Very underutilized tool is section 2605(f) of RESPA which expressly provides a private right of action for violations of the servicing requirements regarding residential loans. One could recover actual and statutory damages besides attorney fees within three years of its violation by suing in either of the federal or state court. This law applies to a “federally related mortgage loan,” which is very broadly defined under RESPA and Regulation X. And most of the residential loans are covered. RESPA is a consumer protection statute, designed to protect mortgagors from certain abusive practices in the real estate mortgage industry. It is implemented by Consumer Financial Protection Bureau regulations, collectively known as Regulation X.
Also, unknown to most homeowners is a legal defense that the lender cannot initiate a foreclosure proceeding for 120 days beginning with the homeowner lapse in payment, a delinquency. Delinquency is legally defined. “A borrower and a borrower’s mortgage loan obligation are delinquent beginning on the date a periodic payment sufficient to cover principal, interest, and, if applicable, escrow becomes due and unpaid, until such time as no periodic payment is due and unpaid.” Reg. X § 1024.31. This is to allow the homeowner to talk to the lender. Regulation X 1024.41(f)(1) prohibits servicers from taking the first step to initiate foreclosure proceedings under state law during this time. There are two exceptions to this prohibition on referral to foreclosure during the initial 120 days of a delinquency. One, if the servicer is joining the foreclosure action of a superior or subordinate lienholder and second, if the foreclosure is based on a borrower’s violation of a due-on-sale clause. Also, it is to be kept in mind that, section 1024.41(f)(1) preempts state foreclosure timelines to the extent that they allow an earlier commencement of foreclosure. Even the acceleration notice under the New York state law shall be barred for the language is clear; “first notice or filing required by applicable law for any judicial or non-judicial foreclosure process.” The acceleration notice is generally a declaration by the note holder that the entire balance of principal and interest immediately due and payable. For that to take place there should have been delinquency in payment and the expiry of grace time as provided in the underlying mortgage note. Acceleration begins the statute of limitation on the enforcement period of 6 years.
Also, stopped is the foreclosure proceeding when the borrower has triggered loss mitigation process. RESPA prohibits it, 12 C.F.R. § 1024.41(g). And the loss mitigation process begins when a borrower submits a complete loss mitigation application, and ends when the servicer denies that application on appeal (or after the servicer’s first denial, if the borrower fails to appeal). The denial of a loan modification application must state the “specific reason or reasons for the servicer’s determination.” If the denial does not do so the loss mitigation period continues. Thus is it clear that scheduling a foreclosure sale when loss mitigation is not complete constitutes dual-tracking, and dual-tracking violates RESPA.
RESPA actual damages for a section 2605 violation is actual damages emanating from the servicer not responding to the qualified written request, not making corrections to the mortgage servicing account, not properly processing a borrower’s loss mitigation application for all available options, not suspending foreclosure proceedings while a loss mitigation application is being evaluated, or otherwise not complying with the Act’s requirements. And while engaged with the servicers’ forgoing issues, the borrower definitely could ask for cost of sending the notices, attorney fees, charges from misapplication of payments, denial of proper credit, crediting rating damage. Actual damages for emotional distress is available too.
Also, claims are made under RESPA if there is a failure on the servicers part to make timely payments out of escrow, to provide annual escrow statements, to perform escrow analysis, calculate proper escrow payment, provide escrow surplus reports and applications or failure to apprise of the escrow shortage, notifying transfer of servicing, duty to respond to notice of error and request for information and among others, identification of the mortgage owner.