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b. Responsibility for Servicing Actions (10/01/2025)
Mortgage Holders are responsible for all servicing actions, including the acts of its Servicers.
Servicers are responsible for their actions in servicing FHA-insured Mortgages, Partial Claim Subordinate Mortgages, and Payment Supplement Subordinate Mortgages. The Servicer is also responsible for actions taken at the direction, or on behalf, of the Mortgage 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.
i. Responsibility during Transfers of Servicing Rights
(A) Definitions
The Transferor Servicing Mortgagee is the Mortgage Servicer that transfers servicing responsibilities.
The Transferee Servicing Mortgagee is the Mortgage Servicer 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, any Payment Supplement(s), and any Partial Claim(s) before the Partial Claim documents have been recorded and delivered to HUD until the Transfer Date. The Transferor Servicing Mortgagee:
• must verify that the change of legal rights to service has been reported accurately; and
Page 1173
III. SERVICING AND LOSS MITIGATION A. Title II Insured Housing Programs Forward Mortgages
1. Servicing of FHA-Insured Mortgages
• may transfer the Borrower’s language preference to the Transferee Servicing Mortgagee.
On the Transfer Date, the Transferee Servicing Mortgagee assumes responsibility for:
• all servicing actions, including:
o ensuring resolution of any servicing errors that were, and remain, the
responsibility of the Transferor Servicing Mortgagee;
o where applicable, reporting the Delinquency/Default Status (DDS) Codes
in HUD’s Single Family Default Monitoring System (SFDMS);
• obtaining the complete mortgage file, including origination and servicing records;
• all servicing actions associated with any Partial Claim(s) and Payment Supplement(s), as required; and
• ensuring that the original Mortgages, mortgage Notes, or deeds of trust are preserved.
The Transferee Servicing Mortgagee must also ensure transfer of any outstanding Payment Supplement Account and associated servicing records. Where applicable, on the Transfer Date, the Transferee Servicing Mortgagee assumes responsibility for:
• all servicing actions associated with the Payment Supplement, including but not limited to: accounting of funds held in the Payment Supplement Account related to a
Borrower’s Payment Supplement; and administration of the Borrower’s Payment Supplement;
• obtaining the complete files relating to the Payment Supplement; and
• obtaining any outstanding funds in the Payment Supplement Account.
(C) Required Documentation
The Transferor Servicing Mortgagee must report the Transfer Date and update the mortgage record in FHA Connection (FHAC) or by Electronic Data Interchange
(EDI) or Business to Government (B2G) 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 Mortgage Holder sells the Mortgage to another FHA-approved Mortgagee.
The Selling Mortgage Holder or Selling Mortgagee is the Mortgagee that sells the Mortgage and thereby relinquishes all rights and obligations under the contract for mortgage insurance.
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III. SERVICING AND LOSS MITIGATION A. Title II Insured Housing Programs Forward Mortgages
1. Servicing of FHA-Insured Mortgages
The Purchasing Mortgage Holder or Purchasing Mortgagee is the Mortgagee that purchases the Mortgage and thereby succeeds to all rights and obligations of the Selling Mortgage Holder under the contract for mortgage insurance.
(B) Standard
The Selling Mortgage Holder relinquishes all rights and obligations under the contract for mortgage insurance on the effective date of the sale. The Selling Mortgage Holder remains responsible for Mortgage Insurance Premiums (MIP) until notice of the sale is received by HUD via FHAC, EDI, or B2G.
As of the effective date of the sale, the Purchasing Mortgage Holder 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 Mortgage Holder must report the effective date of the Mortgage Sale as the Transfer Date and update the mortgage record in FHAC or by EDI or B2G within 15 Days of the date of the Mortgage 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.