As you may know, the new M&M contracts provide for the issuance of non-compliance letters when the M&M contractor believes that the servicer has conveyed a property without complying with one or more of HUD's conveyance requirements. There is no monetary penalty associated with these letters, though HUD has indicated that they will ultimately use the letters as a means of tracking and evaluating servicers' performance.

Safeguard has found that a great many non-compliance letters can be refuted by reviewing the file and supplying appropriate documentation to prove that the compliance requirements actually were met. We have successfully argued for the rescission of a significant percentage of the non-compliance letters that our clients have forwarded to us for review.

HUD's recent mortgagee letter (ML 2005-22) states that, while the M&Ms are not required to respond to a mortgagee's challenge of a non-compliance letter, they are instructed to include any mortgagee response in the claim file.  Therefore, even where we may not succeed in securing a recission of the letter, it is still very important to respond with all available documentation to refute the alleged non-compliance.

A number of the M&Ms have indicated to us that they would be willing to include the field service provider as a copy on non-compliance letters if the servicer has instructed them to do so. Safeguard therefore asks that our clients please advise the M&M contractors that they do want a copy of all non-compliance letters sent to SPI as well.

If you have any questions about the foregoing, or if you would like to discuss how SPI reviews and responds to non-compliance letters, please contact P&P Operations Manager Amy Nauer (amy.nauer@safeguardproperties.com, or ext. 1205) or Operations Specialist Kellie Beyer (kellie.beyer@safeguardproperties.com, or ext. 1362).

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