Ok, I lied. This isn't really a quiz. I can't score your response and give a grade because I don't know the correct answer. That's what I'm looking for.
Scenario:
- For 30 months Borrower pays PITI, which includes a payment for a monthly MI premium.
- In month 31 borrower looses job & can no longer cover monthly payment.
- Loan servicer advances their own funds to pay the monthly MI premium.
- Servicer acquires title to property through foreclosure.
- Shortly after filing a claim for loss with the MI company, the MI company requests a copy of all origination, collection & foreclosure documentation so they can audit the file.
- The MI company finds an indisputable reason to rescind coverage, denies the claim, and refunds ALL premiums that have been paid since the loan closing in a check to the servicer.
Q: Is the servicer entitled to retain the full premium refund, or must the portion paid by the borrower prior to default be returned to the borrower? (Please cite regulatory references used as the basis for your response.)
Thank you.