Recent Changes to the Law Governing Qualified Written Requests
Homeowners who are contemplating or actively engaged in litigation regarding a residential mortgage loan are increasingly taking advantage of a provision of the Real Estate Settlement Procedures Act (“RESPA”) whereby a borrower may request information relating to the servicing of a loan. Such a request for information is termed a Qualified Written Request, or “QWR,” and may impose on loan servicers a duty to respond to borrowers’ inquiries. Financial institutions and others involved in the servicing of residential mortgage loans need to be aware of the duties that can be triggered by receipt of a QWR, particularly in light of recent changes to the statutory response times applicable to QWRs.
What is a QWR and to Whom Does It Apply?
A QWR is defined in RESPA, 12 U.S.C. § 2605(e)(1)(B), as:
a written correspondence, other than notice on a payment coupon or other payment medium supplied by the servicer that (i) includes, or otherwise enables the servicer to identify, the name and account of the borrower; and (ii) includes a statement of the reasons for the belief of the borrower, to the extent applicable, that the account is in error or provides sufficient detail to the servicer regarding other information sought by the borrower.
The Consumer Financial Protection Bureau (“CFPB”) has noted, in its Official Interpretations of this provision, that a QWR “is not required to include both types of requests. For example, a qualified written request may request information relating to the servicing of a mortgage loan but not assert that an error relating to the servicing of a loan has occurred.” See 12 C.F.R. Part 1024, Supp. I, § 1024.31.
Courts have held that “RESPA does not require any magic language before a servicer must construe a written communication from a borrower as a qualified written request and respond accordingly.” Catalan v. GMAC Mortg. Corp., 629 F.3d 676, 687 (7th Cir. 2011). Thus, “[a]ny reasonably stated written request for account information can be a qualified written request.” Id. At the same time, “the statutory duty to respond does not arise with respect to all inquiries or complaints from borrowers to servicers.” Medrano v. Flagstar Bank, FSB, 704 F.3d 661, 666 (9th Cir. 2012), cert. den. 133 S.Ct. 2800 (2013). In particular, a QWR must relate to servicing and, thus, a borrower’s request for loan origination information or documents does not qualify as a QWR. See id. at 666-67.
In addition, the duty to respond to a QWR applies only to a “servicer of a federally related mortgage loan.” See 12 U.S.C. § 2605(e)(1)(A). For purposes of RESPA, a servicer is defined as the person responsible for “receiving any scheduled periodic payments from a borrower pursuant to the terms of any loan . . . and making the payments of principal and interest . . .” 12 U.S.C. § 2605(i)(2)-(3). A “federally related mortgage loan” is generally defined, subject to certain exceptions, as a non-temporary loan, secured by a lien on residential real property, where the lender is regulated by the federal government or the lender’s deposit accounts are insured by a federal agency. See 12 C.F.R. 1024.2(b).
What Actions Are Required upon Receipt of a QWR?
Upon receipt of a QWR, a mortgage servicer is required to take certain steps, each of which is subject to certain deadlines.
First, the servicer must “provide a written response acknowledging receipt of the correspondence within 5 days (excluding legal public holidays, Saturdays, and Sundays) unless the action requested is taken within such period.” See 12 U.S.C. § 2605(e)(1)(A).
Second, within 30 days of receipt of the QWR (with a possible 15-day extension), the servicer must provide a substantive response, the nature of which depends on the type of QWR. Upon receipt of a “notice of error” (i.e., a QWR in which the borrower “asserts an error relating to the servicing of a mortgage loan,” see 12 CFR 1024.35), the servicer must: (1) “make appropriate corrections in the account of the borrower, including the crediting of any late charges or penalties, and transmit to the borrower a written notification of such correction”; or (2) “after conducting an investigation, provide the borrower with a written explanation or clarification” that includes (i) a statement of the reasons the servicer believes the account is correct and (ii) the contact information of a servicer employee or office that can provide assistance to the borrower. See 12 U.S.C. § 2605(e)(2).
Where the servicer receives a “request for information” QWR (see 12 CFR 1024.36), the servicer must provide: (1) the “information requested by the borrower or an explanation of why the information requested is unavailable;” and (2) the contact information of a servicer employee or office that can provide assistance to the borrower. See 12 U.S.C. § 2605(e)(2)(C). While the 30-day deadline for responding to a QWR applies to most borrower inquires, it is important to bear in mind that certain types of “notices of error” and “requests for information” (such as a request for the identity of the owner of the loan under 12 U.S.C. § 2605(k)(1)) may trigger separate deadlines and/or substantive obligations. See 12 U.S.C. § 2605(k)(1); 12 CFR 1024.36(d)(2); 12 CFR 1024.35(e)(3).
Third, during the 60-day period beginning on the date of receipt of a QWR, “a servicer may not provide information regarding any overdue payment, owed by such borrower and relating to such period or qualified written request, to any consumer reporting agency.” See 12 U.S.C. § 2605(e)(3).
Recent Amendments to RESPA’s QWR Provisions
Section 1463 of the Dodd-Frank Financial Reform Act (the “Dodd-Frank Act”), which took effect in January 2014, contains several important modifications to the QWR provisions of RESPA. First, a servicer must now acknowledge receipt of a QWR within 5 business days (previously 20 days) and must provide a substantive response to the borrower within business 30 days (previously 60 days), with a possible 15-day extension if the servicer sends the borrower notice of the extension and its reason for the delay in responding. See 12 U.S.C. § 2605(e)(1)(A); 12 U.S.C. § 2605(e)(2); 12 U.S.C. § 2605(e)(4).
Second, the Dodd-Frank Act added Section (k)(1) to RESPA, which provides in part that a servicer shall not “fail to respond within 10 business days to a request from a borrower to provide the identity, address, and other relevant contact information about the owner or assignee of the loan.” 12 U.S.C. § 2605(k)(1). While this section contains similar requirements to Section 1641(f)(2) of the Truth in Lending Act (“TILA”), Section 1641(f)(2) does not contain a specific deadline. See 12 U.S.C. § 1641(f)(2). Although such inquiries are not technically QWRs, borrowers submitting QWRs frequently include requests for the identity of the owner or assignee of their loans, which are often styled as requests under TILA 1641(f)(2). As such, loan servicers need to be aware of the short 10 business day deadline to respond to such inquiries.
Finally, the Dodd-Frank Act increased the statutory damages available to a borrower for a violation of the RESPA QWR provisions. For individual borrowers, available statutory damages increased from $1,000 to $2,000, while in the case of a class action lawsuit, the maximum allowable amount of statutory damages doubled from $500,000 to $1 million. See 12 U.S.C. § 2605(f). In addition to statutory damages, borrowers may also seek to recover actual damages they allegedly have suffered as a result of a servicer’s failure to provide an adequate and timely response to a QWR. However, servicers potentially can mitigate liability pursuant to RESPA’s safe harbor provision, which provides that a “transferor or transferee servicer shall not be liable” for any violation of RESPA’s QWR provisions if, within 60 days of discovering an error and before the commencement of a QWR-based action and receipt of notice of error from the borrower, the servicer notifies the borrower of the error and makes appropriate adjustments. See 12 USC 2605(f)(4).
The above changes to RESPA, as well as the increasing use of QWRs by borrowers, make it important for mortgage servicers to understand their obligations in responding to QWRs and to establish procedures for acknowledging and responding to QWRs. The following recommended practices are designed to assist mortgage servicers in dealing with QWRs so as to minimize the risk of borrower litigation.
First, it is recommended that servicers establish an address to which QWRs must be sent, as permitted by RESPA’s implementing regulation, Regulation X. That address must be communicated to the borrower, included in any communication in which the servicer provides the borrower with contact information for assistance from the servicer, and included on any website maintained by the servicer if the website lists any contact address for the servicer. 12 CFR 1024.35(c). Where a servicer has established such a QWR contact address, borrower requests sent to other addresses are not proper QWRs. See Roth v. CitiMortgage Inc., 2014 WL 2853549 (2nd Cir. June 24, 2014) (dismissing borrower’s RESPA claim where purported QWRs were not sent to servicer’s designated QWR address). In addition to designating a QWR address, mortgage services are advised to establish a method of determining the date of receipt of a QWR (which triggers the applicable response deadlines) and a mechanism for alerting the appropriate department of receipt of a QWR.
Second, mortgage servicers should set up a procedure to stop reporting the borrower to consumer credit agencies upon receipt of a QWR in order to minimize the risk of being deemed in violation of 12 U.S.C. § 2605(e)(3), as discussed above.
Third, mortgage services are advised to establish a system for identifying the deadlines to respond to a QWR and tracking the progress of preparing and submitting such responses. This is particularly important in light of the recent tightening of the timeframe for QWR responses, whereby a servicer has only 5 days to acknowledge receipt of a QWR and 30 days or less to provide a substantive response or seek an extension.
Finally, mortgage servicers should establish procedures for reviewing QWRs, investigating any allegations of account error, and compiling any documents requested by the QWR. If the account at issue is in error, servicers will need to correct such errors and advise the borrower of any corrections that were made. If the account is determined to be without error, servicers will need to communicate this to the QWR sender, and send any documents requested by the QWR and within the scope of a QWR. Although borrower requests for the identity of the owner or assignee of their loans are proper under TILA 1641(f)(2), most courts have found that information regarding loan origination is not properly within the scope of a QWR and servicers do not have a duty to provide such information to borrowers. See, e.g., O’Connor v. Nantucket Bank, 992 F.Supp.2d 24, 36-37 (D. Mass. 2014); Medrano v. Flagstar Bank, FSB, 704 F.3d 661, 666-67 (9th Cir. 2012); Ward v. Security Atlantic Mortg. Elec. Reg. Sys., Inc., 858 F.Supp.2d 561 (E.D.N.C. 2012); MorEquity, Inc. v. Naeem, 118 F.Supp.2d 885 (N.D.Ill. 2000).
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