Dodd-Frank Act: QWR Timelines Shortened and Other RESPA and TILA
by Kevin T. Dobie
Usset, Weingarden & Liebo PLLP – USFN Member (MN)
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
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.
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.
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.
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:
Individuals: actual damages plus $1,000 increased to actual damages plus
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.
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.
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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