8th Circuit Holds Actual Damages Are an Essential Element of a RESPA Servicing Claim

The U.S. Court of Appeals for the Eighth Circuit recently held in Wirtz v. Specialized Loan Servicing, LLC that actual damages are an essential element of a borrower’s RESPA servicing claim.

The borrower alleged that the past and current mortgage servicers violated RESPA and the Minnesota Mortgage Originator and Servicing Licensing Act, Minnesota Statute § 58.13(1)(a)(8), by failing to respond adequately to his qualified written request.  The borrower eventually settled with the previous servicer, and the current mortgage servicer was the only defendant (hereinafter referred to as “servicer”).

The district court ruled that the servicer violated RESPA because the servicer “made minimal effort to investigate the error” in the borrower’s payment history (i.e., the basis of the borrower’s three qualified written requests).  On appeal, the servicer argued that RESPA does not “impose a substantive obligation on a servicer to ensure that its investigation is sufficiently thorough.”  The Court of Appeals disagreed.  The Court concluded that RESPA imposes a substantive obligation on a mortgage servicer to conduct a reasonably thorough examination before responding to a borrower’s qualified written request.  Since the servicer did not obtain, review, or provide the full payment history as the borrower requested in his qualified written request, it did not perform a thorough examination.

The servicer further argued that even if it failed to comply with the requirements of RESPA, the borrower failed to prove actual damages.  The Court of Appeals agreed.  The Court of Appeals concluded that the $80 in actual damages the district court awarded did not relate to the dispute between the servicer and the borrower.

Moreover, the Court of Appeals concluded that the additional statutory damages imposed on the servicer for a “pattern or practice” of noncompliance were not legitimate because a borrower cannot recover “additional” damages without first recovering actual damages.  The Court also concluded that the borrower failed to present sufficient evidence that the servicer engaged in a “pattern or practice of noncompliance” because the borrower only presented evidence on his own two instances of noncompliance.

Finally, the Court reversed and remanded for further proceedings on the borrower’s state law claim because it reversed the district court’s judgment on the borrower’s claim under RESPA and the Minnesota state-law claim relied on the RESPA judgment.