source:
  type: guide
  id: hud-4000-1-iii-b-general-loan-servicing-requirements
  authority: FHA Single Family Housing Policy Handbook 4000.1, Part III — b. General
    Loan Servicing Requirements (05/09/2022)
  description: FHA Single Family Housing Policy Handbook 4000.1, Part III — b. General
    Loan Servicing Requirements (05/09/2022).
  coverage_tier: operative
obligations:
- id: hud-4000-1-iii-b-general-loan-servicing-requirements-full
  canonical_id: hud-4000-1-iii-b-general-loan-servicing-requirements-full
  section: FHA Single Family Housing Policy Handbook 4000.1, Part III — b. General
    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. General
      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. General 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 who 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. III. SERVICING AND LOSS MITIGATION C. Title I Insured Programs
      1. Title I Property Improvement Loan Program Handbook 4000.1 1535 Last Revised:
      11/26/2025 (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. III. SERVICING AND LOSS MITIGATION C. Title I Insured Programs 1.
      Title I Property Improvement Loan Program Handbook 4000.1 1536 Last Revised:
      11/26/2025 ii. 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. iii. 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 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 in the format
      (electronic or hard copy) requested within 24 hours of the request or as otherwise
      permitted by HUD. iv. 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 If communicating with an Authorized
      Third Party, the Lender must include documentation of the authorization in the
      servicing binder. v. 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. III.
      SERVICING AND LOSS MITIGATION C. Title I Insured Programs 1. Title I Property
      Improvement Loan Program Handbook 4000.1 1537 Last Revised: 11/26/2025 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 fee for 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.
      vi. Insurance Coverage Administration (A) Hazard Insurance Lenders may require
      the Borrower to have hazard insurance. If the Lender requires the Borrower to
      purchase hazard insurance, the Lender must: • be named as a “Loss Payee” on
      the hazard insurance policy; and • escrow sufficient funds for payment of the
      renewal premium. (B) Flood Insurance (1) Standard Flood insurance is required
      for a secured Loan when the Property is located in an SFHA. 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 1. Title I Property Improvement Loan Program Handbook 4000.1
      1538 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. (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 Proceeds Insurance Claims The
      Lender must take necessary steps to ensure that hazard or flood insurance claims
      are filed and settled as expeditiously as possible. vii. 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 loan amount, multiplied by the number
      of years of the loan term. The 1 percent premium is calculated on the original
      loan amount rather than the declining loan amount. All insurance charges are
      considered earned when paid. (C) Billing 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. III. SERVICING AND LOSS
      MITIGATION C. Title I Insured Programs 1. Title I Property Improvement Loan
      Program Handbook 4000.1 1539 Last Revised: 11/26/2025 (1) Billing Schedule HUD
      bills a Lender for the initial installment of the insurance charge on the next
      monthly billing statement after a Lender reports the Loan for insurance. If
      the loan term is 25 months or less, the Lender will receive one billing statement
      that reflects the entire insurance charge. For all other loan terms, the initial
      billing statement will reflect the annual premium for the year, plus any applicable
      penalty or interest for late premium payments. HUD bills a Lender for the remaining
      premium installments annually. This billing occurs during the month of the loan
      disbursement anniversary. The final annual installment may be adjusted to reconcile
      with the total insurance charge due. A premium is not required and HUD will
      not bill for a period of 14 Days or less after acknowledgment of the loan report
      in FHAC. A charge for a full month is assessed for a period of more than 14
      Days. 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.
      (2) Late Reporting A Loan that is submitted for insurance after the first anniversary
      of the Disbursement Date will not be insured until all past due annual premium
      charges are 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 properly notified of the transfer
      through the submission of form HUD-27030. (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. III. SERVICING AND LOSS MITIGATION C. Title I Insured Programs 1. Title
      I Property Improvement Loan Program Handbook 4000.1 1540 Last Revised: 11/26/2025
      The first annual premium payment due will be reflected on the billing statement
      issued the month after the Lender reports the Loan for insurance in FHAC. (F)
      Loan Terms Less than or Equal to 25 Months If a loan term is 25 months or less,
      the Lender will receive only one billing statement that reflects the entire
      insurance charge. Lenders must pay the entire insurance charge reflected on
      the billing statement no later than the 25th Day after the date of the billing
      statement. (G) Loan Terms Greater than 25 Months For loan terms greater than
      25 months, the following must occur: • The first billing statement must reflect
      the initial annual installment due. • The insurance premium must be paid in
      annual installments. • Payments must be paid by the due date reflected on the
      billing statement. • Annual installments are due on the 25th Day after the date
      of billing by HUD. • Second and successive installments are due annually. Lenders
      must remit the loan insurance premium electronically through Pay.gov. (H) Penalty
      Charge and Interest on Late Premium Payments Insurance premiums not received
      from the Lender by the due date will be assessed a penalty charge of 4 percent
      of the amount of the payment. Insurance premiums received from the Lender more
      than 30 Days after the due date will also be assessed daily interest at the
      Treasury Current Value of Funds Rate. However, no penalty charge or daily interest
      will be assessed if HUD fails to acknowledge receipt of the loan report or fails
      to bill the Lender for the insurance charges. (I) 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. Exceptions
      A refund or abatement of insurance charges is permitted only when the following
      events occur: III. SERVICING AND LOSS MITIGATION C. Title I Insured Programs
      1. Title I Property Improvement Loan Program Handbook 4000.1 1541 Last Revised:
      11/26/2025 • 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. (J) 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 charge is
      no longer due. Examples include 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. 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 provide HUD with data on premium charges withheld when processing payment
      to HUD. (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 1. Title I Property Improvement Loan Program Handbook
      4000.1 1542 Last Revised: 11/26/2025 (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.'
  judgment: false
