HUD Reminds of Mortgagee Responsibilities for Sub-servicing of FHA 203(k) Mortgages
On May 19, the U.S. Department of Housing and Urban Development (HUD) released an update titled Mortgagee Responsibilities for Sub-servicing of FHA 203(k) Mortgages and Escrow Rehabilitation Accounts.
TO: All FHA-Approved Mortgagees
Mortgagee Responsibilities for Sub-servicing of FHA 203(k) Mortgages and Escrow Rehabilitation Accounts
This FHA Single-Family Housing News e-mail reminds FHA-approved mortgagees of
their responsibilities under Mortgagee Letter (ML) 2009-42, Sub-servicing of
FHA-insured Mortgages, with regard to the servicing of 203(k) mortgages.
Specifically, one of the functions that a servicer of an FHA-insured 203(k) mortgage
is responsible for is the servicing of the rehabilitation escrow account. When this
function is delegated to another party, the sub-servicing requirements of
ML 2009-42 apply. Therefore, under ML 2009-42, only a mortgagee approved
to service FHA-insured mortgages may handle this function.
ML 2009-42 restates guidance that an FHA-approved servicer is not precluded from
performing servicing actions on behalf of another FHA-approved servicer, which is
an arrangement often referred to as subservicing. FHA reminds mortgagees that:
- Mortgagees must ensure that these arrangements comply with HUD rules,
including the requirement that both servicers and sub-servicers have
- ML 2009-42 references HUD regulations at 24 CFR §203.502, which state
that “[t]he mortgagee shall remain fully responsible to the Secretary for
proper servicing, and the actions of the servicer shall be considered to
be the actions of the mortgagee. The servicer shall also be fully
responsible to the Secretary for its actions as a servicer.”
Additionally, all mortgagees are reminded of the importance of updating FHA
systems with any mortgage record changes as outlined in ML 2011-33,
Mortgage Record Changes and Data Reconciliation. HUD requires that FHA
systems accurately reflect any change with respect to the roles and
subsequent responsibilities as the parties listed as holder of the mortgage
- Review the October 19, 2009 Mortgagee Letter 2009-42 at:
- Review the September 6, 2011 Mortgagee Letter 2011-33 at:
- Call the FHA Resource Center at 1-800-CALLFHA (1-800-225-5342). Persons
with hearing or speech impairments may reach this number by calling the
Federal Information Relay Service at 1-800-877-8339.
- Visit our online resource information at www.hud.gov/answers.
Please click here to view the update in its entirety.
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