When you apply for a home mortgage, you may think that the lender, or loan originator, will service the loan until it is paid off or your house is sold. However, in today’s market mortgage servicing rights often are bought and sold. The Real Estate Settlement Procedures Act (RESPA) is a consumer protection statute. Sections 6 and 10 of RESPA provide you with certain rights regarding the servicing of your mortgage and escrow account. Please read this important information concerning your rights and the responsibility of your loan servicer.
Duty of Loan Servicer to Respond to Complaints. If you have questions or problems with the servicing of your loan, the servicer is required to respond to you. Write to your servicer and call it a “qualified written request under Section 6 of RESPA.” It should be a separate letter and not mailed with your payment. The mortgage servicer must respond to you within 60 business days of receipt. (See Sample Written Complaint to Lender.)
Loan Transferred to New Servicer. Your loan servicer is required to notify you in writing at least 15 days before the servicing of your loan is transferred to a new servicer. The notice must include the following information:
- The effective date of the transfer, the date your current servicer will stop accepting payments and the date the new servicer will begin accepting them.
- The name, address, and toll-free or collect call telephone number for the new servicer.
- Information that tells whether you can continue any optional insurance, such as mortgage life or disability insurance, and what action, if any, you must take to maintain coverage.
- A statement that the transfer of servicing does not affect any term or condition of your mortgage documents other than the terms directly related to the servicing of the loan.
Treatment of Payments During Transfer Period. During the 60-day period beginning on the effective date of the transfer, the payment may not be treated as late if you mistakenly send it to the old mortgage servicer instead of the new one.
Escrow Account. RESPA does not require that you maintain an escrow account for the purpose of paying property taxes, hazard insurance, etc. Nor does RESPA have any jurisdiction over the decision of the lender or servicer to require or terminate an escrow account. RESPA does, however, provide you with the following protections with regard to the escrow account:
- If your lender or mortgage servicer requires you to maintain an escrow account for the purpose of paying property taxes, hazard insurance, etc., RESPA requires that the servicer pay such items by the dates due to avoid a penalty or late charge.
- RESPA sets limits on the maximum amount of money the servicer may require you to maintain and pay in the escrow account. (More information about escrow accounts, including how to calculate the maximum amount RESPA allows the lender to require in the escrow account.)
PMI (Private Mortgage Insurance). RESPA has no jurisdiction over the lender’s decision to require PMI. Nor does it have any jurisdiction over the lender’s decision to cancel PMI. (The PMI Act provides information regarding cancellation of PMI.)
TITLE 12–BANKS AND BANKING
CHAPTER 27–REAL ESTATE SETTLEMENT PROCEDURES
Sec. 2605. Servicing of mortgage loans and administration of escrow accounts
(a) Disclosure to applicant relating to assignment, sale, or transfer of
loan servicing
Each person who makes a federally related mortgage loan shall
disclose to each person who applies for the loan, at the time of
application for the loan, whether the servicing of the loan may be
assigned, sold, or transferred to any other person at any time while the
loan is outstanding.
(b) Notice by transferor of loan servicing at time of transfer
(1) Notice requirement
Each servicer of any federally related mortgage loan shall
notify the borrower in writing of any assignment, sale, or transfer
of the servicing of the loan to any other person.
(2) Time of notice
(A) In general
Except as provided under subparagraphs (B) and (C), the
notice required under paragraph (1) shall be made to the
borrower not less than 15 days before the effective date of
transfer of the servicing of the mortgage loan (with respect to
which such notice is made).
(B) Exception for certain proceedings
The notice required under paragraph (1) shall be made to the
borrower not more than 30 days after the effective date of
assignment, sale, or transfer of the servicing of the mortgage
loan (with respect to which such notice is made) in any case in
which the assignment, sale, or transfer of the servicing of the
mortgage loan is preceded by–
(i) termination of the contract for servicing the loan
for cause;
(ii) commencement of proceedings for bankruptcy of the
servicer; or
(iii) commencement of proceedings by the Federal Deposit
Insurance Corporation or the Resolution Trust Corporation
for conservatorship or receivership of the servicer (or an
entity by which the servicer is owned or controlled).
(C) Exception for notice provided at closing
The provisions of subparagraphs (A) and (B) shall not apply
to any assignment, sale, or transfer of the servicing of any
mortgage loan if the person who makes the loan provides to the
borrower, at settlement (with respect to the property for which
the mortgage loan is made), written notice under paragraph (3)
of such transfer.
(3) Contents of notice
The notice required under paragraph (1) shall include the
following information:
(A) The effective date of transfer of the servicing
described in such paragraph.
(B) The name, address, and toll-free or collect call
telephone number of the transferee servicer.
(C) A toll-free or collect call telephone number for (i) an
individual employed by the transferor servicer, or (ii) the
department of the transferor servicer, that can be contacted by
the borrower to answer inquiries relating to the transfer of
servicing.
(D) The name and toll-free or collect call telephone number
for (i) an individual employed by the transferee servicer, or
(ii) the department of the transferee servicer, that can be
contacted by the borrower to answer inquiries relating to the
transfer of servicing.
(E) The date on which the transferor servicer who is
servicing the mortgage loan before the assignment, sale, or
transfer will cease to accept payments relating to the loan and
the date on which the transferee servicer will begin to accept
such payments.
(F) Any information concerning the effect the transfer may
have, if any, on the terms of or the continued availability of
mortgage life or disability insurance or any other type of
optional insurance and what action, if any, the borrower must
take to maintain coverage.
(G) A statement that the assignment, sale, or transfer of
the servicing of the mortgage loan does not affect any term or
condition of the security instruments other than terms directly
related to the servicing of such loan.
(c) Notice by transferee of loan servicing at time of transfer
(1) Notice requirement
Each transferee servicer to whom the servicing of any federally
related mortgage loan is assigned, sold, or transferred shall notify
the borrower of any such assignment, sale, or transfer.
(2) Time of notice
(A) In general
Except as provided in subparagraphs (B) and (C), the notice
required under paragraph (1) shall be made to the borrower not
more than 15 days after the effective date of transfer of the
servicing of the mortgage loan (with respect to which such
notice is made).
(B) Exception for certain proceedings
The notice required under paragraph (1) shall be made to the
borrower not more than 30 days after the effective date of
assignment, sale, or transfer of the servicing of the mortgage
loan (with respect to which such notice is made) in any case in
which the assignment, sale, or transfer of the servicing of the
mortgage loan is preceded by–
(i) termination of the contract for servicing the loan
for cause;
(ii) commencement of proceedings for bankruptcy of the
servicer; or
(iii) commencement of proceedings by the Federal Deposit
Insurance Corporation or the Resolution Trust Corporation
for conservatorship or receivership of the servicer (or an
entity by which the servicer is owned or controlled).
(C) Exception for notice provided at closing
The provisions of subparagraphs (A) and (B) shall not apply
to any assignment, sale, or transfer of the servicing of any
mortgage loan if the person who makes the loan provides to the
borrower, at settlement (with respect to the property for which
the mortgage loan is made), written notice under paragraph (3)
of such transfer.
(3) Contents of notice
Any notice required under paragraph (1) shall include the
information described in subsection (b)(3) of this section.
(d) Treatment of loan payments during transfer period
During the 60-day period beginning on the effective date of transfer
of the servicing of any federally related mortgage loan, a late fee may
not be imposed on the borrower with respect to any payment on such loan
and no such payment may be treated as late for any other purposes, if
the payment is received by the transferor servicer (rather than the
transferee servicer who should properly receive payment) before the due
date applicable to such payment.
(e) Duty of loan servicer to respond to borrower inquiries
(1) Notice of receipt of inquiry
(A) In general
If any servicer of a federally related mortgage loan
receives a qualified written request from the borrower (or an
agent of the borrower) for information relating to the servicing
of such loan, the servicer shall provide a written response
acknowledging receipt of the correspondence within 20 days
(excluding legal public holidays, Saturdays, and Sundays) unless
the action requested is taken within such period.
(B) Qualified written request
For purposes of this subsection, a qualified written request
shall be a written correspondence, other than notice on a
payment coupon or other payment medium supplied by the servicer,
that–
(i) includes, or otherwise enables the servicer to
identify, the name and account of the borrower; and
(ii) includes a statement of the reasons for the belief
of the borrower, to the extent applicable, that the account
is in error or provides sufficient detail to the servicer
regarding other information sought by the borrower.
(2) Action with respect to inquiry
Not later than 60 days (excluding legal public holidays,
Saturdays, and Sundays) after the receipt from any borrower of any
qualified written request under paragraph (1) and, if applicable,
before taking any action with respect to the inquiry of the
borrower, the servicer shall–
(A) make appropriate corrections in the account of the
borrower, including the crediting of any late charges or
penalties, and transmit to the borrower a written notification
of such correction (which shall include the name and telephone
number of a representative of the servicer who can provide
assistance to the borrower);
(B) after conducting an investigation, provide the borrower
with a written explanation or clarification that includes–
(i) to the extent applicable, a statement of the reasons
for which the servicer believes the account of the borrower
is correct as determined by the servicer; and
(ii) the name and telephone number of an individual
employed by, or the office or department of, the servicer
who can provide assistance to the borrower; or
(C) after conducting an investigation, provide the borrower
with a written explanation or clarification that includes–
(i) information requested by the borrower or an
explanation of why the information requested is unavailable
or cannot be obtained by the servicer; and
(ii) the name and telephone number of an individual
employed by, or the office or department of, the servicer
who can provide assistance to the borrower.
(3) Protection of credit rating
During the 60-day period beginning on the date of the servicer’s
receipt from any borrower of a qualified written request relating to
a dispute regarding the borrower’s payments, a servicer may not
provide information regarding any overdue payment, owed by such
borrower and relating to such period or qualified written request,
to any consumer reporting agency (as such term is defined under
section 1681a of title 15).
(f) Damages and costs
Whoever fails to comply with any provision of this section shall be
liable to the borrower for each such failure in the following amounts:
(1) Individuals
In the case of any action by an individual, an amount equal to
the sum of–
(A) any actual damages to the borrower as a result of the
failure; and
(B) any additional damages, as the court may allow, in the
case of a pattern or practice of noncompliance with the
requirements of this section, in an amount not to exceed $1,000.
(2) Class actions
In the case of a class action, an amount equal to the sum of–
(A) any actual damages to each of the borrowers in the class
as a result of the failure; and
(B) any additional damages, as the court may allow, in the
case of a pattern or practice of noncompliance with the
requirements of this section, in an amount not greater than
$1,000 for each member of the class, except that the total
amount of damages under this subparagraph in any class action
may not exceed the lesser of–
(i) $500,000; or
(ii) 1 percent of the net worth of the servicer.
(3) Costs
In addition to the amounts under paragraph (1) or (2), in the
case of any successful action under this section, the costs of the
action, together with any attorneys fees incurred in connection with
such action as the court may determine to be reasonable under the
circumstances.
(4) Nonliability
A transferor or transferee servicer shall not be liable under
this subsection for any failure to comply with any requirement under
this section if, within 60 days after discovering an error (whether
pursuant to a final written examination report or the servicer’s own
procedures) and before the commencement of an action under this
subsection and the receipt of written notice of the error from the
borrower, the servicer notifies the person concerned of the error
and makes whatever adjustments are necessary in the appropriate
account to ensure that the person will not be required to pay an
amount in excess of any amount that the person otherwise would have
paid.
(g) Administration of escrow accounts
If the terms of any federally related mortgage loan require the
borrower to make payments to the servicer of the loan for deposit into
an escrow account for the purpose of assuring payment of taxes,
insurance premiums, and other charges with respect to the property, the
servicer shall make payments from the escrow account for such taxes,
insurance premiums, and other charges in a timely manner as such
payments become due.
(h) Preemption of conflicting State laws
Notwithstanding any provision of any law or regulation of any State,
a person who makes a federally related mortgage loan or a servicer shall
be considered to have complied with the provisions of any such State law
or regulation requiring notice to a borrower at the time of application
for a loan or transfer of the servicing of a loan if such person or
servicer complies with the requirements under this section regarding
timing, content, and procedures for notification of the borrower.
(i) Definitions
For purposes of this section:
(1) Effective date of transfer
The term “effective date of transfer” means the date on which
the mortgage payment of a borrower is first due to the transferee
servicer of a mortgage loan pursuant to the assignment, sale, or
transfer of the servicing of the mortgage loan.
(2) Servicer
The term “servicer” means the person responsible for servicing
of a loan (including the person who makes or holds a loan if such
person also services the loan). The term does not include–
(A) the Federal Deposit Insurance Corporation or the
Resolution Trust Corporation, in connection with assets
acquired, assigned, sold, or transferred pursuant to section
1823(c) of this title or as receiver or conservator of an
insured depository institution; and
(B) the Government National Mortgage Association, the
Federal National Mortgage Association, the Federal Home Loan
Mortgage Corporation, the Resolution Trust Corporation, or the
Federal Deposit Insurance Corporation, in any case in which the
assignment, sale, or transfer of the servicing of the mortgage
loan is preceded by–
(i) termination of the contract for servicing the loan
for cause;
(ii) commencement of proceedings for bankruptcy of the
servicer; or
(iii) commencement of proceedings by the Federal Deposit
Insurance Corporation or the Resolution Trust Corporation
for conservatorship or receivership of the servicer (or an
entity by which the servicer is owned or controlled).
(3) Servicing
The term “servicing” means receiving any scheduled periodic
payments from a borrower pursuant to the terms of any loan,
including amounts for escrow accounts described in section 2609 of
this title, and making the payments of principal and interest and
such other payments with respect to the amounts received from the
borrower as may be required pursuant to the terms of the loan.
(j) Transition
(1) Originator liability
A person who makes a federally related mortgage loan shall not
be liable to a borrower because of a failure of such person to
comply with subsection (a) of this section with respect to an
application for a loan made by the borrower before the regulations
referred to in paragraph (3) take effect.
(2) Servicer liability
A servicer of a federally related mortgage loan shall not be
liable to a borrower because of a failure of the servicer to perform
any duty under subsection (b), (c), (d), or (e) of this section that
arises before the regulations referred to in paragraph (3) take
effect.
(3) Regulations and effective date
The Secretary shall, by regulations that shall take effect not
later than April 20, 1991, establish any requirements necessary to
carry out this section. Such regulations shall include the model
disclosure statement required under subsection (a)(2) of this
section.
(Pub. L. 93-533, Sec. 6, as added Pub. L. 101-625, title IX, Sec. 941,
Nov. 28, 1990, 104 Stat. 4405; amended Pub. L. 102-27, title III,
Sec. 312(a), Apr. 10, 1991, 105 Stat. 154; Pub. L. 103-325, title III,
Sec. 345, Sept. 23, 1994, 108 Stat. 2239; Pub. L. 104-208, div. A, title
II, Sec. 2103(a), Sept. 30, 1996, 110 Stat. 3009-399.)
Prior Provisions
A prior section 2605, Pub. L. 93-533, Sec. 6, Dec. 22, 1974, 88
Stat. 1726, related to advanced itemized disclosure of settlement costs
by the lender and liability of the lender for failure to comply, prior
to repeal by Pub. L. 94-205, Sec. 5, Jan. 2, 1976, 89 Stat. 1158.
Amendments
1996–Subsec. (a). Pub. L. 104-208 amended heading and text of
subsec. (a) generally. Prior to amendment, text consisted of pars. (1)
to (3) relating to requirements for lenders of federally related
mortgage loans to disclose to applicants whether servicing of such loan
may be assigned, sold, or transferred, directed Secretary to develop
model disclosure statement, and required signature of applicant on all
such disclosure statements.
1994–Subsec. (a)(1)(B). Pub. L. 103-325 substituted “(B) at the
choice of the person making a federally related mortgage loan–
“(i) for each of the most recent”
for “(B) for each of the most recent”, redesignated cls. (i) and (ii)
as subcls. (I) and (II), respectively, and realigned margins,
substituted “or” for “and” at end of subcl. (II), and added cl.
(ii).
1991–Subsec. (j). Pub. L. 102-27 added subsec. (j).
Section Referred to in Other Sections
This section is referred to in sections 2609, 2610, 2614 of this
title; title 15 section 1641.