FHA Single Family Housing Policy Handbook …

1 FHA Single Family Housing Policy Handbook II. Title II Insured Housing Programs Forward Mortgages table of Contents Post Date: 09/11/2014 i FHA Single Family Housing Policy Handbook 1 table OF CONTENTS 2 II. TITLE II INSURED Housing PROGRAMS FORWARD 3 MORTGAGES .. 1 4 B. SERVICING .. 1 5 1. Servicing of FHA-Insured Mortgages .. 1 6 a. Servicing Responsibility .. 1 7 i. Definition .. 1 8 ii. Standard .. 2 9 (A) Transferee and Transferor Servicing Responsibility .. 2 10 (B) Selling Mortgagee Responsibility .. 2 11 (C) Purchasing Mortgagee Responsibility .. 2 12 (D) Registration with Mortgage Electronic Registration System, Inc.. 2 13 b. Communications with Borrowers .. 2 14 i. Mortgagee Communication Capabilities .. 3 15 ii. Communication with Authorized Third Parties .. 3 16 (A) Definition.

2 3 17 (B) Standard .. 3 18 (C) Required Documentation .. 3 19 iii. Notice to the Borrower of Transfer of Servicing .. 3 20 (A) Notice from the Transferor Servicing Mortgagee .. 4 21 (B) Notice from the Transferee Servicing Mortgagee .. 4 22 iv. Statement of Escrow Account .. 4 23 v. Payoff Procedure 4 24 vi. Annual Notices to Borrower .. 5 25 (A) Annual Prepayment Disclosure Statements .. 5 26 (B) Statement for Income Tax Purposes .. 6 27 c. Servicing Fees and Charges .. 7 28 i. Reasonable and Customary Fees and 7 29 ii. Prohibited Fees and Charges .. 7 30 iii. Fees for Borrower Requests for Certain Services .. 7 31 (A) Copy of Mortgage or Deed of Trust .. 7 32 (B) Copy of Mortgage Note .. 8 33 (C) Copy of Settlement Statement .. 8 34 (D) Copy of Amortization 8 35 (E) Replacement Coupon Books.

3 8 36 (F) Verification of Mortgage .. 8 37 (G) Copy of Year-End Statement .. 8 38 iv. Other Fees and Charges .. 8 39 d. Providing Information to HUD .. 8 40 2. Servicing of Performing 9 41 a. Transfers of Servicing and Sales of Mortgages .. 9 42 i. Compliance with all Applicable Laws, Rules, and Requirements .. 9 43 FHA Single Family Housing Policy Handbook II. Title II Insured Housing Programs Forward Mortgages table of Contents Post Date: 09/11/2014 ii ii. Transfers of Servicing .. 9 1 (A) Notification to HUD of 9 2 (B) Mortgage Payments during Transfer .. 9 3 (C) Failure to Provide Timely Notice .. 9 4 iii. Sale of the Mortgage .. 9 5 iv. Mortgage Insurance Premium Reports .. 10 6 v. Mortgage Record Changes in FHAC .. 10 7 b. Escrow Setup .. 10 8 i. Compliance with all Applicable Laws, Rules, and Requirements.

4 10 9 ii. Escrow 10 10 (A) Special Custodial Account .. 10 11 (B) Trust Clearing Account .. 10 12 iii. Commingling .. 11 13 c. Escrow Administration .. 11 14 i. Additional Collections .. 11 15 ii. Proper Use of Escrow 11 16 (A) Improper Application of Escrow Funds .. 11 17 (B) Escrow Funds May Be Treated as One Entity .. 12 18 (C) Interest on 12 19 (D) Investment of Escrow Funds .. 12 20 (E) Prohibition on Pre-Accrual .. 12 21 (1) Definition .. 12 22 (2) Standard .. 13 23 iii. Escrow 13 24 iv. Payments from Escrow Accounts .. 13 25 (A) Penalties Assessed to Borrowers .. 13 26 (B) Payment of Insurance Premiums .. 14 27 (1) Long-term Policies .. 14 28 (2) Optional Policies .. 14 29 (3) Advancing Corporate Funds for Optional Policies .. 14 30 (4) Personal Property and Personal Liability Insurance.

5 14 31 (5) Life Insurance and Disability Insurance .. 15 32 (6) Insurance Protecting Only the Mortgagee .. 15 33 d. Insurance Coverage Administration .. 15 34 i. Hazard Insurance .. 15 35 (A) Payment of Renewal Premium .. 15 36 (B) Notification of Loss .. 15 37 (C) Fee for Change in Hazard Insurance Policy .. 15 38 ii. Flood Insurance .. 16 39 iii. Hazard or Flood Insurance Proceeds .. 16 40 (A) Insurance Claims .. 16 41 (B) Loss Settlement Amounts for Borrower Expenses and Personal Property .. 16 42 (C) Insurance Proceeds for Home Damage .. 16 43 (D) Application of Excess Insurance Proceeds to Unpaid Principal Balance .. 16 44 iv. Optional Policies .. 16 45 (A) Personal Property and Personal Liability Insurance .. 16 46 FHA Single Family Housing Policy Handbook II. Title II Insured Housing Programs Forward Mortgages table of Contents Post Date: 09/11/2014 iii (B) Life or Disability or Optional Coverage Income Policies.

6 17 1 e. Payment Administration .. 17 2 i. Monthly Payments .. 17 3 ii. Premium Payments for Optional Coverage .. 17 4 iii. Fees for Uncollectible Checks .. 17 5 iv. Return of Partial Payments .. 17 6 (A) Definition .. 17 7 (B) Standard .. 18 8 v. Prepayment Procedures .. 18 9 (A) 18 10 (B) Prepayment Procedures .. 18 11 (1) Mortgages Closed On or After January 21, 2015 .. 18 12 (2) Mortgages Closed Before January 21, 2015 .. 19 13 (a) Mortgages Insured On or After August 2, 1985 .. 19 14 (b) Mortgages Insured Prior to August 2, 1985 .. 19 15 (i) Borrower s Notice of Intent to Prepay .. 19 16 (ii) Effective Dates for Notice of Intent to Prepay .. 20 17 (iii)Installment Due Date Falls on a Non-Business Day .. 20 18 (3) Methods of Applying Partial Prepayments .. 20 19 (4) Payoff Procedure Disclosure Requirements.

7 20 20 (C) Advance Full Monthly 21 21 (D) Fee for Fax of Payoff Statement .. 21 22 (E) Fee for Additional Payoff Statements .. 21 23 (F) Trustees Fee for Satisfactions .. 21 24 (G) Recording Fees for Satisfactions .. 21 25 f. Mortgage Insurance Premium 21 26 i. Annual or Periodic MIP .. 21 27 ii. Payment of Periodic MIP .. 21 28 iii. MIP Schedule .. 22 29 g. Post-Endorsement Mortgage Amendments .. 22 30 i. Modifying a Performing Mortgage .. 22 31 (A) Modification Requiring HUD Approval .. 22 32 (B) Principal Amount of Modified Performing Mortgage .. 23 33 (C) Recordation of Lien .. 23 34 (D) Required Documentation .. 23 35 (E) Fee for Modification of Performing Mortgage .. 23 36 (F) Reporting to HUD .. 23 37 ii. Partial Release of Security .. 23 38 (A) Partial Releases from Condemnation.

8 24 39 (1) Mortgagee Consent to Release .. 24 40 (2) Required Documentation .. 24 41 (B) Partial Releases Requiring HUD Approval .. 24 42 (1) Request Process .. 24 43 (2) HUD Review .. 25 44 (C) Fees for Partial Release of Security .. 25 45 iii. Change of Location of Dwelling or Improvements .. 25 46 FHA Single Family Housing Policy Handbook II. Title II Insured Housing Programs Forward Mortgages table of Contents Post Date: 09/11/2014 iv (A) Requesting HUD Approval for Relocation .. 25 1 (B) Emergency Relocation Not Requiring HUD Approval .. 26 2 (C) Relocation Requirements .. 26 3 (D) Notification to HUD of Completed Permanent Relocation .. 26 4 (E) Temporary Relocation .. 27 5 (F) Notification to HUD of Completed Temporary Relocation .. 27 6 iv. Refinance Transactions .. 27 7 h. MIP Cancellation and Termination.

9 27 8 i. Definition .. 27 9 ii. Cancellation of MIP for Loans Closed on or after January 1, 2001 but before June 3, 10 27 11 (A) Automatic Cancellation of MIP .. 28 12 (B) Mortgage Term of More Than 15 Years .. 28 13 (C) Mortgage Term 15 Years or Less and LTV Ratio of 90 Percent and Greater .. 28 14 (D) Mortgage Term 15 Years or Less and LTV Ratio of Percent and Less .. 28 15 (E) Borrower-Initiated Cancellation of MIP .. 28 16 (F) Processing MIP Cancellation .. 28 17 iii. Termination of MIP on Mortgages Closed on or after June 3, 2013 .. 29 18 iv. Distributive Shares .. 29 19 (A) Definition .. 29 20 (B) Payment of Distributive Shares .. 29 21 i. Mortgage Insurance Termination .. 29 22 i. Definition .. 29 23 ii. Termination of Mortgage Insurance .. 29 24 iii. Voluntary Termination of Mortgage Insurance.

10 30 25 (A) Borrower s Consent to Voluntary Termination .. 30 26 (B) Request for Voluntary Termination .. 31 27 (C) Prorated MIP .. 31 28 (D) Effective Date of Termination .. 31 29 iv. Escrow Balance Returned to 31 30 j. Record Retention Servicing File .. 31 31 i. Record Reconciliations .. 32 32 ii. Electronic Storage .. 32 33 3. Default Servicing .. 32 34 a. 32 35 b. HUD Default Servicing Contact .. 32 36 c. Late Charges .. 33 37 i. Definition .. 33 38 ii. Standard .. 33 39 iii. Advance Demand Notice .. 33 40 iv. Application of Subsequent Payment to Unpaid Late Charges .. 33 41 v. Default/Foreclosure Due to Unpaid Late Charges .. 33 42 vi. Surplus Escrow Application to Delinquency .. 34 43 d. Partial 34 44 i. Acceptance of Partial 34 45 ii. Application of Payments .. 34 46 FHA Single Family Housing Policy Handbook II.