FHA Single Family Housing Policy Handbook 4000.1, III. SERVICING AND LOSS MITIGATION > C. Title I Insured Programs > 2. Title I Manufactured Home Loan Program — b. Loan Servicing Requirements

i. Title I Loan Sale

(A) Definition A Loan Sale is a transaction in which a Title I Loan holder sells the Loan to another Title I FHA-approved Lender.

(B) Standard A Lender may sell, assign, or transfer its Title I Loans, but only to a Lender that has been approved by HUD to participate in the Title I program and has an active Title I contract number. The selling Lender relinquishes all rights and obligations under the contract for loan insurance on the effective date of the sale. The selling Lender remains responsible for the Loan’s annual insurance premiums until notice of the sale is received by HUD. The purchasing Lender is the Lender that purchases the Loan and thereby succeeds to all rights and obligations of the selling Lender under the contract for loan insurance. As of the effective date of the sale, the purchasing Lender becomes responsible for outstanding annual insurance premiums, regardless of the date of accrual, and must confirm that the details of the loan sale have been reported accurately. A transfer of Title I Loans between Lenders must be reported to HUD within 31 Days of the effective date of the transfer. Exception for Sale with Recourse Reporting is not required if an insured Loan is transferred with a recourse, guarantee, or repurchase agreement.

(C) Required Documentation The selling or purchasing Title I Lender must report a transfer of Loans by submitting form HUD-27030, Title I Transfer of Note Report, to the FOC, Attention: Premiums (Title I Insurance Processing) Branch. HUD will accept the completed form HUD-27030 from either the selling Lender or the purchasing Lender as long as the form contains the signatures of authorized officials from both institutions. Transfers of Loans for Title I Property Improvement Loans must be submitted separately from Manufactured Home Loans. The two insurance types cannot be submitted on the same form HUD-27030. The Lender must complete a separate form HUD-27030 for each insurance type being reported. If a large number of Loans are being transferred, a completed form HUD-27030 may be submitted with an attached report or electronic file attachment (such as Excel spreadsheet) that provides the loan level data required by the form. HUD will hold the selling Lender responsible for all related premium charges and will disburse claim payments only to the selling Lender until an appropriately prepared form HUD-27030 is received and processed.

(D) Earmarking Reserves HUD may transfer a Loan or group of Loans with earmarking which keeps the insurance coverage separate from other loans owned by the purchasing Lender. In other words, the insurance coverage reserves associated with the Loans being transferred remain in a separate account from any loans already held by the purchaser. Once a Loan is earmarked it remains earmarked even if it is subsequently transferred to another Lender.

v. Insurance Coverage Administration

(A) Hazard Insurance Hazard insurance is required for all Manufactured Home Loans. The amount of insurance must be no less than the unpaid balance due on the Title I Loan, or no less than the actual value of the home where state law precludes a higher amount. The Lender must be named as the loss payee. If a Borrower does not maintain the required hazard insurance, the Lender must obtain the insurance and may pass on the expense to the Borrower. However, the cost of such insurance may not be included in the calculation of HUD’s claim payment. When a Lender obtains title to the home through repossession, the Lender must purchase and maintain sufficient hazard insurance until the sale or final disposition of the home. The cost of such insurance may be included in the calculation of HUD’s claim payment. The Lender assumes the risk for loss of insurance benefits for noncompliance with hazard requirements.

(C) Hazard or Flood Insurance Claims The Lender must take necessary steps to ensure that hazard or flood insurance claims are filed and settled as expeditiously as possible.

vi. Annual Insurance Premium and Billing and Remittance

(A) Definition Annual Insurance Premiums are charges that are remitted to HUD each year of the loan term. Loan Term, for the purposes of Title I insurance, refers to the term of the insurance coverage, which extends from the Loan’s Disbursement to maturity.

(B) Standard The Lender must pay an insurance premium equal to 1 percent of the remaining principal balance, based upon the Loan’s scheduled amortization. The annual premium charge must be paid for the full term of the Loan unless the Loan is prepaid in full or a claim is submitted to HUD. All insurance charges are considered earned when paid.

(D) Premium Adjustment on Notes Transferred When Loans are transferred between Lenders and the premium charges on the Loans transferred are already paid, any adjustments related to these charges are to be made between the Lenders, with no involvement by HUD. HUD will bill the purchasing Lender for any unpaid insurance charges, after being notified of the transfer in compliance with requirements for a Title I Loan Sale. The Lender or subsequent owner of the Loan is responsible for the payment of all premium charges. If the Lender uses a servicing agent to handle this function, HUD can establish billing for the agent on behalf of the Lender.

(E) Remittance of Annual Insurance Premium Lenders must remit the annual insurance premium electronically through Pay.gov. Instructions for accessing Pay.gov can be found in the Title I User Guide, which can be accessed from FHAC under Property Improvement/Manufactured Home. The Lender must remit its annual premium payment within 25 Days from the date of each billing statement. The billing statement will specify the payment due date.

(F) Penalty Charge and Interest on Late Premium Payment Lenders must pay the insurance premium reflected on their bill on or before the listed Payment Due Date. The Lender is assessed a penalty charge of 4 percent of the amount of any premium payment not received by HUD by the due date. Premium payments received from a Lender more than 30 Days after the due date are also assessed daily interest at the Treasury Current Value of Funds Rate. However, a Lender is not required to pay a penalty charge or daily interest if HUD fails to issue a billing statement for annual premium charges in a timely manner. HUD may accept a late report on a Loan where the Lender certifies that the obligation is not in Default.

(G) Refund or Abatement of Insurance Charges HUD does not grant any request for an insurance premium refund or abatement for the following reasons: • The Lender has exhausted its insurance reserve account or is no longer participating in the Title I program. • The loan reporting occurs after the Loan is paid in full by the Borrower. • HUD determines that there was fraud or misrepresentation by a Lender in the loan transaction. Exception A refund or abatement of insurance charges is permitted only when the following events occur: • If the loan obligation is refinanced into another Title I Loan, HUD will prorate any paid annual installments between the old Loan and the new Loan. HUD will use the date of the refinance to determine the amount pro-rated. • If the loan obligation is prepaid in full, charged off in accordance with IRS regulations, or Defaulted with an insurance claim, HUD does not bill for annual installments after a Lender informs HUD of these events. There will be no partial refund of insurance charges already paid for that portion of the year occurring after the reporting of such events. • If a Loan, or portion thereof, is ineligible for insurance from its inception due to statutory violations, HUD refunds any insurance charges that have been paid on the ineligible portion. HUD refunds the insurance charges only if HUD denies an insurance claim based upon this ineligibility, or if a Lender reports the ineligibility promptly upon discovery and HUD confirms the ineligibility. If an insurance claim is denied due to ineligibility and a Lender subsequently resubmits the claim with information showing that it was in fact eligible, any refunded amount of the insurance premium plus any accrued insurance charges must be paid by the Lender.

(H) Lender Review of Premium Charges The Lender is responsible for reviewing each Title I billing statement to be sure that the amount billed is correct. Since each billing statement reflects the current status of Loans as indicated in HUD’s records, a billing statement could include annual premium charges for Loans where the premium is no longer due. No premium is due for Loans that were prepaid in full during the preceding year and Loans where the Lender has submitted an insurance claim to HUD, but the claim is not yet noted in HUD’s records. (1) Reconciling the Billing Statement The Lender is responsible for reconciling the billing statement with the Lender’s records to ensure that the billed amount and the loan activity reflected on the statement are accurate. The Lender should check each billing entry to confirm the Loan’s status. (2) Exception Reporting The billing statement provided in FHAC allows Lenders to take “exceptions” on Loans where they believe they no longer owe premiums (prepaid, claim submitted, other, etc.). If a Loan is no longer active, the Lender may withhold payment (take an “exception”) for the premium charge billed for that Loan. The Lender must report the applicable exception reason for withholding the payment in FHAC. (3) Exception Reviews HUD reviews reported exceptions and may request the Lender to supply supporting documentation if deemed necessary to verify the validity of an exception. HUD will update its records as appropriate, including termination of insurance coverage where warranted. HUD will re-bill the Lender for the premium charge if the exception is determined to be invalid.