| HUD ML 2008-31 2008 Update of Preservation and Protection Guidelines, and Cost Reimbursements |
| Friday, 17 October 2008 | |
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The Dept. Of Housing and Urban Development has released Mortgagee Letter (ML) 2008-31 titled "2008 Update of Preservation and Protection Guidelines, and Cost Reimbursements".
This Mortgagee Letter supersedes Mortgagee Letter 2007-03 in its entirety. The purpose of this Mortgagee Letter is to update and clarify existing policy on preservation and protection provisions, referencing changes related to photographs, debris removal, inspections, over-allowable requests, second bids, repair of heating systems, winterization, permits and vacant property registration This Mortgagee Letter is comprised of a General Guidance Section and ten (10) attachments. In addition to the aforementioned changes, the HUD forms (i.e., Form HUD-9519-A, Form HUD-50012, Form HUD-50002 and Form HUD-27011) referenced in this Mortgagee Letter is now PDF fill-able.The effective date for policy changes and clarifications announced in this Mortgagee Letter is October 16, 2008. The preservation and protection guidance updates are as follows:Photographs Mortgagee Letter 2007-03 provided, “If photographs cannot be produced at the time of the claim review, all unsupported expenses beyond allowable cost limits will be disallowed, and for evictions, all expenses claimed for personal property/debris removal will be disallowed.” This Mortgagee Letter provides clarification to this guideline to eliminate payment of allowable expenses without documentation. The guideline is revised as follows. If photographs cannot be produced at the time of the claim review, the following will be disallowed:
Debris Removal (Dump Receipts) The Department acknowledges that it is a common business practice of many property preservation contractors to wait until they have collected debris from several properties before taking the debris to an appropriate facility for disposal and that not all disposal facilities provide printed receipts. Therefore, where such receipts are not available, Mortgagees will not automatically be denied reimbursement for debris removal. However, the Department must be able to confirm the type and amount of debris that was removed and that all debris was disposed of properly. Therefore, Mortgagees must maintain a complete audit trail which will include: the name, address, and phone number of each company providing the debris removal service, the FHA case number and address of the property, the date of the disposal, the number of cubic yards of debris disposed and a listing of any items that are not ordinary household debris which would include health and safety items, tires, appliances, cars, trucks, boats, batteries, etc. The documentation must also provide the name, address and telephone number of all disposal facilities used. If a dumpster was brought to the property, the supporting information must identify the date the dumpster was delivered to the property, the date it was removed, and the name, address and telephone number of the company supplying the dumpster.
Inspections The securing procedures listed in this Mortgagee Letter may be performed without prior approval from the Management and Marketing contractor if all individual expenses remain within the maximum cost allowable for that particular service. Pest Infestation This Mortgagee Letter clarifies guidance for the use of over-the-counter products for pest infestations. If, on the initial inspection, the Mortgagee finds the property to be infested with pests (e.g., roaches, water bugs, mice, rats) that constitute a health or safety hazard or prevent clean‑out or debris removal, the Mortgagee should have the property fumigated by a Pest Control Service, licensed to conduct such business in the area where the property is located. Insects or vermin that can safely be removed with over-the-counter products do not require professional extermination. A flea infestation does not require photographic evidence.
Over-allowable Request Detail Concurrent with the effective date of this Mortgagee Letter, HUD will accept submission of Form HUD-50002, Request to Exceed Cost Limit for Preservation and Protection by mail, fax or electronic (e-mail) formats and will allow M&M contractors to communicate approval or denial of the request by return email. In the appropriate signature box(s) on the form, the Mortgagee and the M&M contractor shall put the name and contact phone number of the individual authorized to act on behalf of the organization. An approved or denied copy of the request and supporting documentation must be maintained in the claim review file. Limitations on Second Bid Request With the exception of debris removal, Mortgagees are not required to obtain a second bid for an over-allowable expense if the first bid for the item/service is $250 or less. When the M&M requests second or revised bids, the M&M contractor will provide a price-range of usual and customary costs, for similar work. The Mortgagee may request that the M&M provide contact information for those service provider/providers who can do the work for an amount within the usual and customary price-range. The M&M is familiar with these costs and is required to maintain such records therefore the price-range information should be provided to the mortgagee upon request. Upon receipt of two bids for the same scope of work, M&M contractors may not assume that a bid is non-competitive, deny bid approval or request a third bid, solely on the basis that the first and second bids are too close in price. Conversely, Mortgagees should not submit bids that are far apart in price. If bids are far apart in price the Mortgagee must reconcile the price difference prior to submission to ensure that the bids are based on the same scope of work. If the bids are based upon the same scope of work, the M&M contractor may request a revised or third bid or provide a not-to-exceed amount that would be acceptable for completion of the work. Repair to Heating Systems Mortgagee Letter 2007-03 provides in Attachment 7, Section I-B, that if a major repair or replacement is needed to make the heating system operational, the Mortgagee should contact the M&M contractor for instruction. This language is revised to state, “When there is a jurisdictional requirement for heat to remain on (see local variations in the attachment) and a repair or replacement is needed to make the heating system operational, the Mortgagee should contact the M&M contractor for instructions when the costs of repair is greater than $250.00.” Mortgagees are required to repair heating systems during winterization season only when there is a jurisdictional requirement for the heat to remain on. Winterization Mortgagee Letter 2007-03, Attachment 7, required that plumbing and heating systems had to be thoroughly drained. That language has been revised to state that plumbing and heating systems must be drained in a manner sufficient to prevent freeze and/or other damage. Demand letters related to winterization will not be issued unless actual damage has occurred. Permits and Vacant Property Registration Fees Each Mortgagee and/or field service provider should be familiar with the state and/or jurisdictional requirements related to city ordinances or local law. If and when a building permit is required by local law prior to performing preservation and protection services, then the Mortgagee must obtain a permit. If code violations are related to health and safety and/or cost to resolve the violation is less than $250.00 the mortgagee shall complete the work without prior approval from the M&M contractor unless the repair causes mortgagee to exceed the overall cap for preservation and protection. Otherwise the mortgagee shall contact the M&M contractor. If the cost for vacant property registration is less than $250.00 the mortgagee shall pay the fee without prior M&M approval and provide documentation of the same in the claim review file. The fee for vacant property registration should be included as a P&P expense on the claim form HUD-27011. To view the Mortgagee Letter in its entirety, including several Editorial Revisions and the aforementioned attachments, please click here.
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