FHA Servicers Conference Call 05-08-06 Summary
 
THE FHA Servicers Conference Call was organized to discuss common issues and determine the best practices to utilize consistency. Resolutions will not be reached on all issues, but presenting concerns and thoughts to HUD will increase awareness for what the servicers are dealing with and help foster communication and cooperation in the industry.
 
Issue: M&Ms are not paying past-due utility bills upon conveyance, resulting in utility companies denying service on other properties until outstanding invoices are settled.
 
Servicers advised that several methods can be used to avoid the issue. A HUD O/A can be submitted for the overdue balance, advising that the utilities will not be turned on until the balance is paid. If the O/A is denied, the servicer requests permission to convey the property without turning on the utilities. Servicers can terminate the utility service when the property is conveyed, but they are held responsible for any damage caused to the property because of the utility shut-off. M&Ms are notified when a servicer plans to terminate utilities, but this does not guarantee the M&M will take action to transfer the utilities. M&Ms are not reimbursed by HUD for paid utility bills.
 
Direction is needed to clarify how utilities can be turned on at a property pre-conveyance if outstanding utility bills exist, and also how to get the utility bill out of a servicer's name and into the M&M's name following conveyance. Utility companies are further complicating the issue by compounding all property accounts under one client code, which allows any outstanding bill to impact all other properties. Additionally, HUD cannot request accessibility to utility file information if the loan is not in HUD's name, preventing them from reviewing outstanding bills.
 
Wait time charges for turning on utility services can be combined with the cost to reactivate the service, as individual wait time bids are not reimbursed by HUD. This is considered a cost of business for the servicer.
 
Issue: Inconsistencies from the M&Ms in regard to first and second bids.
 
Servicers suggest HUD request photographs be submitted on the first bid to show the scope of work before a second bid is needed. M&Ms can speed the process to approving a bid by allowing bids and photographs to be submitted via email, or requiring all bids include photographs.
 
M&Ms are "cherry picking," which means approving some items submitted on the first bid and other items submitted on the second bid. Servicers also reported that M&Ms are denying both first and second bid amounts submitted, but are not providing requested clarification of an acceptable price or a similar approved bid.
 
Pre-conveyance inspections help to immediately resolve any issues discovered at a property for timely conveyance and provide training to both the servicer and M&M on acceptable standards and practices.
 
Servicers are unsure if second bids should only be provided for debris removal or if they should be submitted to include all convey condition issues reported on the first bid. Some M&Ms have been denying first and second bids that are not exactly comparable with work bid; however, servicers do not tell their contractors what to bid when they inspect a property, which would counteract providing a second, independent bid. Servicers request instruction from HUD as to whether second bids should be provided only for debris removal, or for all convey condition issues, and whether the second bidder should be given the scope of work for which the first bidder provided pricing. Servicers can follow the suggestion of asking the higher bidder to prove their bid with photo documentation.
 
Issue: Inconsistencies from the M&Ms in responding to and rescinding non-performance and demand letters.
 
M&Ms, even within one location, have conflicting interpretations of what issues warrant a non-performance or demand letter and responses to the servicers' explanation. One example is a servicer providing photo documentation of a winterization and then receiving a demand letter for the service when conveyance inspection photos show drips of water coming out of a faucet in the property.
 
Janice Cooper has provided an M&M Escalation Chart for servicers to utilize when inconsistent actions are taken.

 HUD MMs Esclation Chart 05-15-06.xls
 
Services did, however, report a reduction of received non-performance and demand letters.
 
Issue: The definition of first time vacancy date regarding vacant properties with personal property of significant value.
 
When an inspector reports a property vacant, the first time vacancy date is recorded. If the servicer finds personal property of a significant value inside the home upon ordering the lock change, the first time vacancy date will be changed to the date the eviction is completed. Not all M&Ms allow the first time vacancy date to be amended, but some do approve extension requests to allow servicers additional time to put the property in convey condition.
 
Issue: Conveyance delays with the Michigan and Ohio M&M contract still allowing for a 10-business-day approval turnaround time.
 
MC&B will continue to service Michigan and Ohio under the old contract, but HUD is going to reopen the contract for bids. They are under the old contract, which allows 10 business days to approve or deny bids. Servicers reported MC&B representatives are inconsistent in their response times following the request for additional information. Some representatives will respond within 24 hours of receiving the added information, while other representatives will respond after 10 additional business days. Servicers also reported receiving responses to HUD O/A forms that are dated as approved or denied on the 10th business day, but not received until the 12th business day.
 
Issue: Denials of extension requests for hazard claims after 90 days while the claim is pending settlement with the insurance carrier.
 
Servicers have seen an improvement with receiving approvals for requested hazard claim extensions past 90 days. These requests are escalated to the GTR and to best ensure approval, servicers are to include as much information as possible regarding the claim, including all prior loan history. In some situations, M&Ms have not forwarded the extension request to the GTR or the request was forwarded and the loan history information was not included. Servicers are to utilize the attached escalation chart when a request for an extension denial in writing is not provided.
 
Issue: Demand letters are being issued for the full amount of invoiced work when a majority of the work was performed. Demand letters also issued for work that was completed with full documentation, i.e., winterizations with a small amount of water in the lines.
 
Servicers reported receiving demand letters for a full roof repair when only one or two shingles were missing and photo documentation supported the repair was completed properly. A servicer also reported receiving a reconveyance letter for a property that had been fire-damaged prior to the loan origination. If the loan was insured by HUD when fire damage existed at the property, it should be returned by the servicer in comparable condition. Another reconveyance letter was issued for a property that did not have a working septic system at the time of loan origination or conveyance. The servicer was required to fix the system before the property would be accepted by HUD. Servicers need to escalate these issues to the HOC using the attached escalation chart.
 
Issue: M&Ms not providing a response on the O/A form submitted by the servicer.
 
Servicers are seeing M&Ms copy the received O/A form information and paste it onto a form they utilize in their internal system. M&Ms are returning the altered O/A forms to servicers with no explanation or reason for bid denials.
 
Servicers also reported submitting bids for work and receiving bid approval, but having their stated price for work crossed out and rewritten at a lower cost. Servicers assume the cost is one provided by an M&M contractor based on either comparable work performed or a review of the property, but no documentation to support the new price is included in the bid approval.
 
Issue: Boarding versus Reglazing. HUD prefers reglazing and the servicer needs to show repeated vandalism to have boarding approved unless the property is located in a pre-approved boarding area.
 
Many servicers have pre-approved boarding allowables that can be utilized without providing bids. Servicers are receiving non-performance letters for properties that are conveyed while boarded in areas that have not received pre-approval from HUD. M&Ms are requiring servicers to provide bids to both board and reglaze.

To access the audio recording of the call, please click on the following link.

FHA Servicers Conference Call Audio