Court Rejects Servicer’s Argument That Respa’s Safe Harbor Lasts Until The Borrower Files Suit; It Is Not Applicable If The Servicer Did Not Notify The Borrower’s Of The Error. Also, All Reasonably Stated Written Requests For Account Information Shou

In Catalan v. GMAC Mortgage Corp. , No. 09-2182 (7th Cir., January 2011), the Seventh Circuit Court reversed a grant of summary judgment in favor of a servicer, finding that the District Court erred when it held that the servicer qualified for RESPA’s Safe Harbor with respect to its failure to timely and properly respond to borrower’s Qualified Written Requests. The problem began with the plaintiffs’ prior servicer who incorrectly set the first payment date on the account one month earlier, thus causing their loan to show a default when the first payment was actually due. The prior servicer also increased the borrowers’ monthly payment without notice, causing them to go into default even though they continued to make the original payments. Relying on the incorrect information the servicer treated the account as delinquent. In an attempt to resolve the disputed charges, the borrowers wrote five letters to the servicer. While the defendant acknowledged the receipt of the letters, it failed to follow up with responses to the inquiries. Eventually, upon HUD’s intervention, the servicer corrected the account charges, reinstated the loan account and accepted payments from the borrowers. The borrowers sued under RESPA and the District Court found that the corrective actions defendant took following HUD’s intervention constituted a Safe Harbor defense under 12 U.S.C. § 2605(f)(4). The Seventh Circuit held otherwise. It said that the defendant did not qualify for the Safe Harbor because it did not notify the borrower’s of the error. The court was not persuaded by the defendant’s argument that the safe harbor is available until suit is filed even if it did not discover and correct the error before by notified by the borrowers. The Court then evaluated the servicer’s argument that the borrowers’ letters were not Qualified Written Requests within the meaning of RESPA because they did not identify an error or state that the borrowers believed their account was in error. According to the defendant where the communication merely disputes the debt, as it did here, or requests information on the account it does not trigger obligations under RESPA. The court disagreed observing that RESPA does not require any magic language before a servicer must construe a written communication from the borrower as a qualified written request and respond accordingly. It explained that any request for information made with sufficient detail is enough under RESPA to be a qualified written request and thus to trigger the servicer’s obligations to respond. The take-away from this case: a servicer must vet all communication from a borrower to ascertain if it is a Qualified Written Request.