Facts: A lender originated a purchase-assist loan for an owner which was serviced by a separate loan servicer. An escrow account was established into which the owner made monthly payments towards principal, interest, taxes and insurance (PITI). Later, the loan servicer notified the owner the escrow account had insufficient funds to meet all the debt obligations and the monthly payment amount would be increased. The owners sent three letters challenging the validity of the loan terms and requesting modifications to the loan servicer. The loan servicer did not respond to the letters.
Claim: The owner sought money damages, claiming the loan servicer had a duty to timely respond to the three letters disputing the loan terms and requesting modification since the letters were qualified written requests requiring a response.
Counter claim: The loan servicer claimed the letters were not qualified written requests requiring a response since the letters did not dispute the servicer’s servicing of the loan, but the validity of the loan terms themselves.
Holding: The Ninth Circuit Court of Appeal held the loan servicer was not required to respond to the letters since the letters were not qualified written requests as they challenged the terms of the loan, not the servicer’s servicing activity. [Medrano v. Flagstar Bank, FSB (9th Cir. 2012) __ F3d __]