What Happens When Your Mortgage Servicer Refuses to Correct Its Error?

You sent a Notice of Error. You provided proof. You waited 30 days. And then you received a letter saying: “We have completed our investigation and determined that no error occurred.”

This is frustrating, but it is often the trigger for a successful federal lawsuit.

The “Reasonable Investigation” Standard

Under RESPA (Regulation X), a servicer cannot just say “no.” They must conduct a reasonable investigation.

• Did they look at the cancelled check you sent?
• Did they listen to the phone recording you referenced?
• Did they review the prior servicer’s payment history?

If they simply looked at their own computer screen and said “our computer says you’re wrong,” they have likely failed to conduct a reasonable investigation. This is often called “parroting” or “rubber stamping.”

The Lawsuit (Section 2605(f))

If a servicer fails to correct an error or fails to conduct a reasonable investigation, you can sue them in federal court under 12 U.S.C. § 2605(f).

What You Can Win

1. Actual Damages: Money to compensate you for the harm caused (e.g., late fees, lost time, credit damage, emotional distress).
2. Statutory Damages: Up to $2,000 per violation if there is a pattern or practice of noncompliance.
3. Attorney’s Fees: This is the most important part. If you win, the servicer has to pay your lawyer’s bills.

Don’t Give Up

A denial letter is not the end of the road. It is often the evidence we need to prove that the servicer is acting in bad faith. If you have a valid claim and a denial letter, you are ready for litigation.