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Volume 7 - Number 11

May 23, 2014

Only Approved Lenders May Subservice 203(k) Loans

Only an approved lender-servicer may subservice FHA 203(k) rehabilitation mortgages and their escrow accounts, according to a reminder issued this week by the FHA. The FHA said one of the functions of a servicer of FHA-insured property rehabilitation loan is to service the loan’s escrow account. The same rule applies when servicing is delegated to another party, the agency said. The FHA allows an approved FHA servicer to farm out the work as long as the delegated third party is also agency-approved. HUD regulations state that the lender remain fully responsible for proper servicing and that the subservicer’s actions is also considered to be the actions of the lender. The FHA further reminded lenders of the importance of updating FHA systems with any mortgage record changes as outlined in previous guidance. HUD requires that FHA systems ...

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