A Review of the Law Governing Qualified Written Requests
Back in the summer of 2015, we published a popular post on “Qualified Written Requests,” or QWRs, which are written requests by borrowers under the Real Estate Settlement Procedures Act (“RESPA”) for information relating to servicing of their residential mortgage loans. As discussed in our previous post, QWRs may be simply requests for information (see 12 CFR 1024.36) or they may be notices of error relating to loan servicing (see 12 CFR 1024.35). After receiving a QWR, a mortgage servicer must provide acknowledgement of receipt within 5 business days, and a substantive response within 30 days. See 12 U.S.C. § 2605(e)(1)-(2).
On January 12, 2017, Judge Failla of the District Court for the Southern District of New York issued an opinion in a case involving QWR-related claims that provides additional guidance regarding the liability risks that mortgage servicers face in connection with QWRs. In Sutton v. CitiMortgage, Inc., 2017 U.S. Dist. LEXIS 4841, No. 16 Civ. 1778 (S.D.N.Y. Jan. 12, 2017), the SDNY court held that Plaintiff Chantal Sutton, a homeowner, failed to state a claim under RESPA against her mortgage servicer, Defendant CitiMortgage, Inc. (“CitiMortgage”), and dismissed Plaintiff’s complaint against CitiMortgage.
In October 2013, unable to make her monthly home loan payments, Plaintiff received a loan modification from CitiMortgage, her loan servicer. Plaintiff was dissatisfied with that modification, however, because it did not extend the term of her loan but rather contained a “balloon payment” at the time payment was due. In 2014, Plaintiff sought to obtain a term extension by submitting three written letters seeking information concerning her account and requesting a term extension. When CitiMortgage refused Plaintiff’s requests for a term extension on the grounds that the mortgage owner’s policies prohibited such an extension, Plaintiff filed her complaint in March 2016, alleging, among other things, RESPA violations based on CitiMortgage’s refusal to extend the loan term. After Plaintiff filed an amended complaint, CitiMortgage filed its motion to dismiss for failure to state a claim in July 2016.
The Court’s Holding
In its decision, the court first discussed RESPA’s QWR-related provisions generally, including loan servicer obligations with regard to responding to QWRs (including both providing information and correcting errors), as well as liability for failing to properly do so and potential damages available to borrowers.
The court then addressed plaintiff’s RESPA claims, finding that Plaintiff was attempting to fault CitiMortgage for refusing to extend her loan term by alleging that CitiMortgage had failed to sufficiently respond to Ms. Sutton’s QWRs or to “correct” the error of not including a term extension. While the court agreed that Plaintiff’s three letters were in fact technically QWRs (a point disputed by CitiMortgage), it held that her allegations that CitiMortgage failed to adequately respond related to loan modification rather than loan servicing, and, as such, fell outside the scope of QWRs. Moreover, even if the QWRs were requests for error correction rather than information, the court held that the claimed corrections still related to loan modifications and not servicing.
Next, the court considered – and rejected – plaintiff’s claims against CitiMortgage under the statutory and regulatory amendments in the Dodd-Frank Act. Here, again, the thrust of the court’s holding was that requests for loan modifications (such as Plaintiff’s) do not fall within the purview of “loan servicing” and, thus, were not the type of requests covered by QWRs.
Finally, the court held that even if Plaintiff had adequately alleged a RESPA violation, she failed to identify any actual damages she suffered and had failed to allege a “pattern or practice of noncompliance with the requirements” of RESPA by CitiMortgage.
While not a ground-breaking decision, Sutton is helpful to practitioners and stakeholders in the mortgage finance industry, as it provides a useful overview of the state of QWR-related law and clarifies that disputes or requests for information relating to loan modifications do not relate to “loan servicing,” and thus are outside the purview of QWRs.