QUESTION
We are a mortgage servicer, providing servicing throughout the country. I am the company’s Assistant General Counsel.
As a result of a multistate banking examination, it is alleged that we failed to respond fully to RFI requirements. Specifically, the claim is that we did not provide sufficient information in response.
Our staff has done considerable research on this matter; however, we have yet to determine how much information is sufficient to satisfy the RFI requirements. I am writing to you to get your view.
How much information must a servicer provide in response to an RFI?
ANSWER
The Real Estate Settlement Procedures Act (RESPA) and its implementing Regulation X require servicers to respond to borrower requests for information (RFIs). This procedure results from the Dodd-Frank Wall Street Reform and Consumer Protection Act’s expansion of the scope of RESPA’s complaint handling requirements beyond the previously existing qualified written request (QWR) requirements.
The RFI requirements apply to any written request from a borrower (or an agent for a borrower) to a servicer for information if the request includes three elements:
(1) the name of the borrower;
(2) information that enables the servicer to identify the borrower’s mortgage loan account; and
(3) a statement of the information the borrower is requesting.
Let’s take a look at the procedural components.
Regulation X sets up a 2-step process for responding to RFIs, as follows:
First, within five days (excluding legal public holidays, Saturdays, and Sundays) after receiving an RFI, a servicer must provide a written acknowledgment of receipt; and
Second, a servicer generally must respond to the RFI not later than 10 days after receiving an RFI for the identity of, and address or other relevant contact information for, the owner or assignee of a mortgage loan, and not later than 30 days after receiving any other RFI.
The servicer may extend the 30-day period by 15 days if, before the end of the 30-day period, the servicer notifies the borrower of the extension and its reasons. (The 10-day period cannot be extended.) A servicer need not comply with this 2-step process if it provides the information requested in writing within 5 days after receiving the RFI, along with contact information, including a telephone number, for further assistance.
In general, the servicer must respond to an RFI by taking one of two actions:
(1) providing the borrower with the requested information and contact information in writing, including a telephone number; or
(2) conducting a reasonable search for the requested information and providing the borrower with a written notification stating that the servicer has determined that the information is not available to the servicer, with the basis for that determination and contact information, including a telephone number.
Now, to your question about how much information must the servicer provide.
Regulation X offers guidance regarding the types of information a servicer need not provide and what information is considered not available to the servicer. For example, information is not available if a borrower requests information stored on electronic back-up media that is not accessible by servicer personnel in the ordinary course of business without undertaking extraordinary efforts to identify and restore the information. Also, a servicer is not required to respond to RFIs that are overbroad or unduly burdensome, such as RFIs that seek documents relating to substantially all aspects of mortgage origination, mortgage servicing, foreclosure, and mortgage sale or securitization.
I think a recent court decision may provide some clarification.
The U.S. Court of Appeals for the 6th Circuit addressed a borrower’s claim that her mortgage loan servicer failed to provide all the information she requested in an RFI.[i]
In 2005, Ms. Miller bought a home and financed the purchase with a mortgage loan. She fell behind on her payments and by January 2019 was 29 payments past due. She unsuccessfully sought a loan modification. In March 2019, a sheriff’s sale took place.
In August 2019, Miller sued the lender’s assignee and the loan servicer, including RESPA claims for violating Regulation X’s RFI requirements and “dual-tracking” prohibition. (I’ll get to “dual tracking” shortly.) She claimed that the defendants “did not provide all of the information sought in her letters” and that she “was inconvenienced and incurred expenses in seeking the information that [d]efendants refused to provide.”
Miller asked for “actual damages, including, but not limited to:
(1) out-of-pocket expenses incurred dealing with the RESPA violation including expenses for preparing, photocopying and obtaining certified copies of correspondence,
(2) lost time and inconvenience to the extent it resulted in actual pecuniary loss,
(3) late fees, and
(4) denial of credit or denial of access to full amount of credit line, additional [statutory] damages in the amount of $2,000.00, plus attorney’s fees, the costs of this lawsuit, and litigation expenses.”
The district court dismissed all her claims for lack of standing, finding that she had failed to plead sufficient damages to establish an injury-in-fact.
Importantly, the 6th Circuit affirmed, holding that RESPA does not require a servicer to respond in full to a borrower’s request. Rather, RESPA requires a lender to provide “information requested by the borrower or an explanation of why the information requested is unavailable or cannot be obtained by the servicer.” Merely not providing some of the information requested cannot be enough to seek damages.
Although the bar for adequately pleading RESPA’s QWR violations is low, Miller failed to meet that bar. She did not allege a violation of a statutory deadline or any procedural requirement. She also did not provide any theory for how the alleged violations had caused her asserted actual damages, nor did she mention anything resembling a misapplied payment or other error the servicer had failed to correct in its responses.
Without more, she failed to adequately plead a concrete injury-in-fact to survive dismissal. And, having failed to establish one violation, she was unable to plausibly allege a pattern or practice of violations, as required to assert a claim for statutory damages.
Another provision of Regulation X prohibits “dual tracking,” which occurs when a servicer simultaneously evaluates a consumer for loan modifications or other loss mitigation options while pursuing foreclosure on the property securing the loan. The rule prohibits a servicer from making the first notice or filing required for a foreclosure process until a mortgage loan account is more than 120 days delinquent.
Moreover, under the “dual tracking” rule, even if the borrower is more than 120 days delinquent, if the borrower submits a complete application for a loss mitigation option before the servicer has made the first foreclosure notice or filing, the servicer may not start the foreclosure process unless:
(1) the servicer informs the borrower that they are not eligible for any loss mitigation option (and any appeal has been exhausted);
(2) the borrower rejects all loss mitigation offers; or
(3) the borrower fails to comply with the terms of a loss mitigation option, such as a trial modification.
The 6th Circuit found that Miller had provided no factual support for any pattern or practice of dual tracking violations. Nor did she provide any evidence of harm suffered due to alleged dual-tracking violations. As a result, the 6th Circuit affirmed the dismissal of the dual tracking claim and the RFI claims.
Jonathan Foxx, Ph.D., MBA[i] Miller v. Bank of N.Y. Mellon, 2021 U.S. App. (6th Cir. Dec. 1, 2021)
