• Ronald A. Flate

Borrowers, Lenders, and Processing Payments

The Real Estate Settlement Procedures Act (RESPA) is a federal consumer protection law that regulates the real estate settlement process, including the servicing of loans and the assignment of those loans. RESPA places a number of duties on lenders and loan servicers, including requirements that borrowers be given notice by both a transferor and a transferee when their loan is transferred to a new lender or servicer, and that loan servicers respond promptly to borrowers’ written requests for information.

It takes a qualified written request to trigger the loan servicer’s duties under RESPA to acknowledge and respond. RESPA defines a “qualified written request” as written correspondence from the borrower or his or her agent that requests information or states reasons for the borrower’s belief that the account is in error. To qualify, the written request must also include the name and account number of the borrower or must enable the servicer to identify the borrower.

Within 60 days after receiving a qualified written request, the servicer must take one of three actions: (1) make appropriate corrections to the borrower’s account and notify the borrower in writing of the corrections; (2) investigate the borrower’s account and provide the borrower with a written clarification as to why the servicer believes the borrower’s account to be correct; or (3) investigate the borrower’s account and provide either the requested information or an explanation as to why the requested information is unavailable.

In any event, the servicer must provide a name and telephone number of a representative of the servicer who can assist the borrower. During the 60-day period, 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.

In the culmination of what the court described as “maddening troubles” that two borrowers, a husband and wife, encountered with two mortgage companies, a federal appellate court ruled that the borrowers’ claims under RESPA for damages could proceed to a trial on the merits. Two of the five different letters sent by the borrowers were ruled to be qualified written requests. As to both letters, the borrowers contended that one of the mortgage servicers violated RESPA by reporting their account as delinquent to credit bureaus within the 60-day window after the letters were received. As to one of the letters, the servicer also was alleged to have failed to investigate properly or to take corrective action.

The borrowers withstood an argument by the mortgage servicers that the borrowers had not done enough to raise triable issues on actual damages allegedly sustained as a result of the RESPA violations. It was for a jury to decide if they had, in fact, suffered the compensable losses they claimed, stemming from being denied home equity lines of credit and a small business loan, and from suffering emotional distress from the whole affair.

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