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Handling RESPA Qualified Written Requests — Eighth Circuit Reverses Damages Award for Violation

Posted By USFN, Tuesday, April 17, 2018
Updated: Monday, April 16, 2018

April 17, 2018

by Paul Weingarden and Brian Liebo
Usset, Weingarden & Liebo, PLLP – USFN Member (Minnesota)

In a recent case decided by the Eighth Circuit Court of Appeal, a borrower sued his mortgage servicer claiming servicing violations on his Minnesota loan under the Real Estate Settlement Procedures Act (RESPA). Ultimately, the district court’s damages award to the borrower was reversed and remanded for further proceedings in the district court. Essentially, the appellate court found no harm, no foul. [Wirtz v. Specialized Loan Servicing, LLC, No. 16-4069 (8th Cir. Apr. 3, 2018].

The facts of the case are fairly straightforward. Borrower Wirtz made a series of Qualified Written Request (QWR) demands to his current loan servicer, arising from an alleged misapplication of funds for their servicer-transferred loan after the servicer claimed that Wirtz was delinquent on his loan. Through one QWR, the borrower demanded a payment history from “origination to present.”

The current servicer may have received only a partial loan history from the prior servicer at the time of the service transfer. When the current servicer responded in a fashion deemed objectionable, Wirtz sued for damages under RESPA (and the piggyback provisions of the Minnesota Mortgage Originator and Servicer Licensing Act, which also proscribes lenders from violating federal laws regulating mortgage loan).

The district court found the responses to Wirtz were improper, concluding that the servicer did not conduct an adequate investigation into the QWRs submitted by Wirtz. The district court held (and later the appellate court also agreed) that the servicer violated RESPA when it did not “obtain, review, or provide the full payment history as Wirtz requested.” The district court awarded the borrower damages (and costs) in an amount less than $5,000 — plus attorneys’ fees in excess of $45,000.

Appellate Review
The servicer appealed to the Eighth Circuit Court of Appeals. There, the appellate judges carefully analyzed the wording of the statutes in question, and disagreed with the rationale for the ultimate damages award by the district court, noting that Wirtz had no actual damages to trigger the penalties in the statute. The court held that proof of actual damages is an essential element of a claim under RESPA, and that Wirtz had suffered no actual damages to trigger the statutory provisions. In coming to this conclusion, the appellate court stated the following:

“We agree with Specialized that Wirtz failed to prove actual damages, because Specialized’s failure to comply with RESPA did not cause Wirtz’s alleged harm. When a loan servicer fails to comply with § 2605(e), the borrower is entitled to ‘any actual damages to the borrower as a result of the failure.’. . . Congress’s use of the phrase ‘as a result of’ dictates that there must be a ‘causal link’ between the alleged violation and the damages.”

Once disposing of the actual damage issue, the appellate court then vacated the award for statutory damages on the basis that without actual damages, the trigger to impose additional statutory damages failed as a matter of law. The court reversed and remanded to the district court to enter judgment for Specialized on the RESPA claim. The appellate court, however, did mention the possibility for a further examination under the corresponding Minnesota statute, which remains unknown as of this writing.

An important lesson from this case is for servicers to adequately investigate and respond to borrowers’ qualified written requests. If a borrower submits a QWR that includes a demand for a complete loan history (or a loan history covering specific dates), then the servicer should provide the matching loan history to satisfy RESPA requirements.

Hopefully, the result of this case will deter all but the most determined borrowers from litigation if they suffer no actual damages under RESPA. The prospect of a substantial attorneys’ fees award in favor of a borrower remains an issue whenever litigating RESPA matters, so extreme caution is always prudent for servicers around this topic. Nonetheless, it is encouraging to see the reversal of a large damages award when there is no actual loss caused to a borrower.

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April e-Update

Note for consideration of the USFN Award of Excellence: This article is not a "Feature."


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