On January 25, 2007 HUD released Mortgagee Letter 2007-03 announcing updates to the Department's preservation and protection (P&P) requirements and increases the maximum allowable costs that will be reimbursed on a claim for insurance benefits.  These requirements are effective 30 days from the date of this Mortgagee Letter.

This guidance supersedes the policy requirements of ML 2002-10, 2002 Preservation and Protection Cost Schedule and Policy Updates/2002 Post Endorsement Guidelines, Fees and Charges, except for the post endorsement fee schedule which remains in effect.  It supersedes in their entirety, ML 2003-05, ML 2004-07, and ML 2005-22.  Finally, it supersedes that section of ML 2002-19, Clarification Regarding Title Approval issues, Property Condition at Conveyance, Administrative Offsets and a New Process for Lender Appeal of Conveyance Issues that describes the Property Condition and Re-conveyance Appeals' process, Mortgagee Neglect and Requests to Exceed Cost Limits for Preservation and Protection.

Several significant policy updates are incorporated into this guidance, they include:

• An overall increase in cost reimbursements for many P&P services;
• A description of five different types of inspections.  The trigger events that necessitate an inspection have expanded to include property conditions that may signal a non-monetary default.  Also, the maximum number of inspections that may be performed each year has increased and the cost reimbursement for inspections has increased;
• A requirement for Mortgagees to document in the "Mortgagee Comments" section of Form HUD-27011, the key code for changed door locks as opposed to mailing keys to the appropriate Management and Marketing Contractors;
• An increase in the maximum allowable securing fee to allow for the re-securing of a property without prior approval;
• Clarification of the distinction between temporary and permanent roof repairs, and clear guidance when each is appropriate;  
• Clarification of conditions under which HUD will accept conveyance of a property with mold;
• A new requirement for the use of digital photographs and a new flat-fee reimbursement of $30.00 for all photographs, regardless of the number provided;
• An update allowing a Mortgagee to claim reimbursement for one initial grass cut in each growing season;
• An update allowing a Mortgagee to submit one bid per growing season for recurring lawn maintenance on an oversized lot rather than submitting new over-allowable requests each time the yard is mowed;
• Specific language that excludes normal household cleaning products from the definition of hazardous waste;
• Removal of the requirement for installation of the Reduced Pressure Zone (RPZ) device, except in areas where it is a state or local requirement;
• A significant reduction in the number of local variations to general policy; and
• Updates to the Mortgagee appeal procedures that provide additional time for Mortgagees to appeal a re-conveyance decision and additional time for HUD staff (at both appeal levels) to respond.

To read the letter in its entirety please click the following links:

HUD ML 2007-03 

Attachments to ML 2007-03