Section 22.07 - Insurance Loss Settlements and Hazard InsuranceServicer is required to take all actions required by the terms of the mortgage impairment policy or required by prudent practice and custom and normally taken by responsible Mortgage Lenders to require that hazard insurance is maintained in effect by the Borrower(s). Servicer will, upon receipt of any information that hazard insurance maintained by the Borrower will for any cause terminate, procure within the time period required by the terms of a mortgage impairment policy, fire and extended coverage insurance of the account of the Borrower for at least the minimum requirement of the Mortgage Loan and pay the premium therefore, so as to prevent lapse in protection on the mortgaged property. Servicer shall place all insurance loss draft proceeds in an unapplied account pending application. If proceeds are applied to restoration, any excess proceeds shall be applied against the Mortgage Loan debt unless other disposition has been approved by MHMFA. (See 761 CMR 21.21.)
(1)Amount of Loss $2,500 or Less. Servicer is not required to submit a report to MHMFA on the disposition of proceeds of losses of $2,500 or less, unless Servicer recommends application of the proceeds against the Mortgage Loan debt. Servicer shall determine that the property has been repaired to at least its original condition. After the property has been repaired, and provided that there is no delinquency or other servicing problem, Servicer shall disburse the proceeds and document in the Loan File all pertinent facts concerning the loss and disposition of the proceeds. Servicer shall exercise its prudent judgment in determining whether a physical inspection of the property should be made prior to the release of the draft.(2)Amount of Loss Exceeding $2,500. Servicer is required to submit a report to MHMFA advising the nature and extent of any loss in excess of $2,500 immediately upon learning of it. As soon as possible, Servicer shall recommend a disposition of the proceeds indicating the proposed nature and cost of repairs. Partial disbursement or a draw plan may be utilized, provided that physical inspection is made to insure that the work has been satisfactorily completed at least equal to the amount of funds to be disbursed on each draw. Whenever a total or near total loss is sustained and Servicer recommends that the proceeds be applied against the Mortgage Loan debt, Servicer shall explain to MHMFA its reasons. Servicer shall adhere to all applicable laws regarding application of insurance proceeds, all FHA, VA, private mortgage insurer requirements, and prudent practices concerning notification, inspection and approval. Servicer shall take any action necessary to protect the priority of the mortgage, including, but not limited to, obtaining waivers of material or mechanics' liens.