The Dodd-Frank Wall Street Reform and Consumer Protection Act was signed into law July 21, 2010.  The portion of the Act known as the Mortgage Reform and Anti-Predatory Lending Act ("Act") will go into effect soon.  The main provisions of the Act are scheduled to go into effect as early as January 21, 2013.  The Act forms a new Consumer Financial Protection Bureau to establish rules and regulations related to the new law.  These regulations have to be finalized no later than January 21, 2013, with the effective date of the regulations being no later than 12 months from the date they are finalized.  At the latest, these regulations will become effective January 21, 2014.

Of note, the Act amendments change the timelines for response by servicers to qualified written requests significantly and raise the penalties for certain Real Estate Settlement Procedures Act ("RESPA") violations.  The provisions relating to responding to qualified written requests only applies to servicers, however, lenders who service their own loans can fall into this category as well.  Lenders, servicers and their counsel should start initiating protocol now to ensure that once the full force of the Act is in effect that violations do not occur, as non-compliance can be costly.

Shortened Qualified Response Deadlines

Under the current RESPA provisions, a servicer has 20 days (excluding legal public holidays, Saturdays and Sundays) to acknowledge a qualified written request ("QWR").  The Act shortens this time to 5 days.  The QWR response deadline has also been shortened from 60 days to only 30 days, however, this may be extended another 15 days so long as the borrower is notified and provided a reason for the delay.

A servicer should establish an address specifically for QWRs, if it has not already done so.  Regulation X of the current RESPA regulations allows a servicer to establish an exclusive office and address for the receipt and handling of QWRs.  This address should be included with any Notice of Transfer of Servicing or separately delivered to the borrower by first-class mail.  Establishing such an address will help servicers process these requests and can also protect servicers from liability if the borrower sends the QWR to the incorrect address.

Increased Damages Provisions

The Act increases the damages provisions for failing to properly respond to valid RESPA requests.  Currently, the damages per individual are actual damages as a result of the delay, plus $1000 for each violation in cases where the violation was a result of a pattern or practice of noncompliance.  The "pattern or practice" violation is increased to $2000 per violation.  The damages in class actions currently are actual and the "pattern or practice" violation has a cap of the lesser of $500,000 or 1 percent of the servicer's net worth, which will be increased to the lesser of $1,000,000 or 1 percent when the Act becomes effective.

The chart below summarizes the changes made by the Dodd-Frank Amendments discussed in this article.  Servicers should also be aware that there are new RESPA provisions regarding force-placed insurance, fees for responses to QWRs and imposes new requirements for escrow accounts.  Furthermore, there is also a new 10-day deadline to respond to a request for the identity and address of the owner or assignee of the loan.

Comparison Between Current RESPA and Dodd-Frank Amendments

	Current RESPA	Dodd-Frank Amendments
Time to acknowledge QWR	20 days	5 days
QWR response deadline	60 days	30 days*
Damages each violation- Individuals	Actual plus $1000	Actual plus $2000
Damages each violation- Class Actions	Capped at lesser of $500,000 or 1% of servicer's net worth	Capped at lesser of $1,000,000 or 1% of servicer's net worth