Yes, here's what might have happened. If you recorded the two 1098's separately, the software may have mistakenly understood that you had two different loans totaling a much higher amount.
The IRS will calculate an "Average Balance" by looking at the principal reported on your 1098s. If two 1098 forms are reported on your tax return, the IRS doesn't distinguish that they are the same loan. It assumes your debt is more than $750,000 and automatically limits your deduction—often at a much lower amount than the $40,000 you paid.
My suggestion is to respond to the notice by mailing a brief statement to the address on the notice. Include both copies of both 1098's and inform them you changed lenders and that the two 1098's issued are for the same loan. Further state that your total principal never exceeded $750K and that you are entitled to the full interest amount of $40,000.
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