I would like to take a moment to thank everyone who participated in the Property Preservation sessions at the USFN Default Servicing Seminar held in Columbus, Ohio. It is my understanding that these sessions were some of the most well-attended sessions at the conference.

As you are aware, this was the first conference since the effective date of the new HUD ML 2002-10 guidelines, and this event provided us with an opportunity to discuss new issues that have arisen in implementing these guidelines.

The HUD P&P panel discussions addressed a number of points of view, with representatives from HUD, three M&M contractors (Golden Feather, First Preston, and MC&B), servicers, and field vendors in attendance. Following is a summary of the issues discussed at the HUD P&P sessions.

A. Monthly Property Inspections

1. Interior Inspections
   Laurie Maggiano of HUD stated that interior inspections are required per the Servicing Handbook 4330.1 Rev 5, pages 9-26 and 2-27, and the Claims Handbook 4330.4, pages 2-26 and 2-27.

2. Additional Compliance Inspections
   There are several areas where compliance inspections were required under ML 97-31 but are no longer required under ML 2002-10. Servicers were concerned that properties in these areas would not be inspected frequently enough under the new guidelines and would therefore be vulnerable to freeze damage prior to discovery of vacancy.

   Laurie indicated that if servicers begin to see such an issue in these areas, they should notify the REO Director in the HOC with appropriate jurisdiction. If HUD determines that risk has increased as a result of this change, the Department will review its position.

3. Hot Zones
   Laurie indicated that compliance inspections in Chicago are to be performed on vacant properties only. She also advised that HUD may be expanding the Hot Zone list to include other zip codes in Chicago and other cities.

4. First Time Vacancy Date
   Laurie indicated that the FTV date should be the date on which the property is confirmed to be vacant. She indicated that if the property was thought to be vacant but then found to be full of personals, the FTV date should be reset to reflect the date of the eviction of personals.

5. Photo Documentation
   There were no substantive questions or issues concerning photo documentation required at the time of vacancy confirmation.

B. Securing

1. One-time Securing Fees
   Laurie confirmed that the One-time Securing Fee is a maximum allowable and that the full amount cannot be charged for a single lock change. Fair market values for securing work should be charged.

   The panel discussed the inconsistency in assessments of fair market value according to the M&M contractors, and it was noted that some of the M&Ms were cutting the approved amount to less than the established rate in 97-31. Laurie suggested that the ML 97-31 pricing can be followed as a fair market value. Several servicers asked for clarification in writing for purposes of an audit trail.

   Resecuring bids were also discussed, and the panel raised the question of why resecuring must be bid across the board, even where the maximum one-time securing allowable has not been reached. Laurie indicated that she would look into this matter and provide a response.

2. Temporary Emergency Measures
   There were no issues or questions regarding this topic.

3. Lock Code Variations
   Golden Feather is now requiring specific lock codes in areas where either no lock code or a conflicting lock code is listed in the guidelines. For example, in the Philadelphia area Golden Feather requires the use of a Hampton 802 padlock, whereas the guidelines specifically require an A389 padlock. Servicers are concerned that if they follow Golden Feather's instructions they will be in conflict with the guidelines and will have an issue when it is time to be audited. Laurie indicated that HUD would respond to and clarify the Philadelphia lock code issue in writing.

4. Photo Documentation for Securing
   There were no issues or questions regarding this topic.

5. Security Door Cost Allowable
   It was noted that security door bids are being cut to the boarding allowables in ML 2002-10, when in fact the cost for security doors should include some allowance for hardware. Laurie indicated that she would consult with Richard Dunne on this.

C. Debris Removal

1. Removal of exterior debris
   There were no issues or questions regarding this topic.

2. Bidding of Health and Safety Hazards
   All M&M contractors indicated that they are still receiving bids for the removal of H/H where the maximum allowable has not been reached. They indicated that if debris or health hazards cab be removed for under the maximum allowable, they should automatically be removed, even if such removal cannot be billed in cubic yards.

   The M&M contractors advised that as long as charges are reasonable, removal can be billed per item, even though the guidelines do not allow for this. Several servicers, however, expressed concern about this issue, because there is no allowable listed in the guidelines for removing H/H (paint cans, tires,etc.) by item, and the servicers how this would be viewed in a HUD audit. Laurie indicated that HUD would discuss the matter with the M&M contractors to determine fair and reasonable costs for removing things by item and provide additional guidance at a later date.

3. Dump Receipts
   Laurie indicated that the dump receipt is required so that HUD can obtain independent third-party verification that debris items have been disposed of legally.

4. Second Bids
   There were several interpretations of the second bid issue. Golden Feather and First Preston interpreted the guidelines to mean that a second bid was required on overallowable bids in all states. Several servicers interpreted the guidelines to mean that a second bid was required on overallowable bids only in those states where all debris removal is required (Florida and Oregon). Laurie confirmed that a second bid for debris removal is required in all states.

5. Interior Debris Removal
   There were no issues or questions on this topic.

D. Lawn Maintenance

1. Grasscut Within Two Weeks Before Conveyance
   There were no issues or questions on this topic.

2. Initial Cut Bid and Recut Bid
   There were no issues or questions on this topic.

3. Bids on Lots Over 15,000 Square Feet
   It was noted that many bids for lots over 15,000 square feet are being cut by the M&Ms to the 15,000 square foot allowable. The M&M contractors agreed to review this matter with their staffs.

E. Winterizations

1. Performing winterizations within the allowable

2. Partial winterizations

3. RPZ valve/local codes and cost allowable

   Wet Winterizations & Cost Allowables
   There was some discussion of wet winterizations and cost allowables. The vendors pointed out that wet winterizations cannot be performed according to the new requirements for the allowable listed in ML 2002-10. Laurie advised that she would review this with Richard Dunne and get back to us. There was no discussion specific to partial winterizations, RPZ valves, or antifreeze, outside of the allowable discussion.

F. Maximum P&P

1. Effective Date of the New Cost Allowable
   Laurie confirmed that all work should be billed according to the mortgagee letter in effect on the date the work was completed, rather than the date the work was ordered.

G. Escalation Appeal Process

1. Consistency in Bid Approvals
   There was a great deal of discussion regarding the inconsistency in bid approvals by the M&M contractors. Laurie indicated that if servicers are getting bids cut back below ML 97-31 pricing, they should contact the HOC for assistance.

Laurie also reviewed the new appeals process and indicated that this process would be detailed in a new mortgagee letter to come out soon.

A summary of the VA, FNMA, and CV session held on Friday will follow.

I again want to personally thank all of the participants, and I hope that the conference was both educational and enjoyable.

Robert Klein