Qualified Written Requests, RESPA and Mortgage Servicing

When you apply for a loan product, there are two parts: the servicing rights (meaning the right to collect payments) and the actual loan.

A lot of people think that when they get a loan, the lender collects the payments from them and holds the note for the life of the loan. As I’ve mentioned before, this is not necessarily the case. (See the blog post “Produce the Note” here.) These days, the note and the servicing rights are bought and sold. Both can be transferred many times over the life of the loan.

The Federal Trade Commission’s website has a lot of great information on the topic of mortgage servicing, much of which appears in this post. It was very well written and I didn’t think it necessary to rewrite it.

A mortgage servicer is responsible for collecting your monthly loan payments and crediting your account. A servicer also handles your escrow account, if you have one.

An escrow account is a fund held by your servicer into which you pay to cover charges such as taxes and insurance. These escrow payments typically are included as part of your mortgage payments. The servicer also pays your taxes and insurance as they become due during the year.

The Real Estate Settlement Procedures Act (RESPA), enforced by the Department of Housing and Urban Development, is the major law covering escrow accounts.

If your mortgage servicer administers an escrow account for you, the servicer is required to make escrow payments for taxes, insurance, and any other charges in a timely manner. Within 45 days of establishing the account, the servicer must give you a statement that clearly itemizes the estimated taxes, insurance premiums, and other anticipated charges to be paid over the next 12 months, and the expected dates and totals of those payments.

Under RESPA, the mortgage servicer also is required to give you a free annual statement that details the activity of your escrow account. This statement shows your account balance and reflects payments for your property taxes, homeowners insurance, and other charges.

If your loan is about to be sold, you generally get two notices: one from your current mortgage servicer; the other from the new servicer. Usually, your current servicer must notify you at least 15 days before the effective date of the transfer, unless you received a written transfer notice at settlement. The effective date is when the first mortgage payment is due at the new servicer’s address. The new servicer must notify you within 15 days after the transfer has occurred.

The notices must include:
• the name and address of the new servicer.
• the date the current servicer will stop accepting your mortgage payments.
• the date the new servicer will begin accepting your mortgage payments.
• toll-free or collect-call telephone numbers, for the current and new mortgage servicer, for information about the transfer.
• whether you can continue any optional insurance, such as credit life or disability insurance; what action, if any, you must take to maintain coverage; and whether the insurance terms will change.
• a statement that the transfer will not affect any terms or conditions of your mortgage, except those directly related to the servicing of the loan. For example, if your contract says you were allowed to pay property taxes and insurance premiums on your own, the new servicer cannot demand that you establish an escrow account.

There is a 60-day grace period after the transfer: during this time you cannot be charged a late fee if you mistakenly send your mortgage payment to the old servicer. In addition, the fact that your new servicer may have received your payment late as a result cannot be reported to a credit bureau.

So, why should you be paying attention to the servicing letters you receive? To make sure the servicer is correctly crediting your payments and managing your account. Sometimes there are errors when the loans are transferred and you might get charged a late fee, or you might get charged for a fee for something else.

The point is, you should be paying attention to how your payments are credited to your account.  If you think there is a discrepancy, you should send a Qualified Written Request (“QWR”) under RESPA.

Qualified Written Requests are also being used to put lenders on notice that they are investigating their loans and looking for violations of TILA and RESPA. I honestly don’t think lenders pay much any attention to these QWR’s, so if you’re worried about tipping them off, I wouldn’t worry about that.

Many times when clients decide to get a loan audit, they realize that they don’t have the necessary paperwork from closing. You can use a QWR to request a copy of your closing documents if you don’t have them. However, be aware that lenders don’t typically respond within the twenty days required by law. In some cases, it could take several months for the lender to respond. This is important if you’re in foreclosure, so don’t wait until the last minute to send off this request.

Also, as it relates to the produce the note argument, you should be aware that the servicer is going to send you a copy of the same document you signed at closing, which may not reflect the true and current owner of the note. See the blog post about MERS here for more information on this issue.

They will also not send you copies of anything such as servicing agreements or documents that their lawyers don’t think they have to produce, so if you’re using a QWR thinking you’ll hit a goldmine of dirt on the lender, don’t count on it.

I’ve also heard a lot of laypeople say that you should file a lawsuit against the lender for missing the twenty day deadline. However, as I’ve said before, just because the law says they are required to do something within a set period of time doesn’t mean they do it, or that you can win a court case based on their violation of the law.

Here’s a sample qualified written request that you can use to request documents from your lender. You purpose could be to make sure they are crediting your payments correctly or because you need a copy of your closing documents or various other purposes related to the servicing of your mortgage.

[Date]

Via Certified Mail
 Return Receipt Requested

Lender Name and Address

 

Re: Homeowners:   
 Loan Number(s):   
 Property Address:   

Dear Sir or Madam:

This letter is a qualified written request (“QWR”) pursuant to the Real Estate Settlement and Procedures Act (“RESPA”), 12 U.S.C. §2605(e). I am hereby requesting information about the fees, costs and escrow accounting of the above-referenced loan.

The information I am requesting as part of this QWR is as follows:

 1. A copy of all documents executed by me at the closing of this transaction.
 2. The current interest rate.
3. The adjustment dates of each interest rate adjustment, with the corresponding adjustment amount.
4. The current holder of the mortgage/deed of trust, their mailing address for process of service, along with a current telephone number.
5. The current holder of the note, their mailing address for process of service, along with a current telephone number.
6. The date that the current holder acquired this mortgage and from whom it was acquired from.
7. The date your company began servicing the loan.
8. The previous servicer of the loan.
9. The monthly principal and interest payments, and monthly escrow payments received from the date of the loan’s closing to the date of this QWR.
10. A complete payment history, including how those payments were applied, including the amounts applied to principal, interest, escrow and other charges.
11. The total amount due of any unpaid principal, interest, escrow charges, and other charges due as of the date of this letter. Please separately and identify each amount due.
12. The total amount of principal paid on the account up to the date of this letter.
13. The payment dates, purposes of payment and recipient of any and all foreclosure fees and costs that have been charged to my account.
14. A breakdown of the current escrow charges showing how it is calculated and the reasons for any increase within the last twenty-four (24) months.
15. A breakdown of any shortage, deficiency or surplus in our escrow account over the past three years.
16. A breakdown of all charges accrued on the account since the date of closing, that includes, but is not limited by, late charges, appraisal fees, property inspection fees, forced placed insurance charges, legal fees and recoverable corporate advances.
17. A statement indicating which covenants of the mortgage and/or note authorize each charge.
18. Please provide a copy of all appraisals, property inspections and risk assessments completed for this account.
19. Please provide a copy of all trust agreements pertaining to this account.
20. Please provide a copy of all servicing agreements (master, sub-servicing, contingency, specialty and back-up) pertaining to this account.
21. Please provide a copy of all written loss-mitigation rules and work-out procedures for this account.
22. Please provide a copy of all manuals pertaining to the servicing of this account.
23. Please provide a copy of the LSAMS Transaction History Report for this account, and include a description of all fee codes.
24. If this account is registered with MERS, state its MIN number.
25. A statement indicating the amount to pay this loan off in full as of ____________________.

We hereby dispute all late fees, charges, inspection fees, property appraisal fees, forced placed insurance charges, legal fees and corporate advances charged to this account.

Additionally, I believe my account is in error for the following reasons:  _____________________________.

Pursuant to 12 U.S.C. §2605(e) you are hereby notified that placing any negative coding on my credit report before responding to this letter is a violation of RESPA and the FCRA. Your organization will be subject to civil liability if negative coding appears for this account before a response to this QWR is provided to me.

Please provide confirmation that you have received this QWR within twenty (20) days, as required under 12 U.S.C. § 2605(e). Thereafter, please respond to these questions within sixty (60) days of receipt of this letter, as also required by 12 U.S.C. § 2605(e).

Very truly yours,
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