Monday, November 17, 2014

FYI: SD Ohio Rejects Borrower's Allegations of Insufficient Response to QWR, Holds No Liability for Responding With "Good Faith Investigation and Explanation"

The U.S. District Court for the Southern District of Ohio recently granted motions to dismiss and for summary judgment in favor of a mortgage loan servicer and loan owner, as to allegations that the servicer failed to timely and appropriately respond to the borrowers’ written request for information regarding their loan account, in supposed violation of the Truth in Lending Act, 15 U.S.C. § 1639g (“TILA”) and the Real Estate Settlement Procedures Act, 12 U.S.C. § 2605(e) (“RESPA”).


In granting the motions, the Court held that “[a] borrower cannot hold a servicer liable for failing to completely respond to every possible interpretation of a generic and vague QWR,” noting that “RESPA exists to prevent abuse of borrowers by servicers – not to enable abuse of servicers by borrowers.”


A copy of the opinion is available at:  Link to Opinion


The plaintiff borrowers financed the purchase of residential property in southern Ohio with a mortgage loan.  In February 2013, the mortgage loan servicer contacted the borrowers to inform them it was now servicing their account.  The servicer’s introductory correspondence included a provision instructing the borrowers to “send all written requests” to a specified address in Iowa.  Two days later, the servicer sent a second correspondence to borrowers, providing a different address in Iowa for qualified written requests under RESPA.


In March 2013, the borrowers allegedly sent a purported qualified written request to the servicer at an entirely different address in West Palm Beach, Florida.  The request denominated itself as a qualified written request, and sought eight types of information in separately numbered paragraphs.  The record indicated that someone named Earl Hill received the request on March 9, 2013, but did not indicate whether the Florida address was a valid address for the servicer or whether Earl Hill was in any way associated with the servicer.  The servicer acknowledged receipt of the written request on April 25, 2013, and substantively responded on May 1, 2013.


The borrowers filed an action against the servicer and the loan’s owner, alleging that the servicer neither timely nor sufficiently responded to their request for information, as required by 15 U.S.C. § 1639g and 12 U.S.C. § 2605(e).  The servicer filed a motion for summary judgment as to the borrowers’ allegations, and the loan owner moved to dismiss the borrowers’ complaint.


As to the borrowers’ TILA allegations, the servicer and owner both argued that § 1639g of TILA, which requires creditors and servicers to send payoff statements to borrowers within seven business days of receipt of a request, was not in effect at the relevant time of the borrowers’ complaint.  The Court held that section 1639g was enacted as part of Dodd Frank, and did not become effective until January 10, 2014, whereas the alleged events here all took place in 2013.  The borrower did not dispute this position, and the Court accordingly dismissed the borrowers’ TILA allegations without discussion.


As to the borrowers’ RESPA allegations, the Court first noted that the purported QWR was sent in 2013, and was therefore subject to the longer deadlines under pre-Dodd-Frank RESPA.


The Court found that the request constituted a qualified written request.  As you may recall, in order to constitute a qualified written request under RESPA, the request must “include[ ] a statement of the reasons for the belief of the borrower . . . that the account is in error or provide[ ] sufficient detail to the servicer regarding other information sought by the borrower.”  12 U.S.C. § 2605(e)(1)(B)(ii).  The Court held that, although the borrowers did not coherently state their reasons for belief that their account was in error, they did provide sufficient detail regarding the information they sought.


The Court next addressed whether the servicer had any obligation to respond to the purported qualified written request, as it was sent to an unknown address in Florida rather than either of the two addresses provided by the servicer.  The Court confirmed the general rule that “the response obligation under RESPA is only triggered when the QWR is sent to the designated address,” but determined that the rule does not apply under circumstances where no single exclusive address is designated.  The Court found that the servicer’s “closely-spaced correspondence setting forth two different addresses” was confusing, and held that the servicer therefore did have a duty to respond to the request.


Nevertheless, the Court recognized that the undisputed record in the case reflected only that the request was sent by the borrowers to West Palm Beach, Florida on March 5, 2013, received by someone named Earl Hill on March 9, 2013, and received at the servicer’s QWR facility on April 18, 2013.  However, the record did not indicate whether the servicer had an office in West Palm Beach, Florida, or even whether Earl Hill was an employee of the servicer or instead “a kindly old pensioner who forwarded the misaddressed letter.”


The Court therefore held that the servicer’s acknowledgment dated April 25, 2013 was timely, because there was no evidence to indicate that the servicer received the request prior to April 18, 2013, and the servicer thus acknowledged the request within the statutory timeframe then in effect.  The Court also held that even if the servicer had received the request on March 9, 2013, it still provided its substantive response within the timeframe then in effect.


Finally, the Court discussed the sufficiency of the servicer’s response.  Although the Court noted that its analysis “may be somewhat altered in future cases by the regulations promulgated by the CFPB,” it identified the three ways a servicer can respond to a qualified written request: (1) the servicer can make corrections to the account; (2) the servicer can explain or clarify whey the account is already correct; or (3) the servicer can provide the borrower with a written explanation that includes the information requests and explains why information not provided cannot be obtained.  The Court stressed that “the servicer must, whatever response it chooses to make, fairly meet the substance of the QWR.”


In this case, the Court held that the servicer fairly met the substance of the borrowers’ request by providing what documentation it could to answer the borrowers’ request, and specifically explaining why it could offer no more than it did. 


The Court noted that it has previously “taken a dim view of generic form responses by servicers to QWRs,” but in this case chose to “elucidate[ ] the previously unwritten corollary: A borrower cannot hold a servicer liable for failing to completely respond to every possible interpretation of a generic and vague QWR when the servicer has responded with a good faith investigation and explanation.”  The Court expressly stated: “RESPA exists to prevent abuse of borrowers by servicers – not to enable abuse of servicers by borrowers.”


Accordingly, the Court granted the servicer’s motion for summary judgment, and the owner’s motion to dismiss.





Ralph T. Wutscher
McGinnis Wutscher Beiramee LLP
The Loop Center Building
105 W. Madison Street, 18th Floor
Chicago, Illinois 60602
(312) 551-9320
(312) 284-4751
(312) 493-0874


Admitted to practice law in Illinois



            McGinnis Wutscher Beiramee LLP





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