QWR Basics

Simon Fleischmann

February 2,
February 3, 2011
2011
 Real Estate Settlement Procedures Act
12 U.S.C. § 2601, et seq. (“RESPA”)
• Consumer protection statute, first passed in
1974
• Original purpose was to help consumers
become better shoppers for settlement services,
and eliminate kickbacks and referral fees that
needlessly increase the cost of certain
settlement services
• Also includes rules for servicers dealing with
servicing transfers, escrow accounts, and
borrower inquiries

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 RESPA § 6
“Duty of loan servicer to respond to borrower inquiries”

• Qualified Written Request (QWR):

– Received from the borrower or an agent of the
borrower (other than notices on a payment coupon)
– Relating to the servicing of the loan
– Identifies the name and account of the borrower
– “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)(ii)

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 “Servicing” Defined
“The term ‘servicing’ means 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 with respect to the amounts
received from the borrower as may be
required pursuant to the terms of the loan”
– 12 U.S.C. § 2605(i)(3)

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 QWRs Broadly Defined,
Within Limits
• “Any reasonably stated request for
account information can be a qualified
written request.” Catalan v. GMAC
Mortgage, Inc., No. 09-2182 (7th Cir. Jan.
10, 2011)
– Broad language, but the court went on to find
several letters were not QWRs, questioning
whether the letters “pertain to servicing,”
“[request] information,” or state “a belief that
the account is in error”

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 Generic Internet Letters
• Long, burdensome, unreasonable
demands regarding the validity of the loan
and mortgage documents
• Do not relate to the status of the
borrower’s account
• Do not pertain to servicing issues
• Not a “reasonably stated request for
account information”

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 Practice Tip
• It is safest to treat borrower inquiries as
QWRs even if they may not meet the
technical definition
• BUT - respond in a way that does not
concede the applicability of RESPA
• Better to reserve all arguments and
defenses, and let counsel sort out which
ones should be raised if the dispute ends
up in court

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 Responding to QWRs
• Acknowledge: Provide a written response
acknowledging receipt of the inquiry within
20 days (excluding weekends and
holidays) unless the action requested is
taken within that time
– This a good time to clarify that you do not
agree that the inquiry is a QWR but that you
will respond anyway

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 Responding to QWRs (cont’d.)

• Action: Within 60 days (excluding

weekends and holidays) after receiving a
QWR, (A) make corrections, credit any
penalties, and send written notification of
corrective action; or (B) conduct an
investigation and, if the account is correct,
send a written statement of the reasons
why the account is correct
– Always include contact information for an
individual who may provide further assistance

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 Protection of Credit Rating
• No reporting of any overdue payments for
60 days following the receipt of a QWR
“relating to a dispute regarding the
borrower’s payments”
– Applies to payments that come due during the
60-day period and relating to the dispute
raised in the QWR

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 Penalties for Violations
• Individuals
– Actual damages
– Up to $1K for statutory damages for “pattern
and practice of non-compliance”
• Class Actions
– Each class member entitled to the same relief
as individuals
• LIMITED to lesser of: (i) $500K; or (ii) 1% of the
net worth of the servicer

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 Safe Harbor
• No liability for failure to comply if account
error is corrected
– within 60 days after the error is discovered
– before the filing of a lawsuit and the receipt of
written notice from the borrower
– servicer gives notice of the error and
corrective action
– borrower is not responsible for any amount he
or she would not otherwise be required to pay

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 New Requirements Under The
Dodd-Frank Act
Background
• On July 21, 2010, President Obama
signed into law the Dodd-Frank Wall
Street Reform and Consumer Protection
Act (“Dodd-Frank Act”)
• Title XIV of which was entitled the
“Mortgage Reform and Anti-Predatory
Lending Act” (the “Mortgage Reform Act”)

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 Dodd-Frank Act § 1463
• Dodd-Frank amends the QWR provisions
of RESPA to reduce the time
– (1) to acknowledge receipt of a QWR from 20
to five business days; and
– (2) to act on the QWR from 60 to 30 business
days.
• 15 day extension is permitted under certain
circumstances

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 Dodd-Frank Increases
Penalties for Violations
• Statutory damages increased to $2K—in
cases of “pattern and practice of
noncompliance”—per individual or class
member
• Limitation on class relief increased to the
lesser of (i) $1,000,000 or (ii) 1% of the
servicer’s net worth

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 Dodd-Frank Effective Date
• Regulations implementing the new rules
are to be finalized by January 21, 2013 (18
months after the transfer of regulatory
authority to the new Consumer Financial
Protection Bureau), and take effect one
year after that: January 21, 2014 at the
latest
• If no new regulations, then the new rules
take effect January 21, 2013

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