QUESTION
We are a medium-sized
servicer with a servicing portfolio in almost all jurisdictions in the United
States. I am an attorney who heads the team evaluating Qualified Written
Requests (QWR). We recognize there are specific elements to a QWR. However,
sometimes, it feels like a judgment call to determine what is or is not a QWR.
I often
find myself taking deep dives into RESPA’s Regulation X and case law to
interpret whether a letter from a borrower constitutes a QWR or a complaint,
each with obviously different – though sometimes overlapping – resolution criteria
and statutory obligations. There are many instances where the letter is both a
QWR and a complaint.
My focus is
on determining whether we have received a bona fide QWR. I was wondering
if you could provide some guidance in navigating this legal jungle and provide
a case that shows how a court has offered a way to identify a QWR.
What constitutes
the requirements for a Qualified Written Request?
Is there a
case with some guidelines for identifying a Qualified Written Request?
COMPLIANCE
SOLUTION
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and Procedures
ANSWER
You have
asked a question that involves one of the more litigious areas of servicing
compliance. The Qualified Written Request (QWR) provisions of RESPA continue to
produce an abundance of litigation.
Generally,
the court decisions typically use the more general statutory term QWR as they
consider borrower claims regarding Notices of Error (NOEs) and Requests for
Information (RFIs), the specific types of QWRs described in Regulation X[i].
Before
proceeding with a possible case for you to consider, allow me to put down some
foundation.
RESPA[ii]
specifies that
“[d]uring the 60-day period beginning on the date of
the servicer’s receipt from any borrower of a qualified written request
relating to a dispute regarding the borrower’s payments, a servicer may not
provide information regarding any overdue payment, owed by such borrower and
relating to such period or qualified written request, to any credit reporting
agency.”
Similarly,
Regulation X[iii]
provides that, after receiving an NOE, a servicer may not, for 60 days, furnish
adverse information to any consumer reporting agency regarding any payment that
is the subject of the notice of error.
This does
not limit or restrict a servicer or lender from pursuing any remedy under
applicable law, including initiating foreclosure or proceeding with a
foreclosure sale, except for the Regulation X restrictions regarding assertions
of errors relating to:
(a) a first notice or filing required by applicable
law for any judicial or nonjudicial foreclosure process in violation of
Regulation X[iv];
or
(b) a motion for foreclosure judgment or order of
sale or conducting a foreclosure in violation of Regulation X[v].
Now, let's
move on to a case that may be responsive to your inquiry.
On remand
from a decision of the U.S. Court of Appeals for the 4th Circuit, a federal
district court in Maryland recently considered whether a borrower inquiry was a
QWR and, if it were, then whether the servicer had violated the restriction on
furnishing adverse information to a consumer credit reporting agency. The case
is Morgan v. Caliber Home Loans, Inc.[vi]
Here’s my
outline.
·
In 1998,
Morgan borrowed from Nations Bank to refinance his home mortgage loan. Morgan
modified the mortgage loan once to change the date of his monthly payment.
·
In
November 2014, after the loan matured, servicing was transferred from Bank of
America to Caliber. At the time of the transfer, the loan documents showed an
outstanding balance due on the loan. Morgan repeatedly contacted Caliber about
the purported outstanding loan balance.
·
Morgan
learned through an employer-generated credit check that his credit report
reflected a $16,806 arrearage on the loan. The employer told Morgan he needed
to correct the adverse credit reports or he would lose opportunities for job
promotions.
·
Over the
next year, Morgan continued receiving notices regarding the outstanding
balance.
·
On
September 20, 2016, Morgan called Caliber to inquire about the notices because
he believed the loan had been paid off. He learned during that call that the
balance had increased to $30,656.89.
·
On
September 25, 2016, he sent Caliber a letter stating:
o “I called Caliber and talked to
[an employee]…he stated I owe $36,656.89…Can you please correct your records.
Your office’s reporting this wrong amount to this credit agency is effecting
[sic] my employment. Please correct your records.”
·
Caliber
received the letter and responded in writing the next day.
·
In its
October 4, 2016 letter, Caliber acknowledged receipt and stated it would
“perform the necessary research and respond within the time period required by
law.”
·
Two days
later, Caliber determined that the previously reported loan balance was
incorrect. It recalculated the balance as $8,823.
o That same day, Caliber reported
the new balance information to the credit reporting agencies using an Automated
Universal Data form (AUD).
·
Caliber
also suspended its monthly report to the credit reporting agencies regarding
the loan from October 6, 2016 through March 2017.
·
On October
11, 2016, Caliber informed Morgan that the credit report was “inaccurately
reporting the amount past due.”
o The letter vaguely referred to
Caliber having corrected the inaccuracy. Still, it did not explain what was
inaccurate and how that error was corrected, and it did not share with Morgan
that, in Caliber’s view, he still owed $8,823 on the loan.
o The letter added that it might
take up to four weeks before the “correct information” would appear in his
credit report.
·
Morgan
continued to dispute that he owed anything and sent letters to the credit
reporting agencies. According to Morgan, the notice from his employer regarding
his poor credit and the dispute regarding the outstanding balance caused him
emotional distress.
·
On
September 23, 2019, he sued Caliber for violating RESPA and Regulation X.
The
district court dismissed Morgan’s claim, holding that his September 25, 2016
letter did not meet RESPA’s requirements for a QWR. However, the U.S. Court of
Appeals for the 4th Circuit reversed, finding that the letter was a QWR.
On remand,
Morgan moved for partial summary judgment as to liability only, and Caliber
filed a cross motion for summary judgment as to liability and damages.
The
district court granted Morgan’s motion as to two of the three elements of the
RESPA claim (QWR, and failure to refrain from credit reporting, but not as to
damages). It granted Caliber’s motion as to the unavailability of statutory
damages.
Now, I
want to break the foregoing decision into its three elements: QWR, Failure to Refrain,
and Actual Damages. Thereafter, I will provide a few words about statutory damages.
QWR
First, the
court concluded, as required by the 4th Circuit, that the letter was a QWR
because it was “a written correspondence” that articulated a “statement
of reasons” in “sufficient detail” to indicate to Caliber why Morgan
believed the credit reporting was in error. The court granted summary judgment
to Morgan on this element.
Failure
to Refrain
Second,
the parties did not dispute that within 3 days of receiving the QWR, Caliber
submitted an AUD informing the credit reporting agencies that Morgan had $8,823
outstanding, and that this qualified as reporting an “overdue payment.”
Accordingly, Caliber indisputably failed to refrain from reporting “any overdue
payment” for 60 days after having received the QWR. The court also granted
summary judgment to Morgan on this element.
Actual
Damages
Third, the
court determined that Morgan had produced sufficient evidence from which a
reasonable juror could conclude that he suffered emotional distress as a result
of the AUD Caliber sent to the credit reporting agencies.
The mother
of Morgan’s children had observed that Morgan was “worried and anxious,” which
was “unlike Morgan.” When she asked what was troubling him, he would “almost
always turn to Caliber.” His daughter recalled that while living with Morgan
during this time, he was “anxious about Caliber hurting his financial status,”
Morgan “regularly paced around,” he was “short tempered,” and could not eat.
Morgan also sought medical assistance for his anxiety and depression.
From this
testimony, a juror could reasonably conclude that he suffered emotional
distress due to Caliber’s failure to refrain from reporting adverse information
in the AUD. This left a facial issue as to whether Caliber’s RESPA violation
proximately caused Morgan’s emotional distress. Accordingly, the court denied
summary judgment for Caliber as to actual damages.
Statutory
Damages
Morgan
also sought statutory damages, which RESPA allows when a servicer engages in a
“pattern or practice of noncompliance” with RESPA.
Morgan
argued that Caliber’s single AUD constituted a pattern or practice because
Caliber had forwarded it to three credit reporting agencies and violated
multiple RESPA provisions.
Not so,
said the court, because Caliber submitted only one AUD on one occasion. If this
alone were sufficient to establish a pattern or practice, then the pattern or
practice requirement sufficient to trigger statutory damages would apply in
almost every case. The court granted summary judgment to Caliber regarding
statutory damages.
I will
conclude with an observation.
The court
noted that Morgan might wish to pursue an alternative argument that Caliber
violated Regulation X[vii], which requires a servicer to respond to an NOE by either correcting the error
and providing written notification of the correction, or conducting a
reasonable investigation and providing a written notice that no error occurred.
Thus, a legitimate argument could be made that Caliber did not satisfy the
notification requirement, that is, it did not describe the error, how it was
corrected, or the effective date of the correction.
Jonathan Foxx, Ph.D., MBA
Chairman & Managing Director Lenders Compliance Group
[i] Regulation
X §§ 1024.35 (NOEs) and 1024.36 (RFIs), as amended by the 2013 Mortgage Lending
Rules.
[vi] Morgan v. Caliber Home Loans, Inc.,
2024 U.S. Dist. (D. Md. Feb. 22, 2024)
[vii] § 1024.35(e)(1)(i)(B)
