For conventional mortgage loans with borrower-purchased MI, the servicer must pay the renewal premium either monthly or annually as required. See B-1-01, Administering an Escrow Account and Paying Expenses and F-1-05, Expense Reimbursement for additional information.
Payment of the renewal premium for a lender-purchased MI policy is the servicer’s corporate responsibility and must be paid from the servicer’s own funds. The servicer must not deposit these funds in a Fannie Mae custodial account unless Fannie Mae authorizes the use of a custodial account for this purpose.
After a mortgage loan is modified, the servicer must not
include a factor in the servicing fee for lender-purchased MI coverage paid through annual or monthly renewal premiums, or
allow an excess servicing fee.
With the exception of a mortgage loan modified under the Fannie Mae HAMP modification program, the servicer has the option of funding the payment of renewal premiums from its own corporate funds or from the borrower’s escrow account.