Consumer Finance Litigation

The Tenth Circuit issued an opinion last week in Berneike v. CitiMortgage, Inc., 2013 WL 657032 (10th Cir. Feb. 25, 2013), addressing whether a district court properly dismissed a borrower's Real Estate Settlement Procedures Act ("RESPA") claim against CitiMortgage, Inc. ("Citi"). The subject complaint alleged that CitiMortgage, by failing to respond to multiple qualified written requests ("QWRs"), violated RESPA. On three different occasions in early 2010, the borrower sent a barrage of faxes to Citi, each alleging that Citi was improperly servicing the borrower's loan. Citi sent two letters in response to the borrower acknowledging her QWRs, but stating that it believed her account was properly serviced. After sending another round of QWRs, the borrower filed suit in Utah, seeking $1,000 per violation of RESPA. Citi removed the case to federal court and filed a motion to dismiss, pursuant to Fed. R. Civ. P. 12(b)(6), arguing that because the letters were not sent to a specific address designated by Citi for receiving QWRs, it had no duty under RESPA to respond to the borrower's inquiries. The borrower, who did not dispute that she failed to send the QWRs to the designated address, countered that Citi waived its right to enforce the address requirement by responding to her first round of letters. The district court disagreed and dismissed the action, holding that receipt of a QWR at the designated address is necessary to trigger RESPA duties.

The Tenth Circuit, reviewing the district court's holding, first noted that RESPA does not expressly state that a QWR must be sent to any specific address. However, HUD, the agency formerly empowered by Congress to implement regulations concerning RESPA, promulgated 24 C.F.R. Section 3500.21, which gave loan servicers the ability to provide an exclusive address for receipt of QWRs. The Court held that "RESPA and its implementing regulation envisioned that only certain communications would trigger liability for damages under § 2605, and delineated certain requirements for communications before imposing that liability." While it was well established that a QWR must include, among other information, the name and account of the borrower, the Tenth Circuit's holding in Berneike now establishes that a QWR must be sent to a servicer's designated QWR address to trigger duties under RESPA. This lender-friendly holding may prove to be a valuable defense against an increasingly popular mechanism utilized by foreclosure defense firms of bringing numerous RESPA claims against servicers without any evidence of actual damage. Servicers should designate a single location for fielding QWRs, and provide notice of such address to borrowers. Notice to borrowers can be achieved by providing the address to the borrower by first-class mail, postage prepaid, or by including the information in a Notice of Transfer. See 24 CFR 3500.21

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