III.A.1.b. Responsibility for Servicing Actions (03/14/16)

© HUD Single Family Housing Policy Handbook 4000.1

Holders are responsible for all servicing actions, including the acts of its Servicers.

Servicers are responsible for their actions in servicing FHA-insured Mortgages, including actions taken on behalf or at the direction of the Holder.

The costs associated with subservicing may not be imposed on the Borrower or passed along to HUD in a claim for mortgage insurance benefits.

Included in this section are:

i. Responsibility during Transfers of Servicing Rights

ii. Responsibility for Servicing when the Mortgage is Sold

iii. Registration with Mortgage Electronic Registration System, Inc.

i. Responsibility during Transfers of Servicing Rights

(A) Definitions The Transferor Servicing Mortgagee is the Mortgagee that transfers servicing responsibilities. The Transferee Servicing Mortgagee is the Mortgagee to which the servicing responsibilities have been transferred. The Transfer Date is the date on which the Borrower’s Mortgage Payment is first due to the Transferee Servicing Mortgagee.

(B) Standard The Transferor Servicing Mortgagee remains responsible for the servicing of an FHA-insured Mortgage until the Transfer Date. The Transferor Servicing Mortgagee must verify that the change of legal rights to service has been reported accurately. On the Transfer Date, the Transferee Servicing Mortgagee assumes responsibility for:

• all servicing actions, including ensuring resolution of any servicing errors that were, and remain, the responsibility of the Transferor Servicing Mortgagee;
• obtaining the complete mortgage file, including origination and servicing records; and
• ensuring that the original Mortgage, mortgage Note, or deed of trust is preserved.

(C) Required Documentation The Transferor Servicing Mortgagee must report the Transfer Date and update the mortgage record in FHA Connection (FHAC) within 15 Days of the Transfer Date.

ii. Responsibility for Servicing when the Mortgage is Sold

(A) Definition A Mortgage Sale is a transaction in which a holder sells the Mortgage to another FHA-approved Mortgagee.

(B) Standard The Selling Mortgagee relinquishes all rights and obligations under the contract for mortgage insurance on the effective date of the sale. The Selling Mortgagee remains responsible for Mortgage Insurance Premiums (MIP) until notice of the sale is received by HUD via FHAC. The Purchasing Mortgagee is the Mortgagee that purchases the Mortgage and thereby succeeds to all rights and obligations of the Selling Mortgagee under the contract for mortgage insurance. As of the effective date of the sale, the Purchasing Mortgagee becomes responsible for outstanding MIP obligations, regardless of the date of accrual, and must confirm that the details of the mortgage sale have been reported accurately.

(C) Required Documentation The Selling Mortgagee must report the effective date of the sale of the Mortgage as the “Transfer Date” and update the mortgage record in FHAC within 15 Days of the date of the sale.

iii. Registration with Mortgage Electronic Registration System, Inc.

(A) Definition The Mortgage Electronic Registration System (MERS) is an electronic tracking system identified as nominee for a holder of a Mortgage.

(B) Standard Mortgagees may voluntarily register FHA-insured Mortgages with MERS. The holder remains responsible for all servicing actions.