Question: We dealt with a complaint by a borrower who had sent a notice of error to the wrong address at our company. Our disclosures are clear about which address to send these letters to; however, this borrower was miffed that he could not be sure, so he sent it to a general mailbox. When we didn’t respond, he escalated the complaint to our regulator. Why should we be responsible if a borrower can’t read plain English and mistakenly sends his letter to the wrong company address?
Answer
The Real Estate Settlement Procedures Act (RESPA), like the Truth-in-Lending Act (TILA), offers mortgage loan servicers the opportunity to designate an address to which requests for information (RFIs) or notices of error (NOEs) (some of which are considered “qualified written requests” or QWRs under the RESPA statute) must be sent.
The idea that a financial institution should treat borrower NOEs according to a borrower’s level of sophistication has not fared well in the courts. For example, the U.S. Court of Appeals for the 2nd Circuit rejected the idea. It found that the borrower in a similar situation had adequate notice of the loan servicer’s designated address for the receipt of QWRs and that the servicer’s statutory duty to respond to the borrower’s letter was never triggered.
Crucially, the 2nd Circuit refused to consider another argument raised by the borrower because he hadn’t pursued it until his appeal–that a mortgage servicer must establish a separate physical office for responding to QWRs. [Regulation X § 1024.35(c) and Comments 35(c)-2 and-3. Mack v. ResCap Borrower Claims Trust, 678 Fed. Appx. 10 (2nd Cir. 2017)]
In another case, the 11th Circuit dismissed the same argument and held that the servicer’s use of the same address for additional purposes was irrelevant to RESPA liability. The 11th Circuit noted that the servicer had subjected itself to the administrative burden of evaluating and prioritizing a larger quantity of mail to identify QWRs (or NOEs or RFIs), perhaps to minimize customer confusion, and that to penalize it for doing so would be perverse. [Bivens v. Bank of America, 868 F.3d 915 (11th Cir. Aug. 17, 2017)]
Jonathan Foxx, Ph.D., MBA is Chairman and Managing Director of Lenders Compliance Group, the first and only full-service, mortgage risk management firm in the United States, specializing exclusively in outsourced mortgage compliance and offering a suite of services in residential mortgage banking for banks and non-banks. If you would like to contact him, please e-mail [email protected].
