Increasingly in courts around the country, borrowers have attempted to transform the Real Estate Settlement Procedures Act (RESPA), along with its implementing regulation (Reg. X), into a “Gotcha!” device through which borrowers could almost automatically recover damages against their mortgage servicers for responding to notices of error or requests for information. The pattern generally goes like this: the borrower sends a letter to the servicer requesting a laundry list of information related to their (usually defaulted) loan. Then, when the servicer does not respond in the exact way desired by the borrower, the borrower will sue the servicer alleging that the servicer’s response was deficient under RESPA, with the borrower seeking actual damages, statutory damages, and attorney’s fees.
Two recent decisions out of the Southern District of Florida are two of the latest federal decisions in the Eleventh Circuit to reject these types of claims by litigious borrowers.
In O’Brien v. Seterus, Inc., No. 9:15-CV-80300, 2015 WL 4514512 (S.D. Fla. June 24, 2015), the borrowers defaulted on their mortgage, and their servicer began regular drive-by inspections of the borrowers’ home. The borrowers sent a qualified written request (QWR) to their servicer, and after receiving the servicer’s response, sued the servicer under RESPA (for the QWR response) and the Florida Consumer Collection Practices Act (FCCPA) (for the drive-by inspections).
The Court granted the servicer’s motion to dismiss the RESPA claim. The QWR had requested a complete loan history and “detailed” information about the property inspections that had been occurring. The servicer’s 52-page response included a payment history for the time the servicer had serviced the borrowers’ loan, as well as the payment history provided by the borrowers’ prior servicer. The servicer’s response also included invoices for all property inspections and explained its reasons for performing the property inspections (i.e., due to the borrowers’ delinquency).
The Court wrote that although the borrower “did not give [the borrowers] the answers they desired, or respond with the level of specificity [the borrowers] apparently requested,” the servicer had adequately responded to the borrowers’ QWR. The Court held that a question about whether the servicer’s exercise of its inspection authority was proper was “a question for a different cause of action—not [RESPA]. RESPA requires a servicer to respond to requests for information. [The servicer] did so.”
By virtue of the Court’s dismissal of the RESPA claim, there was no longer federal question jurisdiction in the case, so the Court dismissed the borrower’s FCCPA claim for lack of subject matter jurisdiction.
In Russell v. Nationstar Mortgage, LLC, No. 14-61977-CIV, 2015 WL 5029346 (S.D. Fla. Aug. 26, 2015), the borrowers sent their servicer five separate qualified written requests (QWRs), primarily seeking a “complete” loan history. The servicer responded to each of these QWRs,
each time sending or referring to a complete payment history from the time the servicer began servicing the loan. The borrowers eventually stopped making their mortgage payments, the servicer foreclosed, and the borrowers filed a RESPA claim against the servicer.
The borrowers argued that the servicer’s repeated failure to provide a payment history for the entire life of the borrowers’ loan, including the period before the servicer serviced their loan, constituted a pattern or practice of RESPA noncompliance, which would entitle the borrowers to statutory damages. Nationstar contended that it had met its obligations to fully and timely respond to each of the borrowers’ QWRs, and that any of the borrowers’ actual damages, other than postage costs, were caused by the borrowers’ own actions in ceasing payments.
Noting that the Eleventh Circuit has characterized a servicer’s obligations under RESPA as rooted in “transparency and facilitation of communication,” the Court followed other recent federal decisions in holding that Nationstar “is not required to give a response that is desired by or satisfies [the borrowers,] but is merely required to provide a statement of its reasons.” The Court found that a servicer has no obligation to provide loan information from a prior servicer in its QWR response if that information could not be the source of a current problem with the borrower’s account. The pay histories provided by the servicer showed, and neither party disputed, that the borrowers’ account was current at the time the servicer began servicing the loan. Accordingly, the Court held that the servicer was not required to provide prior servicer loan histories; thus, there was no pattern or practice of RESPA noncompliance by the servicer.
As to actual damages allegedly caused by the servicer’s QWR responses, the Court derided as “audacious” the borrowers’ argument that they had suffered emotional distress “as a result of writing, mailing, receiving, and processing mail,” including standing in “long lines” at the post office. The Court found that Nationstar could not have provided the borrowers with any information that would have mitigated the damages they claim to have suffered. Moreover, the Court stated in a footnote that it was “not convinced” that actual damages could consist of postage and photocopying costs, but refrained from ruling on that issue.
Though the flood of litigation related to these types of throw-in RESPA claims shows no signs of slowing down, federal decisions such as O’Brien and Russell are providing more and more authority for servicers to draw upon in order to fight back.
