the Homeowner Assistance Fund, the state-administered program designed to help borrowers cure pandemic-era delinquencies.
According to court documents, the State of Oregon disbursed approximately $60,000 in HAF funds to PHH on or around March 5, 2025, to bring current a delinquent FHA mortgage on a property in Sweet Home, Oregon. Around the same time, PHH approved a loan modification and sent paperwork to the borrowers for signature.
But the documents contained an error in one borrower's middle initial. When the borrowers called to flag the mistake, a PHH representative allegedly told them to sign anyway and promised corrected paperwork would follow.
The borrowers did as instructed. They signed. They mailed the documents back. They began sending in monthly payments under the new modification terms for April, May, and June 2025.
None of it seemed to matter.
Despite approving the modification, receiving the HAF funds, and accepting the new payments, PHH allegedly never applied the $60,000 to the account. Instead, the servicer instructed its foreclosure trustee, Quality Loan Service Corporation, to move forward with a trustee's sale scheduled for May 30, 2025.
Two days before the sale, the borrowers secured restraining orders from the Linn County Circuit Court under Oregon's Elderly Persons and Persons with Disabilities Abuse Prevention Act. One of the borrowers has muscular dystrophy.
The story does not end there. On or about June 26, 2025, the borrowers' attorney sent PHH a formal request to apply the HAF funds, waive the fees that had piled up, and send corrected modification documents. The response, according to court filings, included modification paperwork addressed to the borrowers' deceased stepfather, which PHH described as "corrected loan documents."
The lawsuit raises claims under the Real Estate Settlement Procedures Act, the Oregon Unlawful Trade Practices Act, and the Oregon Unlawful Debt Collection Practices Act, along with a claim for financial abuse of a vulnerable person. It alleges PHH has engaged in a pattern or practice of failing to meet its obligations under federal servicing rules.
The borrowers are seeking actual damages, $2,000 in statutory damages under RESPA, at least $20 million in punitive damages, and a court order confirming they are not in default.
PHH has not yet responded to the allegations, and no determination on the merits has been made.
