| SPI Vendor Conference III Summary |
| Sunday, 08 October 2006 | |
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Safeguard held its third annual Vendor Conference. The intent of the conference was to continue Safeguard's contractor training program. More than 350 of Safeguard's contractors nationwide attended the two-day conference. The following is a summary of issues reviewed.
Safeguard Vendor Conference III Summary, Aug. 21-22, 2006
Client/Servicers Panelists:
Safeguard Panelists:
Property Inspections Per HUD guidelines, inspectors must perform inspections every month within 25-35 days of the previous month’s inspection to ensure the property condition is monitored and issues addressed timely (Safeguard continues to work with HUD to modify this requirement). Various cities such as Chicago, Detroit, and Los Angeles require fast-track inspections in areas considered to be high vandalism, which require more frequent inspections. When timely action is not taken to preserve and protect these properties, our clients face code compliance citations and can be held liable for damages to the property. High vandalism areas exist in every metropolitan city. Safeguard is working with industry investor/insurers to consider submitting a bid for additional inspections for properties in high vandalism areas.
PROPERTY PRESERVATION
Photo documentation is necessary to protect our clients and the contractors, and is the cheapest insurance policy available. We need photos to tell a story of the before, during, and after work being performed. Safeguard also requires condition photos at the time of initial secure, regardless of damage, to prevent the contractor from being responsible for future damage or mortgagee neglect. New property damages should be reported immediately and accompanied by bids to address.
Quality, not quantity, is essential for photos. All steps need to be shown and photos must be taken from the same angle, time-stamped, and correctly captioned. Clients and the investors have access to photos so they must be correct and timely and accompany every bid sent. Servicers requested that contractors try to include an item in the photo that can help show the condition to scale. For example, a contractor can use a standard item, like a hammer or ruler, against a small window to be boarded to better define size. Safeguard and contractors aren’t perfect, and we understand mistakes will be made; however, false (pre-existing) photo documentation will not be tolerated and is a reason for immediate termination. If contractor photos are questioned unfairly or without reason, the issue should be escalated immediately using Safeguard’s Escalation Chart. Videos will become the standard in the future, but until then, photo documentation needs to be completed and performed properly.
Safeguard suggested contractors make checklists for their crews to ensure photos are taken of all necessary items and to train their crews contractors how to supply quality photos and what Safeguard expects of submitted work. Robert advised that one of the main issues reviewed at the HUD M&M Training Session in Denver in August was receiving high bids. Safeguard monitors contractors that submit high bids and also low bids based on a lack of education or experience with the scope of work to be performed. Robert reinforced the importance of having a bid matrix and ensuring all staff members are knowledgeable about its parameters. Not all issues can have a general pricing guide, but Safeguard works to continually create pricing limits for services that cannot be completed within investor allowables.
Providing Bids and Second Bid procedures
Second bids need to be submitted timely because of HUD’s strict timeframe requirements. The M&Ms have (in most cases) 5 business days to review and respond to the initial bid and/or request additional information. Second bids not submitted timely or for the necessary items can prevent the servicer from conveying a property on time. HUD considers second bids a cost of doing business and will not reimburse the servicer for the contractor’s time or trip.
High Risk Properties
Contractors are required to provide information on an property that can cause additional damage if not addressed immediately. Properties are considered high-risk when a sump pump is present. Contractors must notify Safeguard when a sump pump is installed or present and no utilities are on at the property. Convey Condition Servicers have 30 calendar days to obtain clear and marketable title (sale date confirmation), to convey the property to HUD. Even a one to two-day delay can push a property past the deadline. Delayed bids with no extension granted (in some cases) will need to be completed at our cost. Doing it right the first time increases profit and client satisfaction, and reduces out of pocket costs. Safeguard released Memo# 1024: Convey Condition to help outline the items that need to be addressed for conveyance. The list is not all-inclusive, and gray areas will continue to exist as new situations arise. To reach consensus between marketable condition and conveyance condition, Safeguard is performing pre-conveyance inspections with the M&M contractors to improve training and understanding of their interpretation of HUD guidelines. “Big Six” damages caused by fire, flood, hurricane, tornado, earthquake, or boiler explosion in a condominium must be repaired before the property can be conveyed to HUD. With these damages aside, the servicer can request permission to convey a property with damages if they have supporting documentation to show the damage existed at the property during the initial secure (mortgagor neglect).
Personal Property vs. Debris Above ground pools at pre-sale properties should be reviewed first for safety to determine if it is neighborhood hazard. If a safety issue exists, a bid with photo documentation, should immediately be submitted with the following options: removing/securing the pool, covering the pool, or pumping the pool, with the support of good photos and documentation. Contractors should provide bids for all available options for pools at post-sale properties. HUD and the servicers need to determine how to address these issues, keeping in mind local ordinances. It is the contractors’ responsibility to be aware of local ordinances and be able to provide verbiage to HUD if needed to support actions.
Properties in Process of Renovation
Reporting Damages
Safeguard and its clients are not required to correct mortgagor neglect damages during property preservation, but are responsible to prevent further damages from occurring. Wear and tear issues are not claimable under insurance polices, but damages resulting from wear and tear are claimable. For example, a worn roof is not covered under an insurance policy, but interior damage caused by a water leak is claimable. In hurricane areas, proper documentation can help servicers get insurance coverage for interior damage incurred to a property with a worn roof. HUD will not hold the servicers liable for damages incurred while the property was in the possession and control of the mortgagor (mortgagor neglect), except for the six surchargeable damages (noted above), but the servicer is held liable for any damage once access has been gained (FTV) resulting from mortgagee neglect. If no action is taken to prevent further damages, the servicer can be required to repair the property at its (our) cost. Photo documentation and updates are vital to showing exactly the actions taken to prevent damages. Mortgagor neglect currently can only be reported on the Safeguard update under one line item. The R&D department is working to improve the update to allow mortgagor neglect to be reported multiple times at multiple locations and types (roof, exterior, interior, etc.) If a mortgagor or any other person causes intentional damage, this has to be reported as vandalism, not as mortgagor neglect. Use photo documentation and a detailed update to support this damage classification. Clients may ask contractors to file a police report. Police may not file a report, but contractor should make the attempt, as this is additional documentation to support the vandalism claim. Also, police reports are often required to file a hazard insurance claim. Mold must also be reported accurately, including where, how much, the cause, and a bid to address, with photos taken to support the bid amount and description. Mold should be thoroughly described on the initial property condition report. If the cause cannot be identified without removing drywall or causing further damage to the property, report this situation to Safeguard. HUD does not approve bids to treat and remove mold, but Safeguard continues to ask HUD if they want a bid submitted to protect us and our contractors from claims of mortgagee neglect. Contractors can also refer to Safeguard Memo 1123: Reporting Cause of Mold for additional guidance. Contractors are submitting bids to perform pressure testing on radiant systems to ensure no damage exists. However, many M&Ms are denying these bids as an unnecessary cost. Safeguard is working with HUD to get more specific direction on how to address radiant systems.
Hazard Claims Documentation not only helps Safeguard file a claim, but also supports the amount of funds we are requesting for the repair of a property and determines whether extension requests will be approved. Information is vital to ensuring the successful filing of hazard claims, which guarantees our clients’ collateral is protected.
Safeguard’s Commitment to Excellence - Vendor Management Resources and Tools Safeguard currently sends the PPV, which can be used to help organize orders and monitor service quality and performance, to five contractors per region per month. Contractors can request to receive the PPV monthly, if needed. Safeguard's Open Order Team monitors order volume by client and region. Safeguards Field Quality Control representatives perform onsite inspections to ensure compliance with Safeguard expectations and offer suggestions for improvement when needed. Safeguard recently implemented having contractors bring loan files to the property during a field inspection to ensure issues are documented to prevent the contractor from being faulted for an issue that may be mortgagor neglect, caused by the broker, etc.
Safeguard has also developed a Vendor Management Escalation Process to ensure issues are addressed effectively and timely.
Hands on Training must include repetition in performing services, awareness of good and bad methods of performing work (lock changes, winterizations etc), and having work quality controlled while the work is being completed are the best methods for properly training contractors.
Field Quality Control
Internal Quality Control Everyone (Safeguard, contractors, brokers, clients, and all staff members) is responsible for assuring performance quality. In the field, contractors must have the equipment needed to properly perform their duties (air compressors, generators, yard equipment, locks, plywood, antifreeze) and provide photo documentation. In the office, updates need to be thorough and timely with proper photo documentation. Contractors can check the accuracy and fairness of bids by making an evaluation of the cost as if it was a bid provided to them for their personal home. They should also validate that the detail and photo documentation exists to support the work. All updates should be closely reviewed before being sent to Safeguard.
Performance Safeguard internally assures quality by performing:
Safeguard assigns a regional coordinator to monitor each new contractor and communicate processes, guidelines, and expectations for their first 60 days of employment. Through our bid verification process, Safeguard manually reviews any bid over $2,000, which the contractors are also encouraged to do. Our credibility depends on submitting accurate and fair bids to our clients. Six (6) percent of Safeguard's total inspection volume is orders issued to inspect "phantom (non existing)" properties to ensure the contractors are actually visiting each property. Any update received verifying occupancy status on "phantom" inspections, is grounds for immediate termination. Safeguard's vendor report cards gauge performance and its Problem Contractor Program tracks contractor issues to ensure we focus on improving the reliable contractors while weeding out the unreliable or non-performing contractors. The program aims to identify and discuss issues with contractors and help develop action plans for improvement and issue prevention in the future. Safeguard is currently disputing 75% of the NPL and DLs by providing the most important tool--photographs, as described in Memo #1152: The Importance of Photo Documentation and Demand Issues. Inspection results and updates are also essential documentation for disputing letters. Demand letters not rescinded are offset, with the funds taken from an arbitrary account. Rescinding letters is critical for our clients’ accounting accuracy and continued service. Contractors need to report all property condition issues (fixtures and light switch covers missing, ripped carpet, holes in walls, etc.) to avoid letters for mortgagee neglect. Safeguard is receiving many letters for winterized properties that have water remaining in the lines. Contractors must use an air compressor to blow the lines and photograph the air compressor on and attached to the lines, and the faucet or fixture open with no water coming out. Contractors can also submit photos of the air compressor on and at full pressure, or of water coming out of the lines in a constant stream. It is vital to follow the specific instructions included in Memo# 1127: Winterization Season Memo 2005-2006 and Memo# 1130: Winterization Steps. One contractor noted that hot water tanks may have calcium sediment that prevents all the water from being drained. Using a metal coat hanger or pipe cleaner can loosen the calcium, allowing any blocked water to be removed from the tank. One servicer reported it has received 230 demand letters since January, with $54,000 in fees requested for reimbursement for exterior debris, health hazards, and improper winterizations. Roof issues saw the highest amount of requested fees for reimbursement at $13,000 for 18 properties. Safeguard was successful in having $24,000 rescinded, and $18,000 reimbursed by contractors. The servicer advised that improvement has been seen, but they have been replaced by new issues, including cars and debris not fully removed from properties. Bid accuracy is very important for providing rebuttals to demand and non-performance letters. Bids must be itemized, include specific detail and individual costs for portions of the service needed. If the bid is general, Safeguard assumes the entire job will be done for the provided bid. For example, if a contractor provides a bid for a fallen tree with no itemized detail, Safeguard expects the entire tree, stump and all, to be removed from the property. Providing an itemized bid to remove the fallen trunk and limbs, grind them, and then remove the stump is expected so clients and the M&Ms know exactly what they are approving without having to request additional information, which impacts completion timelines. One contractor questioned how to handle natural fallen debris outside the perimeter cutting area of a very large lot. Safeguard advised we have not received any demand or non-performance letters for natural fallen debris in a wooded area on a property. A bid for removal should be provided if the debris is a safety issue or code compliance issue. Safeguard did receive a letter for man-made debris in a wooded area, but the M&M could not prove the area was part of the subject property and the letter was rescinded. There is no clear answer from HUD regarding this issue, so it is always in the best interest of the contractor to provide a bid. By bidding or documenting the issue on the initial property condition report, the contractor, Safeguard, and the client will avoid having to address the issue later, possible at our cost.
Mixed Bid Approvals Mobile homes are mobile and can be moved. Manufactured homes were made and then placed on the land. Both are deemed personal property. Early identification of mobile and manufactured homes is crucial for the servicers to properly handle the foreclosure.
HUD reconveys many properties with incorrect roof repairs. Safeguard advised contractors to provide bids to tarp and patch and repair or replace. Patching is more permanent than a tarp, but not as expensive as a full repair, and will protect the servicer from being responsible for additional roof damage if all options are addressed.
Safeguard reminded contractors of the need to accurately report property conditions in severe weather areas through Memo# 1159: Hurricane Season Alert 2006. Safeguard needs to receive FEMA updates for disaster-declared areas because of the impacts this information has on the clients’ foreclosure process. Contractors are responsible to know the local ordinances in the areas they service to always ensure compliance, as explained in Memo# 1147: Code Enforcement Reporting. Always inform Safeguard of code issues common in their coverage area, such as Dutch Elm Disease, cracked sidewalks, or pulled water meetings meters. This ensures Safeguard, the clients, and other contractors are aware of potential issues and can work toward prevention. It may be necessary to provide Safeguard with a copy of the local ordinance. Cities have been taking a more active and aggressive approach against servicers and contractors for vacant properties that have not been maintained.
Toni Jones Day 2: REO Session Aug. 22, 2006 Robert Klein began Day two of the third annual Vendor Conference by thanking the contractors for their attendance. The purpose of the Vendor Conference is to reinforce our partnership in order to continue improving and growing; both keys to our clients success. Robert introduced the Panelists for day two to the audience.
Panelists:
What Makes REO Different from Pre Sale Activities
Communication
Contractors should use cell and office numbers and email to try and establish contact with brokers. Working together and sharing information is a training issue, as brokers were previously solely responsible for performing services at an REO property. The Broker Direct line is available for brokers with property or contractor issues and can be reached at 800-852-8306 ext. 2296. Clients and Safeguard have pushed the hotline to brokers to speed resolution and ensure the broker is satisfied, which helps to satisfy the clients. Communication is needed to address code enforcement issues because we rely on the contractors and brokers to alert Safeguard and the client when an issue exists at the property. An open, informative relationship is the key to speeding timelines and reducing costs when handling REO properties. Contractors’ communication with Safeguard is very important because we need photos, the sign-off sheet and confirmation that work has been completed correctly. Safeguard should be advised if updates are delayed or issues exist at a property. Contractors should advise Safeguard when second bids will be needed for the trashout. Safeguard staff should be available to field calls past regular business hours until at least 8 p.m. If contact cannot be made, the issue should be called in the next day and escalated for immediate attention.
REO Services Timeline
Initial Services – Securing and Winterization
REO orders are placed as they are received, so contractors may receive orders in the morning based on downloads and more individual orders throughout the day. Safeguard understands orders placed later in the day will usually not be sent to crews until the next day. Safeguard is also working to develop programming that will monitor and identify when contractors are in the area of the new order so they can be expedited to a crew already in the field.
Boarding
Most winterized properties have the heat off, especially in high-risk neighborhoods with increased risk of a break-in or squatters. Safeguard works with clients to identify high-end properties based on their portfolios and preferences; however, if contractors feel a property is labeled high-end in error, contact Safeguard.
Maid Services Safeguard is working with clients to accompany them on property visits and determine what clients’ expectations are for repair bids and what is acceptable so this information can be relayed back to the contractors.
Ongoing Maintenance
Snow removal orders will be placed individually, as they depend on snow falling, and cannot be monitored by a consistent list (like grass cuts). Brokers will place orders when the property is closing, having an inspection completed, or being shown to a potential buyer.
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