Appeal from the United States District Court for the Northern District of Illinois, Eastern Division. No. 05 C 6920-George W. Lindberg, Judge.
The opinion of the court was delivered by: " Hamilton, Circuit Judge.
ARGUED FEBRUARY 12, 2010-
Before EASTERBROOK, Chief Judge, HAMILTON, Circuit
Judge, and SPRINGMANN, District Judge.
Plaintiffs Saul H. Catalan and Mia Morris sued defendants RBC Mortgage Company and GMAC Mortgage Company under the federal Real "Hon. Theresa L. Springmann of the Northern District of Indiana, sitting by designation.
Estate Settlement Procedures Act ("RESPA"), 12 U.S.C. § 2601, et seq., and under Illinois law for gross negligence, breach of contract, and willful and wanton negligence. The district court dismissed the plaintiffs' gross negligence claim as merely duplicating the willful and wanton negligence claim. The court granted summary judgment to GMAC Mortgage on the plaintiffs' RESPA, breach of contract, and remaining negligence claims. The plaintiffs appeal those decisions. We reverse the grant of summary judgment for GMAC Mortgage on the plaintiffs' RESPA and breach of contract claims, and we affirm summary judgment on their negligence claims.*fn1
I. The Real Estate Settlement Practices Act
Before digging into the details of plaintiffs' maddening troubles with their mortgage, we provide a sketch of the relevant RESPA requirements. RESPA is a consumer protection statute that regulates the real estate settlement process, including servicing of loans and assignment of those loans. See 12 U.S.C. § 2601(Congressional findings). The statute imposes a number of duties on lenders and loan servicers. Most relevant here are the requirements that borrowers be given notice by both transferor and transferee when their loan is transferred to a new lender or servicer, 12 U.S.C. §§ 2605(b) and (c), and that loan servicers respond promptly to borrowers' written requests for information, § 2605(e).
The details of the requirement for responding to written requests will become relevant here. First, it takes a "qualified written request" to trigger the loan servicer's duties under RESPA to acknowledge and respond. The statute defines a qualified written request as written correspondence (other than notices on a payment coupon or similar documents) from the borrower or her agent that requests information or states reasons for the borrower's belief that the account is in error. 12 U.S.C. § 2605(e)(1)(B). To qualify, the written request must also include the name and account of the borrower or must enable the servicer to identify them. Id.
Within 60 days after receiving a qualified written request, the servicer must take one of three actions: either (1) make appropriate corrections to the borrower's account and notify the borrower in writing of the corrections; (2) investigate the borrower's account and provide the borrower with a written clarification as to why the servicer believes the borrower's account to be correct; or (3) investigate the borrower's account and either provide the requested information or provide an explanation as to why the requested information is unavailable. See 12 U.S.C. §§ 2605(e)(2)(A), (B), and (C). No matter which action the servicer takes, the servicer must provide a name and telephone number of a representative of the servicer who can assist the borrower.
See id. During the 60-day period after a servicer receives a qualified written request relating to a dispute regarding the borrower's payments, "a servicer may not provide information regarding any overdue payment, owed by such borrower and relating to such period or qualified written request, to any consumer reporting agency." 12 U.S.C. § 2605(e)(3).
RESPA provides for a private right of action for violations of its requirements. 12 U.S.C. § 2605(f). The provision for a private right of action includes a "safe harbor" provision, which provides in relevant part that a transferee service provider like GMAC Mortgage shall not be liable for a violation of section 2605 if, "within 60 days after discovering an error (whether pursuant to a final written examination report or the servicer's own procedures) and before the commencement of an action under this subsection and the receipt of written notice of the error from the borrower, the servicer notifies the person concerned of the error and makes whatever adjustments are necessary in the appropriate account to ensure that the person will not be required to pay an amount in excess of any amount that the person otherwise would have paid." 12 U.S.C. § 2605(f)(4).
Because the plaintiffs appeal the district court's grant of summary judgment, we review the trial court's decision de novo, viewing all evidence in the light most favorable to and drawing all reasonable inferences for the plaintiffs, as the non-moving parties. See Fed. R. Civ. P. 56(c); Hukic v. Aurora Loan Services, 588 F.3d 420, 432 (7th Cir. 2009); Burnett v. LFW Inc., 472 F.3d 471, 477 (7th Cir. 2006). We trace the plaintiffs' problems with their original mortgage servicer, then with the transfer of the mortgage to GMAC Mortgage, as relevant to plaintiffs' claims that GMAC Mortgage violated RESPA by failing to provide notice of the transfer and by failing to respond to their qualified written requests, and by failing to correct erroneous information it had given to credit-reporting services.
Plaintiffs' Problems with RBC Mortgage: In June 2003, the plaintiffs bought a home in Matteson, Illinois. They obtained a Federal Housing Administration loan by executing a mortgage and note in favor of RBC. At the outset, theirs was a 30-year fixed loan at 5.5% annual interest with a monthly payment of $1,598 that included principal, interest, and escrow.
Although the plaintiffs' first payment was not due until August 1, 2003, RBC incorrectly entered the plaintiffs' mortgage into its computer accounting system to show a first payment due date of July 1, 2003. Because of this error, when the plaintiffs made their first payment they were already behind-at least according to RBC's system. By the time the plaintiffs made their second payment, RBC had determined that their loan was in default, and it increased their monthly payment amount to $1,787. The plaintiffs, at first unaware of the increase, and then, without receiving an explanation of the increase, continued to send their mortgage payments for the original amount. RBC returned those checks uncashed.
RBC filed for foreclosure on the plaintiffs' home on February 26, 2004. In May and June, the plaintiffs provided checks to RBC in an attempt to make up for the uncashed payments. However, the plaintiffs' May 2004 payment was still due even after this reconciliation of their account. RBC did not provide the plaintiffs with an account statement or otherwise inform them of that delinquency. Then, when the plaintiffs sent their August 2004 payment to RBC, RBC did not apply that payment to the loan.
GMAC Mortgage Steps In: In September 2004, RBC assigned the plaintiffs' loan to GMAC Mortgage. When GMAC Mortgage assumed the plaintiffs' mortgage, it did not send the plaintiffs a letter notifying them of the transfer. Plaintiffs, not knowing that GMAC Mortgage was their new mortgage holder, sent their September payment to RBC. RBC did not cash it but forwarded it to GMAC Mortgage.
At some point in this period, GMAC Mortgage sent the plaintiffs an account statement dated September 15, 2004, which they received. That account statement was based on information that GMAC Mortgage had received from RBC. It showed that the plaintiffs' account was past due in the amount of $7,990 and that GMAC Mortgage had already assessed late fees totaling $255. On September 23, 2004, GMAC Mortgage sent the plaintiffs a letter demanding proof of their homeowners' insurance coverage. Then, on September 27th, GMAC Mortgage returned the plaintiffs' September payment, which they had sent to RBC. The letter returning the payment informed the plaintiffs that the payment represented only one of five payments that were then due (from May to September), and provided the plaintiffs with a phone number.
On October 6, 2004, the plaintiffs wrote to the United States Department of Housing and Urban Development ("HUD") detailing what they understandably described as their "nightmare" with RBC. They explained:
Despite admissions by RBC that they made errors, they feel no obligation to correct the grievance [sic] wrongs by supplying information necessary to bring closure to this situation, and they have cashed checks as if there was never any question raised or breach of obligation on their part. This is the same company that as of a few weeks ago was in hot pursuit of our home by means of foreclosure and had for months refused to accept our payments. The last message we received from RBC stated that there were updates on our account yet they have continually refused to operate in a professional manner by providing a written explanation that would offer us clarity and accountability on their part.
The letter provided a detailed outline of the plaintiffs' account history with RBC, including the fact that their first payment had been due in August 2003. It also recounted that RBC did not cash their August or September 2004 payments, and that on October 4th they received a letter from GMAC Mortgage returning their September 2004 payment and informing them that the payment was not enough to cover the past due balance because five payments were then due. The plaintiffs wrote: "GMAC claims that they took over our mortgage in May 04. No information to that effect had ever previously been provided by RBC or GMAC." Finally, their letter asked several questions about RBC's and GMAC Mortgage's servicing practices, among them:
* Why did [RBC] cash checks in July for an account that they did not hold and according to GMAC had purportedly been sold in May?
* What happened to the funds that were taken in July?
* Why were previous checks not forwarded to the new company?
* Why would GMAC just now initiate contact?
* Why would GMAC purchase a "non-performing" mortgage?
The plaintiffs sent their letter to HUD, which forwarded it to GMAC Mortgage, which received it on October 14, 2004.
In the meantime, on October 7th and again on October 15th, the plaintiffs wrote to GMAC Mortgage directly, requesting information concerning the transfer of their loan, including the date of the transfer, the amount transferred, confirmation of their monthly payment amount, and the payment address. The October 15th letter further sought "any information available about this account."
On October 13th, in response to the plaintiffs' October 7th letter, GMAC Mortgage advised the plaintiffs that their account had been transferred on September 1, 2004 and that a monthly payment of $1,661 had been due on May 1st. The response also listed plaintiffs' then-current principal balance. Then, under separate cover, when GMAC Mortgage did not receive the plaintiffs' October 2004 payment, the company demanded $9,588 for payments on the plaintiffs' account since May 2004, plus $255 in late fees. In that letter dated October 15, 2004, GMAC Mortgage informed the plaintiffs that they were in default and stated that they could cure by paying the total amount due within 30 days. Days later on October 20th, GMAC sent an odd letter informing plaintiffs that their monthly payment was $1,598, their "next payment due date" was May 1, 2004, and that there was an escrow shortage in their account of $7,022.
On October 21, 2004, GMAC Mortgage responded to the letter that it had received from HUD in a letter to HUD captioned "Re: Saul Catalan and Mia Morris . . . Payment Dispute." GMAC Mortgage informed HUD that there was no indication that the plaintiffs' funds were missing or misapplied based on the records that GMAC Mortgage had received from RBC. GMAC Mortgage also told HUD that those records reflected that the plaintiffs' first payment had been due in July 2003.
GMAC Mortgage sent a letter to the plaintiffs on October 25, 2004 to advise them that their mortgage had "reached an advanced stage of delinquency" and to offer alternatives, such as a repayment plan, loan modification, or deed in lieu of foreclosure, to avoid a completed foreclosure.
On November 15, 2004, the plaintiffs sent a letter to GMAC Mortgage, describing their history with RBC and enclosing a check for $11,186 to cover seven payments of $1,598. In that letter they informed GMAC Mortgage that "RBC received payments from us that were not applied promptly, other payments that were never applied and they never provided a clear explanation for their refusal to accept our payments, an action which resulted in our home being wrongfully placed in foreclosure." They also set forth their "expectations" for how their account would be handled, advising GMAC Mortgage that they expected that "any request from us for information will be provided," "any changes to our account or information that requires correspondence will be forwarded to us in writing," and "all payments will be processed in a timely manner." Finally, they advised GMAC Mortgage that "if you have any questions regarding this account I would appreciate them being asked in writing from the standpoint that documentation is clarity. It is an unsafe approach to take the word of ...