One of the most common issues facing mortgage servicers is how to respond to the thousands of borrower inquiries received every day. Federal law imposes a strict duty on lenders and servicers to both acknowledge and respond timely to a defined type of inquiry known as a “qualified written request,” or QWR. Under the federal Real Estate Settlement Procedures Act and Regulation X, a QWR must be one that requests information or states reasons for the borrower’s belief that the account is in error. See 12 U.S.C. § 2605(e)(1)(B). To qualify, the written request must also include the name and account of the borrower or must enable the servicer to identify them. Id. In essence, the servicer has 60 days (Dodd-Frank provides that this will decrease to 30 days after promulation of the certain final regulations by the CFPB) pursuant to to (1) correct the borrower’s account and provide written notice of the corrections; (2) investigate and provide the borrower with a written clarification as to why the account is correct; or (3) investigate and either provide the requested information or explain why the requested information is unavailable. See 12 U.S.C. §§ 2605(e)(2)(A), (B), and (C). In what can best be described a mixed result for servicers, the U.S. Court of Appeals for the Ninth Circuit has now expanded the arguably broad definition of a QWR but limited its application to the servicing of a borrower’s loan.
In Medrano v. Flagstar Bank, FSB, et al., the 9th Circuit expressly adopted the 7th Circuit’s approach toward QWRs in Catalan v. GMAC Mortgage Corp., 629 F.3d 676 (7th Cir. 2011), holding that no “magic” words are required for QWRs and “[a]ny reasonably stated written request for account information can be a qualified written request.” As a result of this ruling, lenders and servicers must essentially treat every written communication from a borrower as a possible QWR. Despite adopting this broad definition, the 9th Circuit still affirmed the dismissal of the borrower’s RESPA claim because the borrower’s communications “challenged the terms of their loan and requested modification of various loan and mortgage documents,” and, as such, “they were not qualified written requests relating to the servicing of Plaintiffs’ loan.” As the Medrano court emphasized: “the statutory duty to respond does not arise with respect to all inquiries or complaints from borrowers to servicers. RESPA defines the term ‘servicing’ to encompass only ‘receiving any scheduled periodic payments from a borrower pursuant to the terms of any loan, including amounts for escrow accounts . . . , and making the payments of principal and interest and such other payments.’ Id. § 2605(i)(3). ‘Servicing,’ so defined, does not include the transactions and circumstances surrounding a loan’s origination—facts that would be relevant to a challenge to the validity of an underlying debt or the terms of a loan agreement.” The Court explained that because “[RESPA] does not require a servicer to respond to such requests, the district court correctly dismissed Plaintiffs ’claim.” The practical effect of this portion of the ruling is immense: Numerous borrowers have employed a broad Internet-driven tactic of challenging the underlying loan. And, with this ruling, the 9th Circuit rejects such written challenges, even when characterized as QWRs.