Q: Servicing 6 – Is a lender required to provide notice when the servicer, not the lender, sells or transfers the servicing rights to another servicer?
A: No. After servicing rights are sold or transferred, the subsequent notification obligations applicable in connection with NFIP policies are the responsibility of the new servicer. The obligation of the lender to notify the Administrator or the Administrator’s designee (i.e., the insurance provider) of the identity of the servicer transfers to the new servicer. The duty to notify the insurance provider of any subsequent sale or transfer of the servicing rights and responsibilities belongs to that servicer. For example, if a lender makes and services a loan and then sells the loan in the secondary market and also sells the servicing rights to a mortgage company, then the lender must notify the insurance provider 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 insurance provider. If the mortgage company later sells the servicing rights to another firm, the mortgage company, not the lender, is responsible for notifying the insurance provider of the identity of the new servicer.
Similarly, for a flood insurance policy issued by a private insurer, if a lender sells or transfers the servicing rights, the Agencies do not expect the lender to provide notice to the insurance provider of any subsequent sale or transfer of the servicing rights.