Do you know what a “Qualified Written Request” is? Does your institution have procedures in place to deal with these requests?
Our firm represents lenders and mortgage servicers large and small with regard to foreclosure actions, and we have recently seen a proliferation of these so-called “Qualified Written Requests” (QWR) under section 2605 of the Real Estate Settlement and Procedures Act (RESPA). In a nutshell, a QWR is a request for information from a borrower to her mortgage servicer. Sounds simple enough, right? But with QWRs, the devil is most certainly in the details. Indeed, receipt of a properly prepared QWR triggers a number of obligations on the part of the mortgage servicer which could expose the servicer to penalties should it fail to comply. This article provides a broad outline of these procedures and obligations.
RESPA defines a QWR 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.” 12 U.S.C. § 2605(e)(1)(B). QWRs are related to loan servicing, and are only applicable to a “federally related mortgage loan.”
When a servicer receives a valid QWR, it must acknowledge receipt of the correspondence within 5 business days. 12 U.S.C. § 2605(e)(1)(A). The servicer must then respond to the QWR and provide the information and/or documents requested by the borrower not later than 30 days (excluding legal public holidays and weekends) after receiving it. In investigating and responding to the QWR, the servicer must make any appropriate corrections to the borrower’s account if it is in error, and must notify the borrower of the results of the investigation/corrections and provide the borrower with a name and contact information for a representative that can further assist the borrower and answer any questions. 12 U.S.C. § 2605(e)(2). If the servicer believes there is no error in servicing, it must likewise notify the borrower of the results of its investigation and basis for its decision, along with a name and contact information for a representative that can further assist the borrower and answer any questions. 12 U.S.C. § 2605(e)(2). The servicer must also take steps to protect the borrower’s credit rating during the QWR process by halting any credit reporting for 60 days after receipt of a QWR relating to a disputed payment. 12 U.S.C. § 2605(e)(3). Failure to comply with a valid QWR and/or protect a borrower’s credit rating during the QWR process could expose the servicer to any actual damages resulting from the lender’s non-compliance, in addition to costs and reasonable attorneys’ fees. 12 U.S.C. § 2605(f).
In theory, a QWR is a relatively simple mechanism that allows borrowers and lenders to resolve disputes over loan servicing directly without resorting to costly litigation. However, for loans in active litigation, a QWR can also be used burdensome request for documents and other materials meant to circumvent the traditional discovery process. Thus, some debtors’ counsels have taken to using the QWR procedure as a litigation tactic, going so far as advertising their ability to train clients to induce their servicers to violate these provisions.
Moreover, the Seventh Circuit Court of Appeals reads the QWR provisions of RESPA very broadly. In Catalan v. GMAC Mortg. Corp., 629 F.3d 676 (7th Cir. 2011), the Seventh Circuit reversed the grant of summary judgment to a mortgage company and found that the lender had violated RESPA in failing to respond to a borrower’s QWR during active foreclosure litigation. The lender argued that the letters it received from the borrower were not QWRs because the letters did not “identify an error in [the borrower’s] account or provide any statement of the reasons [the borrowers] believe their account was in error.” Id. at 686. Instead, the lender argued that the letters merely disputed the borrower’s debt and requested information, which it contended was insufficient to trigger a response under RESPA. The Seventh Circuit disagreed, and found among other things that:
- A QWR does not need to contain specific reasons supporting the borrower’s belief that there is an error in his/her account. Instead, it need only reasonably identify the borrower, the account and “include a statement of the reasons for the belief of the borrower, to the extent applicable, that the account is in error or provide sufficient detail to the servicer regarding other information sought by the borrower.”
- A simple letter from the borrower disputing the lender’s attempt to collect on the account and stating that the lender had “refused to process checks to alleviate any unnecessary actions or undue harm” was a sufficient statement of belief that the borrower’s account was in error; and
- A letter the lender received from the US Department of Housing and Urban Development (and not directly from the borrower) on the borrower’s behalf also constituted a QWR under the circumstances.
Id. at 687-89. Thus, at least in the Seventh Circuit, a QWR can be a powerful tool for debtors contesting residential foreclosures on the basis of alleged servicing errors. If you believe your institution has received a QWR, you should consider contacting an attorney to better understand your obligations in response and the consequences of non-compliance.