Servicing Guide

Published September 9, 2020

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What are the servicer requirements for property insurance on FHA mortgage loans that will be conveyed to HUD once the property has been acquired?

The following table describes servicer requirements for FHA mortgage loans that will be conveyed to HUD.

The servicer must...
 

Obtain an endorsement to the property insurance policy to reflect Fannie Mae's interests immediately following the foreclosure sale.

 

Cancel the insurance coverage on the date the deed to HUD is filed for record and include the amount of the refund, or an estimated refund amount if the refund has not been received, as a deduction on the FHA MI claim.

If the property cannot be conveyed to HUD, the servicer must instead adhere to the policy described for conventional mortgage loans in For Conventional Mortgage Loans earlier in this topic.

When the servicer receives the refund of the unearned property insurance premium from the insurer, it must immediately remit the funds to Fannie Mae as a “special remittance.” However, if Fannie Mae has not reimbursed the servicer for all of its outstanding foreclosure expenses, the servicer may keep the property insurance premium refund and show it as a credit on the request for expense reimbursement that it submits to request reimbursement of its outstanding expenses for the mortgage loan.

Note: This does not pertain to property insurance proceeds, but only premium refunds.

For more information please see: E-4.4-01: Continuing or Canceling Property Insurance Coverage 

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