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The Real Estate Settlement Procedures Act

The Real Estate Settlement Procedures Act (RESPA) [i] was enacted by the U.S. Congress in 1974. RESPA prohibits kickbacks and fee-sharing between lenders and third-party agents (like mortgage brokers). It also requires that lenders provide specific disclosures to borrowers, including a Good Faith Estimate of what the credit offered by the lender will cost and a settlement statement that itemizes the costs of closing the loan. This settlement statement is commonly called a HUD-1 statement.

Qualified Written Requests

RESPA also requires that lenders respond in a timely fashion to disputes and requests regarding a specific mortgage loan. These requests are also called qualified written requests or QWRs. The Dodd-Frank Act contains provisions that accelerate the timeframe in which lenders must respond to such a request. However, there is some confusion as to when the Dodd-Frank changes become live. As of June 2012, the changes are not reflected in the current version of the statute, [ii] but they may become effective as early as July 21, 2012. Given that the changes are not yet incorporated into the current version of the statute, this section will discuss QWRs based on the pre-Dodd-Frank version of the statute.

QWR Basics

Typically, a qualified written request will request a complete transactional history of the loan including all payments and charges. It is also useful to request a key or glossary of the transaction codes the lender uses. This will make it possible to interpret the loan’s transaction history. In general, these documents are largely unreadable without knowing what the various transaction codes mean.

Other requested documents can include the Pooling and Servicing Agreement (if any) for your loan; the name, address, and contact information for the current holder of your mortgage and note; and copies of all correspondence, notes, and other records related to your account. These documents should demonstrate who owns your loan. More importantly, the lender cannot later deny the validity or accuracy of those documents because they were voluntarily produced from their own records.

Most lenders have a specific address to which your QWR should be sent. Make sure to send the QWR to the right address, or the lender may deny receiving it. The lender may also claim that any delays in responding to the QWR are due to the letter being sent to the wrong address. It is also important to send your QWR via certified mail. The return receipt, or “green card,” that you receive will be proof of when the QWR was received by your lender.

Time to Respond

Currently, lenders are required to acknowledge receipt of a QWR within 20 days of receiving the letter. [iii] 60 days after receiving the QWR, the lender must respond to the QWR with the requested documents. However, the Dodd-Frank Act has changed these time frames. There has been some debate among consumer defense attorneys as to when those changes take effect. Based on the text of the Dodd-Frank Act, it would appear that the changes will take effect between July 21, 2012 and July 21, 2013. [iv] Once the changes have taken effect, lenders will have 5 days to acknowledge receipt of the QWR and 30 days to respond to it.

Failing To Respond

As the law currently stands, lenders that fail to comply with RESPA’s QWR provisions can be pursued for actual damages sustained by the borrower, additional damages up to $1,000.00 if the lender has a pattern of non-compliance with RESPA, as well as attorney’s costs and fees. [v] Once the Dodd-Frank changes take effect, the additional damages available will be increased to $2,000.00. [vi]

The Department of Housing and Urban Development has made a sample QWR available at: http://portal.hud.gov/hudportal/HUD?src=/program_offices/housing/ramh/res/reslettr