District Court clarifies law related to post-foreclosure RESPA communications

Courts RESPA New Jersey Qualified Written Request

Recently, the U.S. District Court for the District of New Jersey ruled that obligations under RESPA extended beyond the issuance of a foreclosure judgment, but dismissed the plaintiff’s other claim under RESPA. The Court rejected the argument by the servicer-defendant that a loan’s “merger” with a foreclosure judgment under state law exempted them from RESPA’s loss mitigation rules. The Court pointed to the servicer’s active engagement with the borrower’s loan modification application post-judgment as a basis for maintaining the servicer’s liability under RESPA.

Elaborating on the scope of RESPA, the Court addressed the nature of correspondence that can be classified as “qualified written requests” (QWRs). The Court held that the plaintiff’s letters regarding her loss mitigation efforts did not qualify as QWRs because a request for modification of loan terms did not align with the statutory purpose of a QWR, which was intended to facilitate information exchange or dispute resolutions specifically related to the servicing of the loan, such as payment history or charges on the account, rather than the negotiation of new loan terms. Therefore, the Court dismissed the plaintiff’s claim alleging a violation of RESPA due to a failure to respond to a QWR.

The Court also allowed a claim under the New Jersey Consumer Fraud Act (NJCFA) to move forward, signaling that foreclosure judgments do not render the NJCFA inoperative. Finally, the Court dismissed the plaintiff’s breach of good faith and fair dealing claims against the lender’s law firm and the servicer/lender due to the absence of a direct contractual relationship with the borrower and no evidence of denied mortgage agreement benefits.