A mortgage lender must stop sending overdue-payment information to credit agencies once the debtor notifies the lender in writing why he or she believes the reported debt is not overdue, a federal appeals court ruled Tuesday in a case brought by a Temple Hills homeowner.
The federal Real Estate Settlement Procedures Act and a related consumer-protection regulation provide that credit-agency notification must be held in abeyance once a debtor sends a “qualified written request” to the lender that provides “sufficient information to identify the account and an alleged servicing error” by the lender, the 4th U.S. Circuit Court of Appeals stated in its published 2-1 decision.
The 4th Circuit’s ruling revived Rogers Morgan’s lawsuit against Caliber Home Loans Inc., which U.S. District Judge Paula Xinis had dismissed in 2020. Xinis ruled that Morgan’s letter to Caliber was inadequate under RESPA because he did not dispute specific charges.
But the 4th Circuit said RESPA does not demand specificity but requires only that the letter provide “a ‘statement of reasons’ in ‘sufficient detail’” as to why the debtor “believed the credit reporting was in error.”
Morgan’s letter satisfied that standard because it included his name, account number and why he believed Caliber’s accounting was in error, the 4th Circuit stated. Caliber’s belief was based on the conflicting balance information he received from Caliber and a credit reporting service the lender contacted, the appellate court added in its 2-1 decision.
“Although the Morgan letter does not state which amount, if either, is the correct amount, this type of discrepancy is sufficient to indicate a dispute exists as to the servicing of a loan,” Judge Stephanie D. Thacker wrote for the majority. “Morgan’s request for appellee (Caliber) to “correct (their) records” clearly stems from the confusion presented about his account balance and his belief that appellee’s “office is reporting the wrong amount to the credit agency.”
Morgan’s attorney, Phillip R. Robinson, said Wednesday that the 4th Circuit’s decision was in keeping with RESPA’s goal of protecting borrowers.
“It (the decision) is going to be helpful for a lot of borrowers,” said Robinson, of Consumer Law Center LLC in Silver Spring. “There is one more tool in the toolbox to challenge the mortgage companies’ improper and inaccurate data.”
Caliber’s attorney, Matthew A. Fitzgerald, did not immediately return messages Wednesday seeking comment on the decision and any plans to appeal. Fitzgerald is with McGuireWoods LLP in Richmond, Virginia.
Morgan discovered his troubled credit rating when his employer, the District of Columbia, expressed concern to him about a reported overdue home loan payment of $16,806 it discovered in 2016 during a periodic credit check of employees, according to court papers.
When Morgan called Caliber, an agent told him the payment due was $30,656.89.
Morgan then wrote the letter to Caliber in which he asked the lender to correct its records because the error was affecting his employment, according to court papers.
He subsequently sued Caliber, alleging the lender violated RESPA by continuing to report overdue payments to the credit agency despite having received his written request questioning the lender’s accounting.
Caliber moved for dismissal of the lawsuit, challenging the letter’s sufficiency under RESPA and a related federal Consumer Financial Protection Bureau regulation.
Xinis, who sits in the federal courthouse in Greenbelt, agreed but was overturned by the 4th Circuit.
Thacker was joined in the 4th Circuit’s majority opinion by Judge Robert B. King.
Judge Julius N. Richardson dissented, saying that Morgan implied in the letter that Caliber’s accounting was wrong but failed to state why he believed the lender was in error, as called for under RESPA
“While precision is not required, there are no reasons provided” in Morgan’s letter, Richardson wrote. “And an asserted error without reasons is not a qualified written request.”
The 4th Circuit rendered its decision in Rogers Morgan v. Caliber Home Loans Inc., No. 20-1745.