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Dodd-Frank Act: QWR Timelines Shortened and Other RESPA and TILA Changes

by Kevin T. Dobie
Usset, Weingarden & Liebo PLLP – USFN Member (MN)


The Dodd-Frank Wall Street Reform and Consumer Protection Act was signed into law on July 21, 2010. The Act changes the timelines for qualified written requests (QWRs), prohibits various servicing practices, significantly raises the stakes for certain RESPA violations, and makes a few TILA changes.

Shorter QWR Timelines
Servicers now have less time to acknowledge and respond to QWRs. The Act changes the acknowledgment deadline for QWRs from 15 days to only 5 days. The Act also changes the substantive response deadline from 60 days to just 30 days. It does allow a 15-day extension, if the borrower is notified of the extension and the reasons for the delay; but even with the extension, the time frames are still short enough that servicers must act quickly. Procedures for promptly responding to QWRS are now even more imperative.

Important QWR Practice Tip: Designated Address
If a servicer has not already designated an address for QWRs, now is the time to do so. A servicer may set up a specific and exclusive address for QWRs by sending notice to the borrower in a notice of transfer, or a separate mailing. 24 C.F.R. § 3500.21(e)(1). Such an address should help servicers process these requests in a timely fashion. The address will also protect servicers from liability, if the borrower sends the QWR to the wrong address.

General Prohibitions & Requirements
Servicers should also be aware of the new general RESPA prohibitions regarding force-placed insurance, as well as charging fees for responses to QWRs and general responses. The Act imposes new requirements for escrow accounts. For example, after receiving a full payoff, any escrow balance must be returned within 20 days. The Act also implements a 10-business day deadline to respond to a request for the identity and address of the owner, or assignee, of the loan.

Damages
The Act raises the available damages for failing to respond to RESPA requests as required. The available damages for each violation under 12 U.S.C. § 2605 changed as follows:

(1)   Individuals: actual damages plus $1,000 increased to actual damages plus $2,000; and

(2)   Class Actions: the cap for class action lawsuits increased from the lesser of $500,000 or 1 percent of the servicer’s net worth to the lesser of $1,000,000 or 1 percent.

TILA
In addition, the Dodd-Frank Wall Street Reform and Consumer Protection Act changes a few sections of the Truth in Lending Act. Escrow accounts are now mandatory for many first mortgages, including all loans guaranteed by a state or federal government. The Act requires servicers to credit payments as of the date of receipt, unless a delay will not result in a charge or negative credit report. Also, payoff statements must be sent within a reasonable time, but no more than seven days after a written request.

Conclusion
The most important points are that servicers must speed up internal actions to meet response deadlines, and that the damages available for RESPA violations have increased. Servicers should take note that they can limit liability for potential QWR violations by requiring that certain requests be sent to a specific and exclusive address. If the borrower sends a QWR to the wrong address, the servicer may be able to avoid liability altogether.

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