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a. Servicing in Compliance with Law (11/07/2023)
i. Definition
The Loan Holder is the Title I Lender who holds title to the FHA insured Loan, has the right to enforce the agreement, is responsible for servicing actions on Loans, including servicing actions performed by its agent.
ii. Standard
Lenders must ensure all Title I FHA-insured Loans are serviced in accordance with FHA requirements and all applicable laws.
Lenders must service all FHA-insured Loans in accordance with FHA requirements and all applicable laws.
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III. SERVICING AND LOSS MITIGATION C. Title I Insured Programs
1. Title I Property Improvement Loan Program
Lenders must comply with all laws, rules, and requirements applicable to loan servicing, including full compliance with the applicable requirements under the purview of the CFPB, including RESPA and TILA.
Lenders must comply with all antidiscrimination laws, rules, and nondiscrimination and equal opportunity statutes, regulations, contract provisions, and other requirements applicable to servicing performing FHA-insured Loans and FHA-insured Loans in Default, including full compliance with the applicable requirements of:
• Fair Housing Act, 42 U.S.C. §§ 3601–3619;
• the FCRA, 15 U.S.C. §§ 1681a‒1681x; and
• the ECOA, 15 U.S.C. §§ 1691a‒1691f.
The Lender must make all determinations with respect to the adequacy of the Borrower’s income in a uniform manner without regard to race, color, religion, sex, age, national origin, familial status, disability, marital status, receipt of public assistance, because the applicant has in good faith exercised any right under the Consumer Credit Protection Act, or location of the Property.
iii. Record Retention – Servicing File
(A) Definition
The Servicing File is the Lender’s record of all servicing activity on an FHA-insured Loan.
(B) Standard
Lenders must retain all Servicing Files for a minimum of two years after the transfer or sale of the Loan or termination of Title I Loan insurance. The Lender must maintain accurate records for each Loan serviced. In addition to the specific documentation requirements stated in this Handbook 4000.1, these records must include the following information:
• loan origination and endorsement documentation,
• Title I Insurance payments made; and
• documentation related to any recovery of hazard insurance proceeds.
The Lender must also retain, in electronic and hard copy, the security instrument when applicable, Note, or a lost note affidavit acceptable under state law, with the electronic copy marked “copy.”
For cases for which a claim is filed, the Lender must retain documentation in compliance with the Claim File section for at least seven years after the final claim or latest supplemental claim settlement date.
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III. SERVICING AND LOSS MITIGATION C. Title I Insured Programs
1. Title I Property Improvement Loan Program
(C) Record Reconciliations
HUD may require Lenders to provide information evidencing reconciliation of Lender records with HUD. This information may include identification, by Loan, of the following:
• amount of insurance premium due and paid to HUD by time period for each insured Loan;
• date insurance was terminated or servicing transferred, if applicable; and
• date servicing was acquired, for Loan acquired after September 1, 1982.
All Lenders must ensure that HUD’s records accurately reflect the status of the Loan and both the correct holder and servicer of record.
(D) Electronic Storage
Where retention of a hard copy or original document is not required, Lenders may use electronic storage methods for all servicing-related documents required in accordance with HUD regulations, handbooks, and Title I Letters.
Regardless, the Lender must be able to make available to HUD in the format (electronic or hard copy) requested legible documents within 24 hours of a request or as otherwise prescribed by HUD.