source:
  type: guide
  id: hud-4000-1-iii-b-loan-servicing-requirements
  authority: FHA Single Family Housing Policy Handbook 4000.1, Part III — b. Loan
    Servicing Requirements (05/09/2022)
  description: FHA Single Family Housing Policy Handbook 4000.1, Part III — b. Loan
    Servicing Requirements (05/09/2022).
  coverage_tier: operative
obligations:
- id: hud-4000-1-iii-b-loan-servicing-requirements-full
  canonical_id: hud-4000-1-iii-b-loan-servicing-requirements-full
  section: FHA Single Family Housing Policy Handbook 4000.1, Part III — b. Loan Servicing
    Requirements (05/09/2022)
  type: do
  tags:
  - regulator-direct
  - fha
  - hud-handbook
  - corpus-expansion
  - tier-operative
  primary_source:
    tier: 1
    authority: FHA Single Family Housing Policy Handbook 4000.1, Part III — b. Loan
      Servicing Requirements (05/09/2022)
    source_class: hud-handbook
    source_url: https://www.hud.gov/hud-partners/single-family-handbook-4000-1
    snapshot_id: 8c03836f77f317e1
    fetched_at: '2026-05-23T00:28:40Z'
    content_hash: sha256:411430f29b13f9b54a2ebb0e6f6e7087ecd2b90d0da22eb0c8c792eaa2d7d0df
    paragraph_quote: 'b. Loan Servicing Requirements (05/09/2022) The Lender must
      have adequate facilities for contacting the Borrower in the event of Default
      and must otherwise exercise diligence in collecting the amount due. The Lender
      must have an organized means of identifying, on a monthly basis, the payment
      status of Delinquent Loans to enable collection personnel to initiate and follow-up
      on collection activities, and must document its records to reflect its collection
      activities on Delinquent Loans. Title I Loan holders are responsible for all
      servicing actions, including the acts of its agents that perform servicing and
      collection activities. 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 III. SERVICING AND LOSS MITIGATION C. Title I Insured
      Programs 2. Title I Manufactured Home Loan Program Handbook 4000.1 1553 Last
      Revised: 11/26/2025 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. ii. Providing
      Information to HUD The Lender must respond to verbal or written requests for
      individual account information, including all servicing information and related
      data and the entire loan III. SERVICING AND LOSS MITIGATION C. Title I Insured
      Programs 2. Title I Manufactured Home Loan Program Handbook 4000.1 1554 Last
      Revised: 11/26/2025 origination file, from HUD staff or from a HUD-approved
      counseling agency acting with the consent of the Borrower. When HUD staff request
      information, the Lender must make available legible documents and in the format
      (electronic or hard copy) requested within 24 hours of the request or as otherwise
      permitted by HUD. iii. Communication with Authorized Third Parties (A) Definition
      Authorized Third Parties are parties who are not Borrowers on the Loan but who
      are authorized to communicate with Lenders regarding a Loan. (B) Standard The
      Lender must comply with all laws, rules, and requirements applicable to third-
      party access to loan information, including any requirement to provide loan
      information and arrange for individual consultation to parties authorized by
      the Borrowers. (C) Required Documentation When communicating with an Authorized
      Third Party, the Lender must include documentation of the authorization in the
      servicing binder. iv. Prepayment (A) Definitions A Partial Prepayment is a payment
      of part of the principal amount before the date on which the principal is due.
      A Prepayment in Full or Payoff is the payment in whole of the principal amount
      of the loan Note in advance of expiration of the term of the loan Note. The
      Installment Due Date is the first Day of the month, as provided for in the security
      instrument. (B) Standard The Lender must accept a prepayment of a Loan in whole
      or in part on any Installment Due Date without penalty to the Borrower. (C)
      Trustee’s Fee for Satisfactions If specifically provided for in the security
      instrument, the Lender may charge the Borrower the amount of the trustee’s fee,
      plus any reasonable and customary fees for III. SERVICING AND LOSS MITIGATION
      C. Title I Insured Programs 2. Title I Manufactured Home Loan Program Handbook
      4000.1 1555 Last Revised: 11/26/2025 payment, or for the execution of a satisfaction,
      release, or trustee’s deed when the debt is paid in full. (D) Recording Fees
      for Satisfactions The Lender may charge the Borrower a reasonable and customary
      fee for recording satisfactions in states where recordation is not the responsibility
      of the 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. (B) Flood Insurance (1) Standard Flood insurance is
      required if the home site is located in a Special Flood Hazard Area (SFHA) identified
      by the Federal Emergency Management Agency (FEMA). Flood insurance must be obtained
      at any time during the term of the Loan when the Lender determines the secured
      Property is located in an SFHA. The Lender must ensure that insurance is in
      force for the life of the Loan or so long as such coverage remains available,
      unless the area in which the Property is located is no longer designated as
      an SFHA. If, due to rezoning, a Property securing an FHA-insured Loan becomes
      located in an SFHA, the Lender must enforce HUD’s flood insurance requirements
      on coverage amounts and maintenance. III. SERVICING AND LOSS MITIGATION C. Title
      I Insured Programs 2. Title I Manufactured Home Loan Program Handbook 4000.1
      1556 Last Revised: 11/26/2025 If the Borrower does not maintain flood insurance
      as required, the Lender must force place 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 a home
      through repossession, the Lender may obtain and maintain flood insurance if
      the Property is or will be located in an SFHA identified by FEMA until the sale
      or disposition of the home. The amount of flood insurance must be no less than
      the unpaid balance due on the Title I Loan. The Title I Lender must be named
      as a loss payee. If the Lender fails to obtain the required flood insurance
      and an uninsured home is damaged, HUD will adjust its claim payment. When a
      Manufactured Home is without flood insurance and has sustained, at any time
      prior to the sale or disposition of the home, damage that would normally be
      covered by such insurance, the appraised value for claim calculation purposes
      will be based on the retail value of comparable homes in undamaged condition
      without any deduction for such damage. The cost of such insurance may be included
      in the calculation of HUD’s claim payment. (2) Required Documentation The Lender
      must include in the case binder a copy of the insurance policy showing the amount
      of coverage and name of the loss payee. (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 III. SERVICING
      AND LOSS MITIGATION C. Title I Insured Programs 2. Title I Manufactured Home
      Loan Program Handbook 4000.1 1557 Last Revised: 11/26/2025 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. (C) Billing Annual Insurance Premium HUD will issue a billing statement
      each month to the Lender through FHAC. The billing statement will show the total
      amount due to HUD for that period. The billing statement will differentiate
      Loans originated under the FHA Manufactured Housing Loan Modernization Act of
      2008 from Property Improvement and/or Manufactured Home Loans originated under
      the portfolio loan insurance program and are still covered by the Lender’s insurance
      reserve account. (1) Billing Schedule HUD bills the Lender for the initial installment
      of the insurance charge on the monthly statement at the beginning of the second
      year of the Loan. The charge will appear on the billing statement for the monthly
      billing cycle that corresponds to the anniversary of the Loan’s Disbursement
      Date. HUD bills a Lender for the remaining premium installments annually. This
      billing occurs during the month of the loan disbursement anniversary. If the
      loan term includes a partial year (e.g., 12 years and 6 months), the annual
      premium charge for the final partial year is pro-rated based on the number of
      months remaining (e.g., 0.5 percent for six months). HUD will include the pro-
      rated annual premium charge for the final partial year with the premium charge
      billed for the final full year, if the partial year is less than 7 months. This
      may vary from the number of Borrower payments required to repay the Loan. The
      loan term varies based on the time between the Disbursement Date and the date
      of the first payment. When calculating the loan term, HUD does not count partial
      months of 14 Days or less. HUD counts as a full month any partial month that
      is more than 14 Days. (2) Late Endorsement Reporting A Loan that is reported
      for endorsement after the first anniversary of the Disbursement Date will not
      be endorsed until the upfront premium and all past due annual premium charges
      are paid. The Lender must contact the FOC to confirm the amount due and to make
      arrangements for payment. III. SERVICING AND LOSS MITIGATION C. Title I Insured
      Programs 2. Title I Manufactured Home Loan Program Handbook 4000.1 1558 Last
      Revised: 11/26/2025 (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. III. SERVICING AND LOSS MITIGATION C. Title
      I Insured Programs 2. Title I Manufactured Home Loan Program Handbook 4000.1
      1559 Last Revised: 11/26/2025 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.). III. SERVICING AND LOSS MITIGATION
      C. Title I Insured Programs 2. Title I Manufactured Home Loan Program Handbook
      4000.1 1560 Last Revised: 11/26/2025 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.
      vii. Reporting Non-compliant Activities If the Lender discovers fraud, misrepresentation,
      or substantial noncompliance with program requirements, the Lender must promptly
      submit a report to HUD. Examples of non-compliant activities that must be reported
      include: • misstatement of fact(s) on the credit application; • falsified documentation;
      • false certifications from Borrowers, Dealers or inspection companies; • Dealer’s
      failure to submit an executed form HUD-56002-MH, Placement Certificate for Manufactured
      Home; • Dealer’s failure to comply with contractual obligations to the Borrower;
      • dealer referral fee or any like charges paid; • inaccurate or deceptive advertising
      and/or marketing material; and • manufacturer’s refusal to honor its warranty.
      The Lender must prepare a report of noncompliance on the Lender’s letterhead.
      The report must detail the non-compliant activity and must contain the following
      information to assist in any investigation: borrower name, borrower address,
      borrower telephone number, loan amount, loan date, inspection date, lender loan
      number, Title I loan number, loan officer name, dealer name, dealer address,
      dealer telephone number, and dealer Taxpayer Identification Number (TIN). The
      report must be sent to: Housing Office of Lender Activities and Program Compliance
      Attn: Director, Quality Assurance Division Department of Housing and Urban Development
      451 7th Street, S.W. Washington, DC 20410 If the Loan has been endorsed for
      insurance by HUD, the insurance on the Loan will stay in effect. If the non-compliant
      activity was caused or sanctioned by an employee of a III. SERVICING AND LOSS
      MITIGATION C. Title I Insured Programs 2. Title I Manufactured Home Loan Program
      Handbook 4000.1 1561 Last Revised: 11/26/2025 Lender, HUD may request that the
      Lender indemnify HUD for any loss sustained, or may impose other sanctions against
      the Lender.'
  judgment: false
