Misapplication of Fees

“A qualified written request asserts an error relating to the servicing of a mortgage loan and is a notice of error for purposes of this section, and a servicer must comply with all requirements applicable to a notice of error with respect to such qualified written request.” 12 C.F.R. §1024.35(a). In the “Scope of error resolution” portion of 12 C.F.R. §1024.35(b)(5) for example, the regulation specifically enumerates “[i]mposition of a fee or charge that the servicer lacks a reasonable basis to impose upon the borrower” as a covered error under RESPA.

Regarding the servicing error found at 12 C.F.R. §1024.35(b)(2), concerning the failure to correctly apply payments accepted, and the CFPB Final Rules and Official Interpretations of § 1024.35(b)(2) notes:

“Proper allocation of payments is also, by definition, servicing, and already subject to the qualified written request procedures set forth in section 6(e) of RESPA and current § 1024.21(e) of Regulation X.”

78 Fed. Reg. 10695, 10740.

Regarding the servicing error found at 12 C.F.R. §1024.35(b)(3), concerning the failure to credit a payment to a borrower’s mortgage loan account and the CFPB Final Rules and Official Interpretations of § 1024.35(b)(3) states:

“The Bureau proposed § 1024.35(b)(3) to implement, in part, section 6(k)(1)(C) of RESPA with respect to borrower requests to correct errors relating to the allocation of payments for a borrower’s account and other standard servicer duties. A failure to credit a payment as of the date of receipt may have implications for the correct application of borrower payments. A servicer’s failure to credit a payment promptly…may cause a servicer to misapply other payments received by the borrower. Further, a servicer’s failure to credit borrower payments promptly may generate improper late fees and other charges. The Bureau further believes that prompt crediting of borrower payments is a standard servicer duty as set forth in section 6(k)(1)(C) of RESPA. The Bureau also observes that prompt crediting of borrower payments is, by definition, servicing and, therefore, is subject to the qualified written request procedure set forth in section 6(e) of RESPA.” (Emphasis added).

78 Fed. Reg. 10695, 10741.

Regarding the servicing error found at 12 C.F.R. §1024.35(b)(5), concerning the imposition of a fees and charges that the servicer lacks a reasonable basis to impose upon the borrower, the CFPB Final Rules and Official Interpretations of § 1024.35(b)(5) notes that:

“Proposed § 1024.35(b)(5) would have included as an error a servicer’s imposition of a fee or charge that the servicer lacks a reasonable basis to impose upon the borrower. The Bureau proposed § 1024.35(b)(5) to implement, in part, section 6(k)(1)(C) of RESPA with respect to standard servicer duties. The Bureau believes that it is a typical servicer duty, both to the borrower and to the servicer’s principal, to ensure that the servicer has a reasonable basis to impose a charge on a borrower.” (Emphasis added).

See 78 Fed. Reg. 10695, 10741.

The CFPB then goes on to say in that same section of the Federal Register that:

“The Bureau believes that servicers should not impose fees on borrowers that are not bona fide – that is, fees that a servicer does not have a reasonable basis to impose upon a borrower. Examples of non-bona fide charges include such common sense errors as late fees for payments that were not late, default property management fees for borrowers that are not in a delinquency status that would justify the charge, charges from service providers for services that were not actually rendered with respect to a borrower’s mortgage loan account, and charges for force-placed insurance in circumstances not permitted by final rule § 1024.37…

Id.

Regarding the servicing error found at 12 C.F.R. §1024.35(b)(6), the Bureau provides:

The Bureau proposed § 1024.35(b)(6) to implement, in part, section 6(k)(1)(C) of RESPA with respect to borrower requests to correct errors relating to a final balance for purposes of paying off a mortgage loan and standard servicer duties…Servicers already have an obligation to comply with the timing requirements of section 129G of TILA with respect to any mortgage loan that constitutes a “home loan” as used in section 129G of TILA. The Bureau proposed § 1024.35(b)(6) because it believed, consistent with TILA section 129G, that borrowers require accurate payoff statements to manage their mortgage loan obligations. A payoff statement is necessary any time a borrower repays a mortgage loan, and servicers routinely provide payoff statements for borrowers to refinance or pay in full their mortgage loan obligations. However, consumer advocates have indicated that servicers have failed, or refused, to provide payoff statements to certain borrowers or have required borrowers to make a payment on a mortgage loan as a condition of fulfilling the borrower’s request for a payoff statement. Any such conduct has the perverse effect of impeding a borrower’s ability to pay a mortgage loan obligation in full…Final § 1024.35(b)(6) defines as an error the failure to provide an accurate payoff balance amount upon a borrower’s request in violation of section § 1026.36(c)(3). Because servicers will already be required to comply with the timeframes set forth in § 1026.36(c)(3) with respect to certain mortgage loans they service, the Bureau does not believe that defining their failure to do so as an error imposes additional burden on servicers. (Emphasis added).

See 78 Fed. Reg. 10695, 10742.

Congress intended the terms “relating to servicing” to be broad and the applicable subsections of 12 C.F.R. §1024.35(b) clearly enumerates the information borrowers are allowed to request.

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