The Dodd-Frank Act is proving to be a ally for homeowners and giving individuals a voice against big banks.
New mortgage servicing rules took effect in 2014, implementing provisions of the Dodd-Frank Act, which impose significant obligations on mortgage servicers, including the obligation to conduct reasonable investigation upon receipt of a notice of error, and to respond to the notice within certain time frames and with certain information. In May of 2016, the 11th Circuit United States Court of Appeals addressed the new mortgage servicing rules in a case between a homeowner and a mortgage servicer.
In this case, the borrower noticed that her monthly payment had increased by about $100 when a new servicer took over servicing her home loan. The borrower wrote to the servicer to inquire about the error, requesting investigation and demanding a refund if appropriate. In response, the servicer sent out a “boilerplate” answer, stating that the “loan and related loan documents were reviewed and found to comply with all state and federal guidelines that relate to them.”
Many of us might have stopped here. Sometimes it feels hopeless trying to contend with these financial goliaths. But this homeowner was not satisfied with the servicer's response, and for good reason.
The borrower’s “notice of error” satisfied requirements for a qualified written request asserting an error, triggering the error resolution obligations imposed on servicers pursuant to RESPA and Regulation X. The written request must include the name of the borrower, information that enables the servicer to identify the borrower's mortgage loan account, and the error the borrower believes has occurred. The error resolution procedure requires servicers to respond to error complaints in a timely manner by either (1) correcting the errors identified by the borrower and providing a written notification of the correction with the effective date of the correction and contact information for further assistance, or (2) conducting a reasonable investigation, and providing the borrower with the following:
(a) a written notification that includes a statement that the servicer has determined that no error occurred
(b) a statement of the reason or reasons for this determination
(c) a statement of the borrower’s right to request documents relied upon by the servicer in reaching its determination
(d) information regarding how the borrower can request such documents
(e) contact information for further assistance
The servicer in this case decided to take the second option and deny any error, but the response letter did not give a detailed statement of the reason or reasons for this determination or any supporting documents. The court found that the generic response letter did not meet the standards of a written notification that includes the reasons for the servicer’s determination.
The decision in this case indicates that courts may interpret the new mortgage servicing rules under RESPA somewhat liberally in favor of consumers. Mortgage loan servicers should ensure their error resolution practices adequately comply with the new rules, especially the letters and supporting documentation that are sent in response to error complaints.