The U.S. Court of Appeals for the Eleventh Circuit recently affirmed a summary judgment ruling in favor of a mortgage servicer, holding that the servicer had no duty to respond to a Qualified Written Request (“QWR”) under the federal Real Estate Settlement Procedures Act (RESPA) because the borrower failed to send the QWR to the servicer’s designated address for QWR receipt.
A copy of the opinion in Bivens v. Bank of America, NA is available at: Link to Opinion.
A mortgage servicer sent a letter to a borrower advising that the lender transferred the servicing of the borrower’s mortgage loan to the servicer. The letter notified borrower of three separate addresses to use for correspondence — one address for General Correspondence, one address for all Disputes/Inquiries, and one address for Payment Remittance. The otherwise identical addresses contained different post office box numbers.
After receiving the service transfer notice, borrower’s counsel sent correspondence designated as a QWR under RESPA, 12 U.S.C. § 2605(e), to the servicer at the servicer’s General Correspondence address. The letter disputed the servicer’s standing to enforce the note, requested the loan owner’s name, address and phone number, and requested a certified copy of the note in its current condition.
The servicer received the letter at its General Correspondence address and forwarded the letter to its Disputes/Inquiries department. In response to the QWR, the servicer sent the borrower two letters. The first letter identified the holder of the note. The second letter advised the borrower that he mailed his letter to the wrong address, and once again notified the borrower of the correct Disputes/Inquiries address. However, the servicer failed to timely provide the borrower a certified copy of the note in its current condition.
The borrower sued the servicer alleging that he was entitled to actual and statutory damages under RESPA because the servicer did not properly respond to his purported QWR.
The servicer moved for summary judgment claiming, among other things, that the purported QWR did not trigger its acknowledgment and response obligations under RESPA because the borrower did not mail the letter to the correct address. The trial court granted the servicer summary judgment. Specifically, the trial court found that the servicer had no duty to respond to the QWR because the borrower mailed the QWR to the wrong address.
This appeal followed.
Initially, the Eleventh Circuit observed that when a borrower submits a QWR then the servicer must provide “a written response acknowledging receipt of the correspondence” and otherwise respond within specified time periods. 12 U.S.C. § 2605(e)(1)(A), (e)(1)(B), (e)(2).
As you may recall, RESPA authorized the Secretary of the Department of Housing and Urban Development “to prescribe such rules and regulations” and “make such interpretations . . . as may be necessary to achieve [the statute’s] purposes.” 12 U.S.C. § 2617 (repealed 2011). The Secretary then promulgated Regulation X, 24 C.F.R. § 3500.21 (repealed 2014), RESPA’s primary implementing regulation.
Regulation X authorized servicers to “establish a separate and exclusive office and address for the receipt and handling of qualified written requests.” 24 C.F.R. § 3500.21(e)(1). The Secretary’s final rulemaking notice indicated that when a servicer designates an address for receiving QWR’s, “then the borrower must deliver its request to that office in order for the inquiry to be a ‘qualified written request.’” Real Estate Settlement Procedures Act, Section 6, Transfer of Servicing of Mortgage Loans (Regulation X), 59 Fed. Reg. 65,442, 65,446 (Dec. 19, 1994).
Later, the Dodd-Frank Wall Street Reform and Consumer Protection Act transferred the Secretary’s rulemaking authority to the Consumer Financial Protection Bureau. The CFPB rescinded the version of Regulation X at issue in this case, and promulgated a new Regulation X that also permits a servicer to require borrowers to send QWR’s to a designated address. 12 C.F.R. §§ 1024.35(c), 1024.36(b).
The borrower maintained that he did not have to send the QWR to the Disputes/Inquiries address because the servicer did not designate a specific address to receive only QWRs. The borrower argued that designating a general address to receive Disputes/Inquiries was insufficient. Instead, the borrower argued, section 3500.21 required the servicer to explicitly use the term “qualified written requests.”
The Eleventh Circuit rejected this argument. As the servicer directed borrowers to send “all written requests to the specified address,” it necessarily directed borrowers to send QWRs to the specified address. The Eleventh Circuit also noted that the servicer used “more accessible language than Regulation X required,” because borrowers probably would be more familiar with lay terms like “disputes,” “inquiries,” and “written requests” than with the statutory term, “qualified written request.”
Further, the Eleventh Circuit observed that it would be “perverse” to penalize a servicer for subjecting itself to the additional administrative burden to evaluate and sort a larger quantity of mail to identify QWRs to minimize consumer confusion.
The Court noted that this does not mean that a servicer may designate an address to receive QWR’s with terminology so vague that it would fail to advise a borrower of the specified address intended for QWRs. Instead, the Court held that a servicer must designate an exclusive address for QWRs that is “clear to a reasonable borrower.”
The Eleventh Circuit had “little difficulty” in determining that the servicer met this standard.
The borrower also argued that he did not have to send his QWR to the Disputes/Inquiries address because the servicer did not “establish a separate and exclusive office” solely to respond to QWRs. The Eleventh Circuit noted that it construes “[r]egulations with a common sense regard for regulatory purposes and plain meaning.” United States v. Fuentes-Coba, 738 F.2d 1191, 1195 (11th Cir. 1984). The Court held that the borrower’s proposed construction of section 3500.21(e)(1) fails this test because it would frustrate, not serve, the regulation’s purpose.
The Eleventh Circuit noted that the section 3500.21(e)(1) was designed “to help servicers timely respond to QWRs by enabling them to more easily identify and prioritize correspondence that purport to be QWRs.” To require “a servicer to maintain a separate office for the sole function of processing QWRs would impose high costs on the servicer while providing little benefit.” The borrower argued that a servicer could train employees at a QWR-only processing facility, but the Eleventh Circuit rejected this argument because a servicer could also train employees at a common mail processing office.
The Eleventh Circuit concluded that it is more sensible to construe Section 3500.21(e)(1) to allow a servicer to designate an office “separate” from any other office as its exclusive office for receiving QWRs, without any regard to any other function that office may serve. This “construction accords with § 3500.21(e)(1)’s text and purpose.” The Court held that the servicer therefore “successfully invoked § 3500.21(e)(1) by directing borrowers to mail QWRs to a particular office, even though it used that office for other purposes as well.”
Thus, the Eleventh Circuit held that a servicer does not have to devote an offer for the separate and exclusive purpose of processing QWRs to “establish a separate and exclusive office” to receive and handle QWRs.
Accordingly, the Eleventh Circuit affirmed the trial court’s summary judgment ruling in favor of the servicer and against the borrower.