HUD USFN National Default Servicing Conference ’08
Robert Klein, CEO Safeguard Properties facilitated two sessions at the National Default Servicing Conference hosted by the USFN.? Both sessions were dedicated to discussing Preservation and Protection issues related to default servicing.? Robert was accompanied by a host of panelists consisting of representatives from HUD, Fannie Mae, Freddie Mac, field service providers, and several servicers.
- the winterization procedures regarding demand letters for small amounts of water left in the lines
- clarification that second bids should not be requested when initial bids are less than $250.?
Servicers recognize the lengthy process of FHA publishing a new mortgagee letter and are using the HUD published presentation in their rebuttals of denied P&P requests.? Servicers are also using the presentation to work with M&M contractors to gain consistency in P&P responses.?
Ms. Bromer stated that FHA is working to coordinate a joint training session for both servicers and M&M contractors in an effort to work towards consistency in guideline interpretation.? It was strongly suggested that the GTR?s be required to attend the training session, since they are a source of inconsistency.?
The GTR?s are not acknowledging the clarifications in the HUD presentation from the webinar because it is not a published mortgagee letter.? Ms. Bromer stated that FHA will consider publishing the questions and answers on HUD?s P&P FAQ page on the web.?
A second mortgagee letter is expected to be released expanding the claims without conveyance process.? The pilot program for claims without conveyance has not shown much success for FHA in Ohio and Michigan; due to economic factors in these states.? The staff in Oklahoma City are monitoring the program and coordinating the foreclosure sale bids, but needs feedback from the servicers.
Ms. Bromer also provided an update on the initiatives suggested at the National P&P Conference in November 2007 to streamline property preservation procedures.? The P&P working group continued the conversation at the industry conferences that followed (MBA and USFN sponsored conferences).?
HUD is working toward the separation of mortgagee compliance from the procurement of new M&M contracts.? A lot of discussion has been held with the REO Directors and Oklahoma City staff to hire one contractor to manage the P&P requests and allow the M&M Contractors to solely focus on marketing and selling the property. Most of the current M&M Contracts do not expire until July 2009.
It has become apparent that there will not be forward movement on the proposed flat fee for property preservation reimbursement as the flat fee is not feasible for smaller servicers.?
Maximum Allowable Cap
Establishment of a maximum cap for property preservation services is still being considered as a viable option to streamline the over allowable process.? FHA is reviewing the statistics that properties could convey 30-75 days faster if the P&P cap was higher.?
Cash For Key
FHA is also looking for more funding to motivate homeowners to relinquish their properties in better condition.? The funding would be directed to the cash for keys and deed in lieu programs specifically, which have been tremendously successful for servicers in their REO portfolios.?
The following additional issues were raised by the panelists and attendees of the session:
- Will HUD reconsider their clarification of debris removal following an eviction? HUD stated in the webinar conference summary that all debris removal associated with an eviction is to be removed by man hours at $20 per man hour.? Prior to this statement, servicers were following the guidelines for debris removed the same day at the direction of the sheriff and were removing debris by the CYD allowable when instructed to return to the property 48 hours, or more, after the eviction.? With the recent clarification of HUD?s interpretation, servicers are finding it increasingly difficult to get evictions completed.
- First and second bids are submitted for debris removal and for many other items requested by the M&M Contractor.? The M&M is approving a mixture of the bids from both contractors.? This process results in two contractors having to return to the property and each complete a portion of the convey condition work, which adds time to the conveyance process and creates confusion for servicers.
- Servicers are being cited for mortgagee neglect and late conveyance when minor freeze damages occur at the property while awaiting a personal property eviction.? The M&M contractors do not recognize that servicers cannot proceed to secure and winterize a property when personal property is on site.? Ms. Bromer suggested that servicers provide the documentation from the attorney to the M&M when not proceeding to complete work at the property.? Servicers would like HUD to issue guidelines based on the three categories of vacancy: 1) vacant and abandoned; 2) vacant with personals; and 3) vacant and maintained.? This would eliminate the discrepancies from the M&M contractors and GTR?s.
- M&M contractors routinely deny P&P requests for damages and ask servicers to file a hazard insurance claim, without recognizing that the amount of damages is well below the insurance deductible.? Ms. Bromer advised that servicers should note those details on the P&P request to avoid the confusion.
- Servicers have seen a recent increase in denied extension requests for additional time to convey while awaiting a decision on a hazard claim filing.? M&M contractors are indicating that servicers should have more control over the insurance company to settle the claim timely, which is not the case.? Examples should be forwarded to Ms. Bromer to address with the GTR?s.
VPR (Vacant Property Registration) Session:
The second P&P session was dedicated to issues surrounding the recent influx in vacant property registration requirements across the country.? Following a series of conference calls, the industry partnered to voice one response to the proposed ordinances in Chicago and then followed up to attend meetings to respond directly to city officials.? The city of Chicago was responsive to several concerns raised by the servicers in attendance.? Of particular importance was their acknowledgement that lenders/servicers cannot be held responsible for the property after registering the property prior to foreclosure sale.? A legal representative for the city acknowledged that lender/servicers registering the pre-sale properties is only to provide contact information to the city code enforcement.?
Another area of concern for servicers is how to handle de-registration when the property transfers to the investor or new owner.? The city of Chicago did not have a response.?
There are hundreds of cities across the nation devising some type of vacant property or foreclosure registration ordinance.? Each city has unique language and different fines and penalties associated.? With so many variables and the increasing number of delinquencies, it is nearly impossible for servicers to maintain compliance with each registration program.? These registration programs are a knee-jerk reaction to the small percentage of properties not being maintained.? City officials are not well informed as to the servicing policies and investor guidelines which require routine maintenance.?
It was suggested by Sherilee Massier, Manager Wells Fargo, and several other panelists to establish a working group to develop one suggested ?model? ordinance that servicers could send to individual cities in response to their proposed registration ordinances.? Robert Klein added that the servicing industry needs to reach out to the city code enforcement across the nation and begin to educate them regarding the investor guideline requirements and establish more efficient methods of communication to avoid blighted properties and neighborhoods.?
Unlike the lending and servicing industry, the city code enforcement industry does not have national trade groups or committees to disseminate information easily to the individual cities.? The US Conference of Mayors may be a good starting point for the industry to reach out and begin discussions.?
Robert Klein closed the session acknowledging that vacant property registration is going to happen regardless of efforts by the industry to halt.? Servicers and the industry need to come together now, early in the process, to work towards one registration procedure across the board.? He added that registration is a good thing for the property and the neighborhood; it is also good opportunity for the industry to begin to work more closely with the cities?(click?here).
Robert Klein, CEO Safeguard Properties facilitated two sessions at the National Default Servicing Conference hosted by the USFN.