HUD has posted an Updated version of the revised preservation and protection requirements and cost allowables set forth in ML 2007-03. ML 2007-03 was originally released January 25, with delayed implementation until April 30, 2007.

The updated guidelines still go into effect on April 30, 2007 and include several significant changes from the original version.  Highlights include the following:

• A differentiation of the securing timeframes for pre and post-sale properties, which allows ample time for the servicer to review the file prior to securing the property pre-sale.  The guidelines require post-sale properties to be secured within 5 calendar days of first time vacancy and 15 days for pre-sale properties.

• Instruction to immediately address damages upon discovery, such as flowing water and collapsed roof and approval to submit an O/A request after the work has been completed.

• One set of pricing for securing, boarding and inspections across the nation.

• Increased emergency roof allowable to $400 across the nation.

• The boarding of properties does not require light holes to be drilled or for the exterior of the boards to be primed and painted white.

• The winterization requirements have been simplified to reflect removal of the 2002-10 requirement for wet/radiant heating systems to be up and running while maintaining the heat in the property.  The winterization steps for a dry system were clarified and simplified, which is consistent with industry best practices of a "system shutdown" with a thorough draining of water from the system and adequate amounts of antifreeze added to prevent freeze-ups. 

• The requirement of automatic second bids for the replacement of sump pumps was removed and HUD added a $250 allowable for sump pump replacement.

• The requirement of automatic second bids for pumping water from the basement has been removed.  

HUD ML 2007-03 also includes several other revisions from ML 2002-10 and 2003-05.  These revisions were previously communicated upon the initial release of the letter and include the following highlights:

• 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 entire ML 2007-03, click the following links:

HUD ML 2007-03 Cover Letter

HUD ML 2007-03 Attachments