Common use of Third-Party Functions Clause in Contracts

Third-Party Functions. ‌ This section addresses the requirements for using third-party services. Vendor Management (4/9/18)41‌ PFIs and Servicers must have written policies and procedures for the approval and oversight of vendors and must monitor vendors, and third parties such as mortgage brokers, loan correspondents, quality control firms, document custodians, subservicers, and any other third parties who have been delegated to perform origination and servicing functions. The PFI or Servicer’s policies and procedures must include requirements: • That the vendor must meet and maintain its compliance with all required licenses, registrations, permits, approvals and qualifications for each jurisdiction where the vendor conducts business; • That the vendor have written policies and procedures for the activities performed; • That the vendor have adequate business continuity and disaster recovery plans in place; and 40 MPF Announcement 2016-30 (12/22/16) 41 MPF Announcement 2018-23 (4/9/18) MPF Announcement 2017-13 (3/28/17) • That the PFI conduct audits, quality control reviews and operational assessments that measure vendor performance for the activities performed, including services performed outside the United States, to ensure compliance with MPF Program Requirements and Applicable Law. If the vendor causes a breach or failure of the responsibilities as outlined in the Guides or any Applicable Agreements or to a failure to comply with any Applicable Law, the PFI or Servicer is not relieved of its liability or representations and warranties under the MPF Program. The PFI or Servicer defends, indemnifies and holds harmless the MPF Bank, MPF Provider and their successors and assigns from any resultant claim, loss, damage, judgment, cost, expense, reasonable attorneys' fees and legal or regulatory action. The MPF Bank or MPF Provider may require the PFI or Servicer to cease using a vendor for Mortgage Loans sold or serviced under the MPF Program and may exercise any remedy under the Applicable Agreement or Guides, including requiring the repurchase of Mortgage Loans affected by the vendor causing the PFI or Servicer to breach or fail to fulfill Origination Obligations, Servicing Responsibilities or to ensure their compliance with any Applicable Laws. PFIs and Servicers must be aware of and comply with all specific requirements for vendors in the Applicable Agreements and the Guides. Third-Party Origination‌ While a PFI may deliver Mortgage Loans originated by a third-party originator to the MPF Bank, the PFI must ensure its quality control process includes additional steps to monitor the quality of third-party originations. At a minimum, a PFI must ensure that third-party originations meet the MPF Bank’s standards for investment quality through a diligent quality control process. Document Custodians‌ As an alternative to using the MPF Program Custodian, a PFI or Servicer may use an approved third party custodian, or a PFI or Servicer that satisfies the eligibility requirements may act as its own Custodian upon receiving approval from the MPF Bank and/or MPF Provider. A Custodian that meets the eligibility criteria set forth in the appended Custody Manual may serve as Custodian for Mortgage Loans delivered under the MPF Traditional products. A PFI or Servicer that uses a Custodian other than the MPF Program Custodian must pay all fees charged by that Custodian for the performance of the Custodian's duties in connection with Collateral Files delivered by the PFI or Servicer. When using an alternative Custodian, the PFI or Servicer is required to obtain Initial Certification on all Mortgage Loans prior to sale. A PFI or Servicer that uses multiple custodians must name a Custodian for each Master Commitment under the MPF Program. The PFI or Servicer may designate a separate Custodian for one or more Master Commitments or one Custodian for all of its Master Commitments.

Third-Party Functions. ‌ This section addresses the requirements for using third-party services. Vendor Management (4/9/18)41‌ PFIs and Servicers must have written policies and procedures for the approval and oversight of vendors and must monitor vendors, and third parties such as mortgage brokers, loan correspondents, quality 40 MPF Announcement 2016-30 (12/22/16) 41 MPF Announcement 2018-23 (4/9/18) MPF Announcement 2017-13 (3/28/17) control firms, document custodians, subservicers, and any other third parties who have been delegated to perform origination and servicing functions. The PFI or Servicer’s policies and procedures must include requirements: • That the vendor must meet and maintain its compliance with all required licenses, registrations, permits, approvals and qualifications for each jurisdiction where the vendor conducts business; • That the vendor have written policies and procedures for the activities performed; • That the vendor have adequate business continuity and disaster recovery plans in place; and 40 MPF Announcement 2016-30 (12/22/16) 41 MPF Announcement 2018-23 (4/9/18) MPF Announcement 2017-13 (3/28/17) • That the PFI conduct audits, quality control reviews and operational assessments that measure vendor performance for the activities performed, including services performed outside the United States, to ensure compliance with MPF Program Requirements and Applicable Law. If the vendor causes a breach or failure of the responsibilities as outlined in the Guides or any Applicable Agreements or to a failure to comply with any Applicable Law, the PFI or Servicer is not relieved of its liability or representations and warranties under the MPF Program. The PFI or Servicer defends, indemnifies and holds harmless the MPF Bank, MPF Provider and their successors and assigns from any resultant claim, loss, damage, judgment, cost, expense, reasonable attorneys' fees and legal or regulatory action. The MPF Bank or MPF Provider may require the PFI or Servicer to cease using a vendor for Mortgage Loans sold or serviced under the MPF Program and may exercise any remedy under the Applicable Agreement or Guides, including requiring the repurchase of Mortgage Loans affected by the vendor causing the PFI or Servicer to breach or fail to fulfill Origination Obligations, Servicing Responsibilities or to ensure their compliance with any Applicable Laws. PFIs and Servicers must be aware of and comply with all specific requirements for vendors in the Applicable Agreements and the Guides. Third-Party Origination‌ While a PFI may deliver Mortgage Loans originated by a third-party originator to the MPF Bank, the PFI must ensure its quality control process includes additional steps to monitor the quality of third-party originations. At a minimum, a PFI must ensure that third-party originations meet the MPF Bank’s standards for investment quality through a diligent quality control process. Document Custodians‌ As an alternative to using the MPF Program Custodian, a PFI or Servicer may use an approved third party custodian, or a PFI or Servicer that satisfies the eligibility requirements may act as its own Custodian upon receiving approval from the MPF Bank and/or MPF Provider. A Custodian that meets the eligibility criteria set forth in the appended Custody Manual may serve as Custodian for Mortgage Loans delivered under the MPF Traditional products. A PFI or Servicer that uses a Custodian other than the MPF Program Custodian must pay all fees charged by that Custodian for the performance of the Custodian's duties in connection with Collateral Files delivered by the PFI or Servicer. When using an alternative Custodian, the PFI or Servicer is required to obtain Initial Certification on all Mortgage Loans prior to sale. A PFI or Servicer that uses multiple custodians must name a Custodian for each Master Commitment under the MPF Program. The PFI or Servicer may designate a separate Custodian for one or more Master Commitments or one Custodian for all of its Master Commitments.