What’s In a Qualified Written Request Letter
- “Qualified Written Requests” under RESPA put mortgage servicers in a troublesome place. But there’s law on their side to help distinguish legitimate issues from abuse and harassment
- A bank will receive a letter from a mortgage borrower, or from an attorney or other agent purporting to act on behalf of that borrower. The letter will generally demand that the lender provide the inquirer with a wide-ranging amount of information concerning the borrower’s loan and the transaction in general.
- The communication may assert that there is a defect or mistake in the borrower’s account, and then demand that immediate action be taken to correct that mistake.
- Asserting only slight oversights in the borrower’s escrow account calculation.
- The letters are marked as “Qualified Written Request” under Section 6 of RESPA.
- The “QWR” label stirs legal consequences that servicers and lenders cannot ignore.
What the law says:
- QWRs are special and important because they arise under specific consumer protection law contained in Section 6 of the Real Estate Settlement Procedures Act (RESPA). Section 6 was added to RESPA in 1990, and generally imposes standards and requirements regarding the assignment sale or transfer of mortgage loan servicing. (12 U.S.C. Section 2605.) Under Section 6 of RESPA, borrowers are afforded a dispute resolution mechanism that gives rise to specific duties on the part of servicers where certain conditions are met.
- RESPA’s Section 6 and Section 3500.21(e) of RESPA’s implementing regulations (Regulation X), provide that consumer inquiries would constitute QWRs where:
- They are submitted in writing.
- They include, or allow the servicer to identify, the name and account of the borrower.
- They include a statement of the reasons for the borrower’s belief that the account is in error or must provide sufficient detail to the servicer about other information the borrower is seeking. (12 U.S.C. Section 2605(e)(1)(B)(ii))
- Where all such items are included in correspondence to a mortgage loan servicer, the servicer must then provide written acknowledgment to the consumer within 20 business days of receipt of the request. The receipt of a QWR triggers an affirmative duty to investigate the problem identified by the consumer, which must be rectified or explained not later than 60 business days after the receipt of the request.
Unlike other inquiries from consumers, the duties that arise from inquiries that qualify as a QWR have potent legal consequences.
- Under RESPA, borrowers can institute a private lawsuit for a Section 6 violation. They can potentially then recover actual and statutory damages (up to $1,000 per violation), plus attorney’s fees.
- Furthermore, class-action lawsuits are available in instances of pattern and practices of non-compliance, within three years, of the violation against a loan servicing company who refuses to comply with Section 6.
- Lawsuits for violations of Section 6 may be brought in any federal district court in the district in which the property is located or where the violation is alleged to have occurred.
- Finally, either HUD, a state attorney general, or state insurance commissioner may bring an injunctive action to enforce violations of Section 6 within three years.
- Clearly then, any correspondence received by a bank that is marked as “QWR” should not be ignored.
- The important question for compliance professionals is, therefore, how should an institution respond to the QWR, and equally important, how should the institution handle requests that are plainly abusive or harassing?
How do you spot a true QWR?
- As a preliminary matter, a request must specify the particular errors or omissions in the account, along with an explanation from the borrower of why he believes an error exists, in order to qualify as a QWR. A list of unsupported demands for information is not sufficient.
- “A qualified written request must … include a statement of the reasons for the belief of the borrower that the account is in error.” Walker v. Equity 1 Lenders Group, 2009 WL 1364430 *4-5 (S.D.Cal. 2009).
- Please note that if your institution is not a mortgage loan servicer, these provisions do not apply to you.
- By coverage and definition, the RESPA provisions under Section 6 apply to only “servicers” as defined by the statute. If you do not service mortgage loans, the requirements described herein are inapplicable to your institution.
- The QWR provision applies only to mortgages secured by a first lien, thereby excluding subordinate-lien loans and open-end lines of credit.
- RESPA requires a QWR to request information “relating to the servicing of the loan.” (See 12 U.S.C. Section 2605(e)(1)(A)).
- “Servicing” is defined as “receiving any scheduled periodic payments from a borrower pursuant to the terms of any loan, including amounts for escrow accounts described in Section10 [of RESPA], and making the payments of principle and interest and such other payments with respect to the amounts received from the borrower as may be required pursuant to the loan.”
- A QWR which requests no information related to servicing is not a valid QWR. In particular, requests related to origination do not qualify as QWRs.
- A leading case discussing this issue, MorEquity v. Nameem (118 F. Supp. 2d 885 (N.D. Ill. 2000), reached the important conclusion that borrowers fail to state a claim where the borrower’s request merely seeks information concerning the validity of the underlying loan and mortgage documents, but does not seek any information as to the status of the account balance.
Requests made in a QWR must relate to servicing and escrow matters; those requests that relate to extraneous issues dealing with the items relating to the loan’s settlement or secondary market information, for instance, are simply outside the proper scope of the QWR process.
- As a final, critical, note, if after considering all the elements listed above, a bank discards a request as not qualifying under RESPA’s QWR provisions, most legal experts recommend that the bank’s rationale should be well explained, and that the bank should document the reasons for rejecting the supposed QWR. Such rejections should, where possible, be sent back in writing. Legal counsel should be involved in ensuring that this procedure meets legal standards.
Dealing with the legitimate QWR
- When a servicer receives and properly identifies a valid QWR, the servicer must, by law, both acknowledge receipt of a QWR and respond to the substance of any claims or requests included in the QWR.
- In addition, the law directs servicers not to provide information to a consumer reporting agency during the 60 days following receipt of the QWR concerning overdue payments related to that period or to the QWR. (See RESPA Section 2605(e)(3) )
- In establishing procedures to comply with RESPA’s QWR provisions, banks should keep in mind that, contrary to some claims, the QWR process does not require a lender or servicer to stop foreclosure proceedings or other legal action on the loan.
- To properly respond to the QWR:
- A servicer must, within 20 business days, provide a written response acknowledging receipt of the QWR. (12 U.S.C. Section 2605(e)(1)(A))
- Within 60 business days the servicer must investigate the account, make any appropriate corrections, and provide the consumer with a report of their action. (Id. at Section 2605(e)(2)(A))
- If the servicer corrects the account, the servicer must provide a written explanation of the corrections. (Id.)
- If the servicer does not correct the account, it must provide an explanation or clarification that includes a statement of reasons why the account is correct and the name and telephone number of an employee of the servicer who can be contacted to further assist the borrower
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