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17.1 INTRODUCTION
Servicers are responsible for servicing SFHGLP loans and protecting security interests and servicing accounts in a reasonable and prudent manner. This Chapter provides additional guidance about the ways in which servicers are expected to service loans that are either current or less than 20 days past due. Servicing non-performing loans is described in Chapter 18 of this Handbook.
Section 1 defines the requirements associated with servicing current accounts, such as collecting payments, escrowing funds, and loan reporting functions. Section 2 defines how the servicer should consider borrower requests for partial releases of security, and transfers and assumptions.
A. Sale of Loans to Approved Lenders [7 CFR 3555.54]
Lenders may sell SFHGLP loans to any USDA approved servicing lender (servicer). While the guarantee is transferred with the loan, the originating lender will be held to the responsibilities in accordance with Section 4.9, Indemnification, of Chapter 4 regarding omissions and/or unresolved review findings stemming from problems at loan origination when a loss claim is requested. Requirements for loan sales are described in Chapter 4 of this Handbook.
B. Contracting for Servicing of SFHGLP Loans
The holding lender is responsible for ensuring the loan is properly serviced by a USDA approved servicing lender. If the USDA approved servicing lender contracts out rights to a third-party provider, the holding lender remains responsible for ensuring the loan is properly serviced.
C. Notifying the Agency of Loan Sales or Servicing Transfers
The Agency must be notified within 15 days of a sale or servicing transfer by submitting Form RD 3555-11 to the Single Family Housing Servicing Branch, Lender Reporting Section. Agency notification should be password protected or encrypted and emailed to rd.so.hsb@usda.gov.
D. Non-Compliance
Failure by the lender to comply with Agency requirements including reporting or other program guidelines, or failure to provide high quality origination, underwriting, or servicing can result in the following Agency actions:
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x Withdraw the lender’s approval; x Transfer its portfolio of SFHGLP loans; x Require the lender to indemnify the Agency if a loss is paid; deny or reduce
future loss claims; and/or x Withdraw the loan guarantee. The Agency will notify the lender in writing of non-compliance and provide appeal rights, if necessary, in accordance with HB-1-3555, Appendix 3. Failure to comply with the reporting requirements and other lender responsibilities outlined in HB-1-3555, Chapter 4 could indicate non-compliance.
SECTION 1: SERVICING PERFORMING LOANS