By Lane Houk
July 25, 2011
The Dodd-Frank Wall Street Reform and Consumer Protection Act was signed into law on July 21, 2010. The Act modifies the timelines for qualified written requests (QWRs), outlaws various servicing practices, greatly increases the liability for specific RESPA violations, and makes several TILA adjustments.
Shorter QWR Timelines are NOW IN EFFECT
Servicers now have less time to acknowledge receipt of a QWR along with less time to properly respond to QWRs. The Act changes the receipt acknowledgment deadline from 15 days to only 5 days for a proper QWR (Qualified Written Request). The Act also modifies the substantive response deadline from 60 days to just 30 days while permitting a one-time 15-day extension, if the borrower is notified with the extension and also the reasons for the delay; but even using the extension, the time frames are nonetheless short so servicers are going to be challenged to act quickly. Procedures for promptly responding to QWRS are now even more imperative however don’t be surprised if servicers pay sloppy attention to these issues.
Important thing to WATCH OUT FOR: The Designated Address Tactic
Many servicers may already have designated an address for QWRs, but don’t or won’t publicize this address (others put it in the fine print of your mortgage statement). A servicer may well set up a particular and exclusive address for QWRs by sending notice towards the borrower in a notice of transfer, or a separate mailing. 24 C.F.R. § 3500.21(e)(1). Such an address should assist servicers process these requests in a timely fashion but don’t be surprised if many try to use the address as a potential safeguard to protect them from liability, if the borrower sends the QWR towards the wrong address they might make the claim that they weren’t properly notified.
So here’s a borrower practice tip: Call your Servicer before you send a QWR and specifically ask for the address to send a Qualified Written Request to. Verify who you spoke with, what date and time and make them repeat the address twice to make sure you have it right.
Common Prohibitions & Requirements
Servicers ought to also be aware of the new general RESPA prohibitions regarding force-placed insurance, as well as charging fees for responses to QWRs and common responses. The Act imposes new requirements for escrow accounts. For example, after receiving a full payoff, any escrow balance must be returned within 20 days. The Act also implements a 10-business day deadline to respond to a request for the identity and address with the owner, or assignee, with the loan.
The Act raises the available damages for failing to respond to RESPA requests as required. The available damages for each violation under 12 U.S.C. § 2605 changed as follows:
(1) Individuals: actual damages plus $1,000 increased to actual damages plus $2,000; and
(2) Class Actions: the cap for class action lawsuits increased from the lesser of $500,000 or 1 percent with the servicer’s net worth to the lesser of $1,000,000 or 1 percent.
In addition, the Dodd-Frank Wall Street Reform and Consumer Protection Act adjustments several sections with the Truth in Lending Act. Escrow accounts are now mandatory for many first mortgages, including all loans guaranteed by a state or federal government. The Act requires servicers to credit payments as with the date of receipt, unless a delay will not result in a charge or negative credit report. Also, payoff statements should be sent within a reasonable time, but no extra than seven days after a written request.
The most crucial points are that servicers ought to speed up internal actions to meet these new deadlines, and that the damages available for RESPA violations have doubled. Servicers must take note that they can limit liability for potential QWR violations by requiring that particular requests be sent to a particular and exclusive address. If the borrower sends a QWR towards the wrong address, the servicer may well be able to avoid liability altogether. So watch out for these tricky, deceptive servicing tactics. It’s shameful that any of these companies does this.
It’s really quite simple. Be honest with your customers. Don’t tack on usurious fees and don’t try to get one over on them. What surprises me the most is that the average consumer doesn’t realize that the major servicers are all subsidiaries of the major banks. Chase, Wells Fargo, Bank of America, Citigroup, etc.
Servicing is where so much of the damage is being done to our housing market yet NO ONE boycotts the big banks. I for one will never have a checking account or get a loan from any of the big banks. They can forget it… you should send a clear voice as well.