When an entity sells servicing rights, when must it notify the loan servicer of a loan secured by property located in a special flood hazard area?

When an entity sells servicing rights for a loan secured by property located in a special flood hazard area, it is important to promptly inform the loan servicer about the risk and requirements associated with flooding. The correct answer emphasizes the necessity of acting as soon as possible after the entity provides the borrower with the Notice of Special Flood Hazards and Availability of Federal Disaster Relief Assistance.

This requirement helps ensure that the servicer has timely and accurate information regarding the special flood hazard areas, enabling them to manage the risk associated with flooding appropriately. By notifying the servicer promptly after issuing the notice to the borrower, the entity aids in maintaining compliance with federal regulations and ensures that servicers can take necessary actions related to flood insurance requirements and borrower notifications.

This approach reflects the emphasis on consumer protection and risk management inherent in mortgage compliance regulations. The focus is on immediate communication to maintain the integrity of the lending process, particularly in regard to potential hazards that could impact the value of the collateral securing the loan.