Articles Posted in RESPA SECTION 6: LOAN SERVICING

Section 6 of the Real Estate Settlement Procedures Act (RESPA) provides borrowers with consumer protections relating to the servicing of their loans. When a borrower sends a “Qualified Written Request” or “QWR” to his loan servicer concerning the servicing of the loan, the loan servicer must provide a written acknowledgment within 20 business days of receipt of the request. Not later than 60 business days after receiving the request, the servicer must make any appropriate corrections to the borrower’s account, and must provide a written clarification regarding any dispute. During this 60-day period, the loan servicer is strictly prohibited from providing information to a consumer reporting agency (i.e. Transunion, Equifax, etc) concerning any overdue payment related to such period or qualified written request.

Under RESPA Guidelines , a borrower can institute a private lawsuit for a Section 6 of Real Estate Settlement Procedures Act “RESPA” violation and/or a group of aggrieved borrowers may bring a class action lawsuit if a pattern of non-compliance can be shown within three years of the violation against a loan servicing company who refuses to comply with Section 6.

Reporter Kristi Marohn with the St. Cloud Times wrote an excellent article, “Experts: Improper fees play part in crisis–Servicers may benefit from loans in default” on how some loan servicing companies are engaging in abusive tactics which is helping fuel mortgage defaults across the United States.

The loan servicing companies typically do not own the loans they service and profit margins of just servicing loans is actually fairly small but they can make a tremendous amount of money in tacking on fees and penalties. Loan servicing companies can make even more money if a loan goes into foreclosure because they can charge even more fees.

The ongoing frustration for homeowners, attorneys, and others is that many loan servicing companies are simply none responsive to problems associated with the loans they service. We are seeing fees being charged to consumers for such things as Pre-paid Late Fees for all of 2009, 2010, 2011 or Pre-paid monthly inspection fees for years in advance when there is no inspection even done.

The charging of these fees is a direct cause for an increase in foreclosures across the United States. We are seeing these fees and many other unknown fees being charged now when borrowers enter into loan modification agreements which is why the default rates are so high for those borrowers who have entered into a loan modification only to find themselves stuck again in foreclosure because the fees that were charged forced them into foreclosure once again.

RESPA’s Section 6 is routinely ignored by the loan servicing companies as most Qualified Written Requests are either totally ignored or the information they provide is non-information or a letter stating that the law does not require them to give information to the borrower on his/her own loan.

Loan servicing fraud is very prevalent and one must be very diligent when evaluating causes of action. When evaluating a claim please make sure you pull the courthouse records to make sure the signatures of the borrowers are actually the borrowers. We are seeing and hearing of many cases where the loan servicing employees are forging borrowers signatures to documents. These documents often increase the fees so much that it forces homeowners into foreclosure because they can’t get anyone on the phone from the loan servicing companies to fix or even address the problems the loan servicer itself caused.

We urge everyone to call your congressman and senator and request they regulate this industry. This is a completely unregulated industry and the abusive behavior is fueling the credit and housing crisis in the United States. Consumers need real protection and relief from those loan servicing companies are preying on the American public.
Continue reading

Section 6 of the Real Estate Settlement Procedures Act (12 U.S.C. 2605) gives certain classes of borrowers rights, regardless of whether the borrowers loan was held by the lender or the loan service was transferred to one or more loan servicing companies. If a borrower believes there is an issue with the loan servicing (including escrow account questions) on their loan the following steps must be carefully followed:

1. The borrower or the borrower’s attorney must send a “Qualified Written Request” to the loan servicer. *See below as to what is required on a Qualified Written Request Letter.

2. The loan servicer must provide the borrower or borrower’s attorney with a written acknowledgment within twenty (20) Business Days of receipt of the borrower’s request.

3. The loan servicer has no more than 60 days Business Days after receiving the borrower’s request to correct the errors on the borrower’s loan account or the loan servicing company must provide the borrower with a written clarification disputing any such error.

4. Its extremely important to note that during this sixty (60) Business Day period that the borrower’s servicer is forbidden to provide a credit reporting agency any information concerning any overdue payment related to such period or qualified written request.

What kind of damages would a borrower or a loan servicing company potentially be entitled/subjected to? Well Section 6 of RESPA provides for actual damages, additional damages, and costs for individuals or classes of individuals in circumstances where the services are shown to have violated the requirements of Section 6.

Section 6 of RESPA has a 3 year statute of limitations.

It is important to note that borrowers who are experiencing loan servicing irregularities continue to make their monthly mortgage payments.
Continue reading