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PROPERTY LAW UPDATE: A Brief Synopsis of RESPA's "Qualified Written Request"

January 8, 2012

Steve Friedman, Senior Attorney, National Legal Research Group

The Real Estate Settlement Procedures Act ("RESPA"), 12 U.S.C. §§ 2601B2617, is a federal consumer protection statute that regulates, among other things, the servicing of mortgage loans.  Among the several duties RESPA imposes is that loan servicers must respond promptly to any "qualified written request from the borrower (or an agent of the borrower) for information relating to the servicing of such loan."  12 U.S.C. § 2605(e)(1)(A).  If the servicer fails to adequately respond to such a request, then the borrower may recover actual damages, statutory damages if there is "a pattern or practice of noncompliance," id. § 2605(f), and the costs of suit, including reasonable attorney's fees.

The threshold inquiry for this statutory scheme is the "qualified written request."

For purposes of this subsection, a qualified written request shall be a written correspondence, other than notice on a payment coupon or other payment medium supplied by the servicer, thatC

(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.

Id. § 2605(e)(1)(B).

With regard to the statutory definition of a "qualified written request," two federal courts of appeals have recently stated as follows:

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.  The language of the provision is broad and clear.  To be a qualified written request, a written correspondence must reasonably identify the borrower and account and must "include 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."  12 U.S.C. § 2605(e)(1)(B) (emphasis added).  Any reasonably stated written request for account information can be a qualified written request.  To the extent that a borrower is able to provide reasons for a belief that the account is in error, the borrower should provide them, but any request for information made with sufficient detail is enough under RESPA to be a qualified written request and thus to trigger the servicer's obligations to respond.

Catalan v. GMAC Mortg. Corp., 629 F.3d 676, 687 (7th Cir. 2011); Medrano v. Flagstar Bank FSB, No. 11-55412, 2012 WL 6183549, at *3 (9th Cir. filed Dec. 11, 2012) (quoting Catalan, 629 F.3d at 687).

Furthermore, the Ninth Circuit opinion went a step further than the Seventh Circuit one had and explicitly articulated a three-part test:

[A] borrower's written inquiry requires a response as long as it (1) reasonably identifies the borrower's name and account [12 U.S.C. § 2605(e)(1)(B)(i)], (2) either states the borrower's "reasons for the belief . . . that the account is in error" or "provides sufficient detail to the servicer regarding other information sought by the borrower," [12 U.S.C. § 2605(e)(1)(B)(ii),] and (3) seeks "information relating to the servicing of [the] loan" [12 U.S.C. § 2605(e)(1)(A)].

Medrano, 2012 WL 6183549, at *3.

Additionally, although not explicitly included in the Medrano test, the statute also clearly requires that the servicer "receive[] [the] request from the borrower (or an agent of the borrower)," 12 U.S.C. § 2605(e)(1)(A), adding what is essentially a fourth element to the Medrano test.

Whereas the first element of the Medrano test is readily and objectively understandable, the remaining elements are more subjective.  Fortunately, the above-cited federal appellate decisions have helped to give some clarity to these somewhat fuzzy requisites of § 2605(e).

The implied fourth element of the Medrano test—that the request may be from the borrower's agent rather than from the borrower directly—derives from the plain and unambiguous terms of the statute, which requires that a qualified written request come "from the borrower (or an agent of the borrower)."  Id.  In Catalan, the borrowers had sent a written request to the U.S. Department of Housing and Development ("HUD"), and HUD then forwarded the letter to the loan servicer.  The court had no "difficulty interpreting that requirement, under the circumstances of [that] case, to include HUD's intercession on the plaintiff's behalf."  629 F.3d at 688 (plaintiffs "had exhausted every reasonable avenue in their communications with [the loan servicer]," including sending multiple written correspondence to the servicer's legal counsel, with no pertinent action in response by the servicer, as well as attempting to send multiple checks to the servicer as payments on the loan, which payments were rejected).

The Catalan court's rulings on four borrower letters illustrate how subjective the determination can be on the first prong of the second element of the Medrano test—whether the borrower has sufficiently detailed to the servicer the reasons why he or she believes the account is in error.  In one letter, the borrowers had merely "set forth their expectations for how [the servicer] would handle their account going forward."  The court held that such a letter "did not raise any disputes or errors in their account."  Catalan, 629 F.3d at 688.  In another letter, the borrowers recounted their failed attempts to bring their account current and then merely asked for a "quick resolution of whatever issues remain."  Id. at 689.  The court determined that such a letter could not reasonably be construed "as a statement of [the borrowers'] belief that [the] servicing of their account was in error."  Id.

By contrast, a "three-page letter describ[ing] in great detail the difficulties the [borrowers] encountered at the hands of [the servicer]," id. at 687, was deemed clearly sufficient to be a qualified written request.  The letter included an account of how the servicer had "raised the [borrowers'] monthly payment amount without informing them of the change," and noted that "each of [the borrowers'] attempts to communicate with [the servicer] was rebuffed until [the servicer] at last acknowledged its error and dismissed its foreclosure action[.]"  Id.  In another letter, the borrowers expressly stated that they were "disputing [the servicer's] attempt to collect on the above referenced account" and, further, "that they had sent the full amount required to bring the account current, but [the servicer] had refused to process [the] checks."  Id. at 689.  Here, too, the court held that the borrowers' letter "was a statement of their belief that their account was in error."  Id.

Similarly, the subjectivity of the second prong of the second element of the Medrano test—whether sufficient detail has been provided about what information is being sought by the borrower—is likewise exemplified by the court's rulings on three borrower letters.  In one letter, the borrowers had merely "set forth their expectations for how [the servicer] would handle their account going forward."  The court determined that "their 'expectations' were not requests for information."  Id. at 688.

By contrast, the borrowers, in another of their letters, "very clearly requested specific information regarding their account—namely, an explanation of how their account balance increased from $229,098 to $428,298 over a two-month time span."  Id. at 689-90.  This letter was ruled "unequivocally" a qualified written request under RESPA.  And in another letter, which the court concluded was a qualified written request, the borrowers had asked the servicer to explain why it had cashed certain checks after it had already sold the account to another entity, and they had also requested an accounting of the funds the borrowers had paid the servicer.  Id. at 687-88.

 The third element of the Medrano test requires that the request "relat[e] to the servicing of [the] loan."  As explained by the Ninth Circuit, this requirement

ensures that the statutory duty to respond does not arise with respect to all inquiries or complaints from borrowers to servicers.  RESPA defines the term "servicing" to encompass only "receiving any scheduled periodic payments from a borrower pursuant to the terms of any loan, including amounts for escrow accounts . . . , and making the payments of principal and interest and such other payments."  [12 U.S.C.] § 2605(i)(3).  "Servicing," so defined, does not include the transactions and circumstances surrounding a loan's origination—facts that would be relevant to a challenge to the validity of an underlying debt or the terms of a loan agreement.  Such events precede the servicer's role in receiving the borrower's payments and making payments to the borrower's creditors.  Perhaps for that reason, Congress drafted the statute so as not to include those matters.

The statute thus distinguishes between letters that relate to borrowers' disputes regarding servicing, on the one hand, and those regarding the borrower's contractual relationship with the lender, on the other.  That distinction makes sense because only servicers of loans are subject to § 2605(e)'s duty to respond—and they are unlikely to have information regarding those loans' originations.

Medrano, 2012 WL 6183549, at *3-4 (emphasis in original).

In the Medrano case, the court held that the plaintiffs' three letters were not "qualified written request[s]" under RESPA, and thus the loan servicer was not required to respond thereto, because the plaintiffs' letters were

challenges to the terms of the loan and mortgage documents and are not disputes regarding [the] servicing of the loan.  The first letter states that the loan documents did not "accurately reflect . . . the proper payment schedule represented by the loan broker."  That assertion amounts to an allegation of fraud or mistake during the closing of the loan and the drafting of the relevant documentation.  Thus, it concerns only the loan's validity and terms, not its servicing.  Likewise, in the second letter, Plaintiffs demanded that Flagstar "revise all documentation concerning the current loan" to reflect the "original terms" of the agreement.  A request for modification of a loan agreement, like one for rescission, does not concern the loan's servicing.  Finally, the sole request in the third letter is that Plaintiffs' monthly payment be reduced because they were told, when they purchased their home, that those payments would not exceed $1,900.  Again, that demand is a challenge to the terms of the loan and mortgage documents, premised on an assertion that the existing documents do not accurately reflect the true agreement between Plaintiffs and the originating lender.  Because the letter requests modification of those documents, it is not related to servicing.

Id. at *4 (emphasis in original) (footnote omitted).

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