Q: Is a regulated lender required to provide notice when the servicer, not the regulated lender, sells or transfers the servicing rights to another servicer?
A: No. After servicing rights are sold or transferred, subsequent notification obligations are the responsibility of the new servicer. The obligation of the regulated lender to notify the Director or the Director’s designee of the identity of the servicer transfers to the new servicer. The duty to notify the Director or the Director’s designee of any subsequent sale or transfer of the servicing rights and responsibilities belongs to that servicer. For example, a financial institution makes and services the loan. It then sells the loan in the secondary market and also sells the servicing rights to a mortgage company. The financial institution notifies the Director’s designee of the identity of the new servicer and the other information requested by FEMA so that flood insurance transactions can be properly administered by the Director’s designee. If the mortgage company later sells the servicing rights to another firm, the mortgage company, not the financial institution, is responsible for notifying the Director’s designee of the identity of the new servicer.
– This Q&A was included in the “Interagency Questions and Answers Regarding Flood Insurance.” For ease of collection, this has been obtained from the FDIC’s Compliance Examination Manual – April 2016, which may be found here: https://fdic.gov/regulations/compliance/manual/5/V-6.1.pdf