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The Industry Webinar focusing on issues pertaining to the servicing of FHA loans held March 12th, 2008 included the following panelists:
- Laurie Maggiano, HUD
- Leslie Bromer, HUD
- Tom Rose, HUD Santa Ana HOC
- Marc Hinkle, PHH Mortgage
- Jack Evans, Chase Home Finance
- Barb Komisarof, Bank of America
- Sherilee Massier, Wells Fargo
- Robert Klein, CEO Safeguard Properties
- Caroline Reaves, MCS
Prior to the conference call, HUD issued written answers and clarification to the questions posed by the industry. The questions and answers are included in the attached and linked below presentation .
PowerPoint
PowerPoint Flash Version
A brief summary of each question and answer and topic discussions follow below.
1) Is work completed per bid approval included in total P&P costs to date?
HUD Response: Yes.
Additional Comments: Yes, when the cost of work to be completed exceeds the scheduled amount the lender must request an over-allowable. All requests to exceed cost limits should advise/include amounts spent to-date on the request. The M&M can then determine if approval of those additional costs are feasible. When debris is removed from a 1 unit dwelling in excess of 12 cubic yards then that amount is counted against the total allowable for debris removal and any subsequent debris removal services will require an over-allowable
2) If a servicer removes 10 cans of paint per bid approval, does that negate the 12 cyd allowable to remove debris and health hazards on subsequent visits to the property?
HUD Response: Yes.
3) If a servicer removes 14 cyds of exterior debris per bid approval, does that negate the 12 cyd allowable to remove debris and health hazards on subsequent visits to the property?
HUD Response: Yes.
Additional Comments: The panelist discussed that this may result in additional bids needing to be submitted for small amounts, due to quickly exceeding the maximum total P&P costs defined in ML 2007-03 and will ultimately create delays in conveying the property.
4) Servicers would like clear instruction as to when debris removal should be claimed per cubic yard or per man hours following an Eviction.
HUD Response: Any curbside debris removal required following an eviction will be reimbursed as an eviction cost even if the work is not performed on the date of the actual eviction. No bids are required.
Additional Comments: HUD clarified that all debris removal associated with an eviction (same day as the eviction, or 2 days later) is to be removed by man hours as described in ML 2007-03.
5) M&M Contractors are requiring 2nd bids for exterior debris or health hazard items that are bid less than $200, and cannot be removed by the CYD allowable.
HUD Response: Mortgagees will not be asked to obtain a second bid for an over-allowable expense if the cost of the item or service is $250.00 or less.
Additional Comments: HUD stated that a new mortgagee letter will be issued to clarify this issue.
6) Servicers are receiving large demand letters in the amount of $1000 for “possible freeze damages” because the plumbing lines would not hold pressure at the time of the M&M’s initial inspection.
HUD Response: ML 2007-03 included a reference in Attachment 7, describing winterization requirements for plumbing systems that indicated that all water must be removed from systems. That language is being revised as follows:
“Unless otherwise specified by local variation, the winterization process must include cleaning toilets and draining of all plumbing and heating systems in a manner sufficient to prevent freeze and/or other damage.”
Additional Comments: HUD will be issuing clarification in an upcoming mortgagee letter. Demand letters should be appealed per ML 2007-03 guidelines if servicers receive letters citing, "possible damages".
* Servicers are not required to complete pressure tests on dry heating systems, but asked HUD to consider the requirement in order to avoid claims later on.
* Discussion were held that pressure tests of old plumbing systems may cause damage to older systems, which may be the reason the M&M Contractor is finding that the lines do not hold pressure.
7) Servicers are receiving demand letters requesting reimbursement of all securing fees, when only one door or opening was not secured.
HUD Response: HUD has clearly defined its minimum securing requirements in Attachment 3, item 1 of ML 2007-03. Failure to complete those minimum securing requirements is grounds for denial of securing fees even if some of the tasks were performed.
8) Demand Letter Appeals.
HUD Response: If, following conveyance an M&M contractor finds potential reconveyance or demand issues, they send an email notifying the servicer of the issue and requesting clarification. It is our understanding that the vast majority of issues are resolved at this stage. However, if the issue is not resolved, the M&M must obtain permission from the GTR to issue a formal Notice of Intent to Reconvey or Notice of Intent to Collect by Administrative Offset. It is receipt of either of these documents that may be sent via email and followed by regular mail that triggers the 15 day appeal opportunity.
Additional Comments: HUD also clarified that if an appeal if filed by the servicers are entitled to a response to their appeals prior to the actual offset.
Laurie Maggiano added that a property cannot reconvey to the servicer during the appeal process, and the M&M Contractor is responsible to maintain the property during the appeal process.
Lenders/servicers should notify the M&M Contractor when an appeal has been filed.
Appeals can be filed via email and hard copy mail.
HUD stated that appeals should be answered within 5 business days if complete and thorough documentation is provided to HUD. If detailed information is not provided,some responses may take 15 or more days. Servicers are encourage to contact the appropriate party in HUD when a response is not received timely.
9) Servicers are still receiving denied bids and extension request, and reconveyances for minor infractions; such as one missing inspection report, a wrong date entered on a form, and an inspection report missing one piece of information.
HUD Response:These instances should be elevated immediately to the GTR and or REO Director with jurisdiction.
10) Servicers are receiving denied bid requests because the first and second bids are either 1) too close in price, stating “not independent and competitive”; or 2) too far apart in price, stating “not the same scope”. How are servicers to proceed?
HUD Response: 1) Upon receipt of two competitive and independent bids for the same scope of work, M&M contractors may not deny bid approval or request a third bid, solely on the basis that the first and second bids are too close in price.
2) Mortgagees should not submit bids that are far apart in price. When bids are far apart mortgagees must reconcile them prior to submission. If multiple bids are far apart in value, the M&M may request a revised bid, a third bid or provide a not-to-exceed amount that would be acceptable for completion of the work.
11) Servicers are receiving 2nd bid requests for exterminations and both bids are denied stating, “complete for the allowable.” Licensed exterminators will not complete for the allowable for $50 or $110. Is a certified exterminator required for minor (possible) roach infestation that can be cured with over the counter products?
HUD Response: Insects or vermin that can safely be removed with over-the-counter products do not require professional extermination.
12) Are approved and signed over allowable expenses claimable if the OA request contains an inaccuracy, such as a mis-typed date?
HUD Response: M&M contractors should not approve overallowable requests if they are aware that some of the information is incorrect. However, if an overallowable request has been approved and the work was performed properly, an inaccuracy in the request form is not justification for denial of a claim reimbursement.
13) - Some HOCs are upholding large dollar demand letters and requiring servicers to maintain the heat at properties that do not share common utilities. This is contradictory to the instructions in ML 2007-03.
HUD Response: Servicers are not required and should not be requested to repair heating systems unless the property is in the possession of the mortgagee during a period when there is a requirement for the heat to remain on.
Additional Comments: HUD expects to issue written clarification in an upcoming mortgagee letter.
14 - Mold Remediation.
HUD Response: A mortgagee must take reasonable action to remediate the cause of the mold (i.e., patch the roof) and complete any other required preservation and protection actions related to minimizing further mold damage (i.e. remove soaked carpeting) prior to conveyance of a property. In most cases this will require an overallowable request. HUD will review the overallowable request and make a determination if there is sufficient cost benefit to proceed with the work. These decisions will generally be made by the GTR. The EPA web-site’s guide to mold is specific in that “mold spores will not grow if moisture is not present.” See www.epa.gov/iaq/molds/moldbasics.html
Additional comments: Simply removing the source of water will no stop to growth of the mold and will continue to cause damage to the property. Mold discovered in pre-foreclosure properties are at the highest risk of spreading and will have additional damages at time of conveyance. Upon discovery of the mold, bids for mold remediation are being submitted and denied the M&M. HUD clarified that if proper documentation is provided and the remediation bid was derided by the M&M, the servicer should not be held responsible the additional damages.
15) The pulling of city permits typically results in city violations that must be cured prior to conveyance. These violations are usually minor, resulting from wear and tear. Is pulling city permits a requirement for completing repairs at a property? If so, when is it appropriate?
HUD Response: If and when a building permit is required by local law prior to performing preservation and protection services, then the permit must be obtained.
Additional Comments: Robert Klein recognizes the need to comply with city code, and added that the pulling of permits often triggers the city's request to repair mortgagor neglect items, which do not affect convey condition.
Additional Topics Discussed:
1 - Servicers are receiving denied extension requests when bids are approved by the M&M Contractor. Tom Rose responded that the M&M Contractors should be exercising reasonable judgment when approving or denying extension requests. Extension requests are valid if the servicer needs additional time to obtain a 2nd bid per the M&M's request (non-debris related). Extension requests for additional time to obtain 2nd bids for debris are not valid.
HUD National P&P Conference Webinar Follow Up Call Questions List
The Following Questions and Comments Were Addressed During the Call:
1. Many cities will waive the fee for federal agencies
2. Time is running short, and I was curious if vacant property registration was going to be discussed?
3. What about a mis-type in price? We had an o/a that we approved for 300 $ only later for them to ask us for 3000 due to a mistype.
4. We are having a problem with the M & M Company taking part of one bid and part of another when we have submitted two bids for work to be done. Why is this happening either they take one bid or the other. It is difficult to go back to the contractor and ask one to do part of the work and another to do another part. The M & M companies used to take one bid or the other but not part from each bid??????
5. Will the new mortgagee letter address dye testing prior to conveyance; we are finding deeds not being recorded upon transfer from bank to HUD
6. Who is now the GTR and REO director for Wyoming?
7. We recently requested an O/A and submitted an extension request at the same time. The O/A was approved, but the M&M denied the extension. We appealed to our GTR and were ultimately granted 5 days. However, the GTR plainly stated that the only reason an extension was granted was due to HUD's delays in processing. She specifically stated that P&P was not a sufficient reason to request an extension to convey. This contradicts what the HUD panelists just stated.
8. Many times the lender did not notify the M&M that they sent in an appeal so we have no idea it is under appeal so we continue with letters on schedule
9. Contractors are not going to be willing to do evictions for just man hours. What about the cost of taking the property to the dump?
10. Would it be correct then that there would be potentially two separate man hour charges (one from the house to the curb and one from the curb to a disposal site)?
11. So when boarding is required we do not need to submit an OA? Because it is not subject to the max allowable
The Following Questions and Comments Were Not Addressed During the Call
1. Why is the conveyance days counted by calendar days but the M&M response is business days?
2. We transitioned our claims to a different State. Another Mortgage Co now owns the building that we were in. We are not getting our demands. How can we get our address updated with the M&M Contractor?
3. When the property is in redemption can we convey to HUD or do we have to wait for redemption to expire?
4. If servicers address the source of moisture or water infiltration into the property (i.e. roof leak, water in basement, etc.) mold will still continue to grow in hot humid climates with the house closed up with no A/C on. The moisture is in the humid air.
5. How are servicers to address old houses with basic ground water seeping into the basement?
6. M&M Contractors are approving line item bids from both the first and second bid submitted. In many parts of the country contractors have to travel 100 miles or more to complete the work. Increasing gas prices are making it difficult to get the work completed timely.
7. We have received denied over allowable requests b/c an inspection was completed a few days late. Is this a valid reason for an over allowable request to be denied?
8. Is there a list available of contacts when lenders/servicers need to appeal to the next level?
9. We have been having a lot of problems with our M&M contractor. It seems as though the M&M contractor is not clear on the requirements allowed by HUD. There have been several times when we have had to quote parts of the mortgagee letter to the M&M Contractor, when we do this they usually withdraw the request. Is there not a requirement that the M&M contractors take classes and actually read the mortgagee letters?
10. Regarding the 5 calendar day time frame to secure a property (post foreclosure): How strictly is HUD enforcing this? 5 calendar days is not always realistic in rural areas and does not allow the servicer sufficient time to quality control the inspection results.
11. If a property is going to be reconveyed, does the M&M deed the property back to the lender listed on the deed that was recorded to HUD? We have had properties reconveyed to the bank in the incorrect name.
12. If a crawl space or opening was properly secured and broken between the last inspection to the property and the date the Part A was filed, and we have photos to support, do servicers still get a HUD Demand letter for all securing fees?
13. We have been receiving notice on noncompliance because the utilities are inactive. In the mortgagee letter it states that utilities should be turned off. Why would a non-performance letter be issued for this?
14. How does pressure testing the water lines compromise the winterization?
15. How are personals to be treated following an eviction when the sheriff or state requires that they be stored for 30 days following the eviction?
16. What date should be used as the first time vacancy date when personals are to remain in the property for 10 day s following the eviction?
17. Has HUD considered expanding the pre-approved boarding areas to include more of the urban, high risk areas? Servicers are reglazing windows and then having to reglaze again due to vandalism.
18. Is debris located in a secured shed or outbuilding considered interior or exterior debris?To view a copy of the Webinar PowerPoint, please click on the following link(s).
About Safeguard
Safeguard Properties is the largest privately held field services company in the country. Located in Cleveland, Ohio and founded in 1990 by Robert Klein, Safeguard has grown from a regional preservation company with a few employees and a handful of contractors performing services in the Midwest, to a national company with over 450 employees. Safeguard is supported by a nationwide network of subcontractors able to perform any requested superintendence, preservation, and maintenance functions, as well as numerous ancillary services in the U.S., the Virgin Islands, and Puerto Rico.
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