Second Circuit Upholds Bankruptcy Court Order Denying Borrowers’ RESPA Claim on the Grounds the QWR Was Mailed to the Incorrect Address

By: Andrea M. Roberts

In Barry F. Mack v. ResCap Borrower Claims Trust, Case Number 16-304 (2d Cir. Jan. 31, 2017) the Second Circuit recently affirmed the Bankruptcy Court’s order sustaining Residential Capital, LLC’s (“ResCap”) objection to the borrowers, Barry and Cheryl Mack’s (“Borrowers”) Proof of Claim for damages based on, among other things, failure to respond to a Qualified Written Request (“QWR”) in violation of the Real Estate Settlement Procedures Act (“RESPA”). The Second Circuit held that Borrowers’ Proof of Claim was properly denied, because Borrowers did not mail the QWR to the designated address and therefore, ResCap’s lack of response did not violate RESPA.

In 2009 Borrowers sent a QWR to GMAC Mortgage LLC (“GMAC”) querying why an erroneous foreclosure action against them remained pending even though GMAC had notified them that they were not in default. Notably, Borrowers did not send the QWR to the address designated by GMAC for receipt of QWRs. Instead, Borrowers sent the QWR to the address designated for “General Inquiries.” GMAC never responded to Borrower’s QWR.

In May 2012, ResCap and 51 of its subsidiaries, including GMAC, filed for bankruptcy.[1] Borrowers timely filed a Proof of Claim for money damages premised upon, among other things, a violation of RESPA for GMAC’s failure to respond to the QWR. After a trial, the Bankruptcy Court sustained ResCap’s objection to the Borrower’s RESPA claim on the grounds that the Borrowers failed to mail the QWR to the correct address. Borrowers appealed.

Under RESPA, a mortgage servicer can “establish a designated address for QWRs.” See Roth v. CitiMortgage Inc., 756 F.3d 178, 181 (2d Cir. 2014). If a servicer designates a specific address for receipt of QWRs, “then the borrower must deliver its request to that office in order for the inquiry to be a ‘qualified written request.’” Id. (quoting RESPA, § 6, Transfer of Servicing of Mortgage Loans (Regulation X), 59 Fed. Reg. 65,442, 65,446 (Dec. 19, 1994)). The failure to send the QWR to a servicer’s designated address “does not trigger the servicer’s duties under RESPA.” Id. (quoting Berneike v. CitiMortgage, Inc., 708 F.3d 1141, 1148-49 (10th Cir. 2013).

The Second Circuit found that although there is no dispute that the Borrowers sent a QWR to GMAC, and GMAC failed to respond to the QWR, because Borrowers did not send the QWR to GMAC’s designated address for receipt of QWRs, the duty to respond to the Borrower’s letter under RESPA was never triggered. Therefore, GMAC did not violate RESPA. Accordingly, the Second Circuit held that the Bankruptcy Court properly sustained ResCap’s objection to the Borrowers’ RESPA claim.

In practice, borrowers or their counsel have attempted to attach purported QWRs to pleadings and then allege RESPA violations for failure to respond. This decision confirms that financial institutions cannot be liable under RESPA if the QWR is not directed to the designated address.

[1] GMAC is a named debtor under the Borrower Claims Trust Agreement dated December 17, 2013 (the “Agreement”). Under the Agreement, in pursuing any borrower-related causes of action, such matters and/or execution of any documents relating thereto, are to be in the name of “ResCap Borrower Claims Trust.”

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