Under RESPA, mortgage loan servicers are required to respond to borrowers’ qualified written requests (QWRs). The Dodd-Frank Wall Street Reform and Consumer Protection Act amended RESPA setting forth additional requirements upon servicers when responding to borrowers’ requests. The Consumer Financial Protection Bureau (CFPB) was charged with writing those statutory changes into Regulation X. Part 2 of RESPA News’ multi-part series on the CFPB’s mortgage servicing final rule covers notices of error and requests for information.  

The CFPB ran into some issues when it realized that Dodd-Frank required servicers to respond to borrowers’ requests to correct errors or for information, but did not stipulate that the requests must be in the form of a QWR. Currently, a servicer is not required under RESPA to respond to a borrower inquiry that is not within a valid QWR. The CFPB’s new mortgage servicing regulation changes that.

Rather than having a separate section designated for QWRs, the bureau decided to incorporate them into two new sections: Error Resolution Procedures and Requests for Information.

QWRs are required, by statute, to be in writing in order to be valid. In the proposed rule the CFPB released in August 2012, it suggested that servicers be required to respond to both written and oral notices of error. The industry, however, strongly opposed this idea, arguing that it would place a significant burden on servicers. It appears the bureau listened, because the final rule does not include oral notices of error.

The final rule is set up as follows:

Section 1024.35: Error resolution procedures

Section 1024.35(a) requires servicers to reply to a written notice from the borrower that claims there is an error on the borrower’s account. Along with the asserted error, the notice must include: 1) the borrower’s name; and 2) information that enables the servicer to identify the account. Similar to a current QWR, a notice that is written on a payment coupon does not need to be treated as a notice of error. A QWR that asserts an error relating to the servicing of the loan will be considered a notice of error.

The rule also defines the term “error” so that servicers know in which instances they must respond to a servicer. Section 1024.35(b) contains a list of 11 covered errors. This list includes failure by the servicer to: accept valid payments; credit an account as of the date of receipt; and provide an accurate payoff balance amount upon the borrower’s request. The eleventh error in the list is a catch-all — “Any other error relating to the servicing of a borrower’s mortgage loan.”

Servicers can designate a specific address to receive notices of error and must send borrowers a notice providing the address.

Section 1024.35 requires servicers to acknowledge receipt of the borrower’s notice of error within five days (excluding holidays and weekends).

The servicer must then fully respond to the notice of error by either: 1) Correcting the error identified by the borrower and providing the borrower with notification of the correction, the date of the correction and contact information for further assistance; or 2) Conducting a reasonable investigation and providing the borrower with a notification that includes a statement that the servicer has determined no error occurred, a statement of the reasons for this determination, a statement of the borrower’s right to request documents relied upon by the servicer in reaching its determination, information regarding how the borrower can request such documents and contact information for further help.

If the servicer finds an additional error during its investigation, it must correct the error and provide the borrower with notification.

The bureau also established new response time limits. The time limits for error resolution responses are broken into three parts. First, if the borrower asserts that the servicer failed to provide an accurate payoff balance, the servicer has only seven business days to respond. Second, if the borrower complains that the servicer illegally filed for foreclosure or conducted a foreclosure sale, the servicer must respond either prior to the date of the scheduled foreclosure sale or within 30 business days, whichever is earlier. Lastly, for all other covered errors, the servicer must respond within 30 business days. The time limits can be extended by 15 days under certain circumstances.

In addition, if a notice of error is delivered to the servicer more than one year after servicing was transferred or the mortgage was paid in full, the error is considered untimely and the servicer is not required to comply. The servicer is, however, required to inform the borrower of this in writing within five days after making the determination.

The rule also allows for exceptions when the servicer would not be required to comply.

It’s also important to note that servicer cannot charge a fee as a condition of investigating and responding to a notice of error. A servicer also may not send adverse information to any consumer reporting agency regarding the subject of the notice for 60 days after receipt.

Section 1024.36: Requests for information

An information request is a written request for information from the borrower that includes: 1) the name of the borrower; 2) information that enables the servicer to identify the borrower’s mortgage loan account; 3) an explanation of the information the borrower is requesting. A request for information on a payment coupon is not valid. A QWR that requests information relating to servicing of the loan is considered a request for information.

Similar to notices of error, the servicer can require the borrower to send the notice to a certain address. The servicer has five business days to acknowledge a request for information. In addition, the servicer must respond by either: 1) providing the borrower with the requested information and contact information for further assistance; or 2) conducting a reasonable search for the requested information and providing the borrower with a notification that states that the servicer has determined that the requested information is not available to the servicer, provides the basis for the servicer’s determination and provides contact information.

Again, there are different time limits depending on what information the borrower is requesting. If the servicer receives a request for the identity and contact information for the owner or assignee of the loan, a response is required within 10 days. For all other requests for information, the servicer has 30 days to respond with the option of a 15 day extension under some circumstances. The rule also allows for exceptions when the servicer would not be required to comply.

The official interpretation for these sections begins on page 711 of the rule. According to the CFPB’s interpretation, a notice of error or request for information can be submitted by an agent of the borrower. The interpretation sets forth a list of errors servicers do not need to respond to and gives further explanations of each section.

Stay logged on to RESPA News for further analysis of the CFPB’s final mortgage servicing rule. October Research LLC will be offering a webinar focusing on the new loan servicing standards in March as part 1 of its 2013 RESPA webinar series.