yep, it's now confirmed on the blabbering, lol.


THIS is a great site, articles are by attorneys that represent mortgage bankers, check out their articles: http://www.usfn.org/cgi-ocal/library.cgi

Qualified Written Requests: Deal with Them (Sept. '00)
by Glen D. Rubin
McCalla, Raymer, Padrick, Cobb, Nichols & Clark, LLC – USFN Member (GA)

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What is a Qualified Written Request (QWR)?
Section 6 of the Real Estate Settlement Procedures Act (RESPA) describes the requirements for this request:

must be written correspondence from the borrower or his agent (such as an attorney) that is not contained on a payment coupon or other payment medium supplied by the servicer;

must contain enough information to allow the servicer to identify the borrower’s name and account; and

must include a statement of why the borrower believes the account is in error or a sufficiently detailed request for account information.

RESPA was originally enacted in the 1970s to protect homebuyers from abusive settlement practices and unnecessarily high settlement charges. In 1990, RESPA was amended to encompass loan servicing -- in particular to deal with disclosures owed to borrowers relating to the assignment, sale or transfer of loan servicing.

The part of RESPA dealing with QWRs [12 U.S.C. §2605(e) or the "Statute"] covers all "federally related mortgage loans," which is broadly defined to include virtually any loan secured by a one- to four-family residence. The Statute applies to servicers who, by definition, include the person responsible for servicing the loan, together with a person who makes or holds the loan if he also services the loan.

It is important to note that the written communication triggering the Statute need not be very official looking. It does not need to reference the Statute -- or state that it is intended to be a QWR. If a borrower simply mails copies of cancelled checks to a servicer, this has been held not to constitute a QWR. However, if the copies are accompanied by a writing identifying the account and giving an indication that payments have been made and not properly accounted for, this has been found to activate the statutory requirements.

Why are QWRs now a BIG Concern in Bankruptcy?

The effects of the Statute in a bankruptcy scenario can be far-reaching. Anyone receiving a response to a Motion for Relief from the Automatic Stay -- either by formal pleading or by letter from a debtor’s attorney -- may want to consider whether the Statute has been invoked. Although there are some excellent arguments why the Statute should not apply to motion practice in a specialized federal court, the issue has yet to be directly confronted in the bankruptcy courts.

Until recently RESPA rarely, if ever, crossed paths with bankruptcy law. However, there has been a recent proliferation of litigation in the mortgage banking industry. At first the plaintiffs’ bar focused on aspects of RESPA relating to origination and settlement. Ultimately, their scrutiny led them to the default servicing area and into bankruptcy matters. Ever-increasing servicing transfers have turned attention to the Statute. Plaintiffs’ counsel recognize the Statute as a means to collect damages and awards of attorneys’ fees against unsuspecting servicers.

More importantly, however, is its use as a powerful discovery tool enabling plaintiffs’ counsel to gain easy access to servicers’ records and business practices for other potential class action claims. Many of the plaintiffs’ attorneys do not regularly practice before the bankruptcy courts. Nevertheless, they have entered the bankruptcy arena by associating or partnering with prominent debtors’ counsel around the country – and even targeting specific servicers.

What is a Servicer’s Duty when it receives a QWR?

Once a request is received a servicer must:

Provide a written acknowledgement of receipt to the sender within 20 business days; and

Within 60 business days of receipt, either: (a) investigate and make appropriate corrections to the account and transmit written notification of the corrections made to the borrower; (b) investigate and provide the debtor with a written explanation of why the servicer thinks its position and accounting are correct; or (c) investigate and provide the debtor with a written explanation that includes all the information requested by the borrower or an explanation of why that information is not available.

It is important to note that only business days count. The Statute excludes weekends and "legal public holidays" from the computation of the 20- and 60-day deadlines. In lieu of acknowledging receipt, the 20-day letter may indicate that the borrower’s requested actions have been taken. Therefore, no further actions will be required of the servicer. If an inquiry or investigation by the servicer is required, however, the 20-day acknowledgement letter, while not conceding that the correspondence is a QWR, must explicitly acknowledge its receipt. The 60-day communication should contain the name and telephone number of an individual employee, office or department of the servicer that can provide assistance to the borrower.

During the 60-business day period following receipt of a QWR, the servicer may not report on any disputed sums to a consumer-reporting agency. The creditor may make credit reports on amounts not subject to dispute. Under the Fair Credit Reporting Act, the QWR will also trigger a duty to report corrections made to the account. The servicer may still pursue collection efforts during the 60-day period, but this would not be advised if the only source of default is the disputed amounts.

What Potential Damages does a Servicer Face?

Successful individual plaintiffs can recover actual damages. Actual damages include travel expenses, compensation for missed work due to QWR preparation, costs of preparing, copying and mailing correspondence, reparations for denial of credit based on failure to correct the account after receiving the request and -- in some cases – for mental anguish.

Additional damages may be awarded if there is a "pattern or practice of noncompliance" with the Statute. These damages may not exceed $1,000 and are generally limited to one award per case. However, certain courts have suggested that the defendant can be held liable ($1,000 award) for each and every inquiry on a particular loan that is not timely answered. Further, a borrower need not have any actual damages to collect these additional damages under the Statute. Costs and reasonable attorneys’ fees are recoverable as well.

Finally, the Statute provides for class actions to be brought with actual damages awarded to each class member. In the case of a "pattern or practice of noncompliance," supplementary damages of not greater than $1,000 can be granted to each member of the class. The overall award is capped at the lesser of $500,000 or one percent of the servicer’s net worth. Again, reasonable attorneys’ fees and costs may be awarded.

Strategies for Dealing with QWRs

Establish a separate, exclusive office or address for receipt and handling of QWRs. A servicer must give notice of the specified address to the borrower either at origination, in the Notice of Transfer of Servicing, or by separate notice for loans in your portfolio. After the notice is given, only requests sent to this address will trigger the Statute’s requirements.

With the help of your attorneys, establish well-defined policies and procedures to assure that requests are timely, effectively, and uniformly answered. Consideration should be given to naming and training one individual to receive the requests and serve as a contact for borrowers.

Take advantage of the Statute’s safe-harbor provision. You may audit your loan portfolio and correct any known mistakes without penalty. Specifically, if within 60 days of discovery of an error (and before commencement of an action or before receipt of written notice of the error from the borrower), the servicer notifies the borrower of the error and makes necessary corrections, the servicer shall not be liable for any failure to comply with the Statute.

Use the opportunity to have your attorneys dispute the validity of the QWRs if they are received during any court proceeding -- especially a bankruptcy case. The challenge should be based upon the premise that bankruptcy rules and procedures preempt and overrule RESPA. The Bankruptcy Code and Federal Rules of Bankruptcy Procedure contain other mechanisms allowing borrowers to request the information or to resolve account disputes.

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