The Mortgage Bankers Association had more than 1,500 mortgage loan servicers, field services companies, attorneys, asset management companies and other servicing personnel attend its annual mortgage servicing conference last month in Dallas, TX. The MBA once again put on another successful conference. Diamond Sponsor Safeguard Properties was honored to introduce this year’s keynote speaker, Yahoo Tech Columnists David Pogue, who was the former weekly personal technology columnist for The New York Times. 

Additionally, Safeguard led a panel discussion during the conference. This session summary can be found below. 

Property Preservation

Moderator: Kellie Chamber, Safeguard Properties

Panelists:

• William Collins, HUD
• Jeffrey Pallozzi, SunTrust
• Caroline Reaves, Mortgage Contracting Services (MCS)
• David Swanson, Wells Fargo
• Matt Varnum, Roundpoint

Overview
The panelists during this session discussed the new HUD Property Preservation Guidelines ML2016-02. Panelists dissected the intent of the changes, the efficiencies gained, the compliance challenges and the impact on time conveyance. The panelists also shared current industry challenges and their unique solutions or approaches to each.

Timeline Increase
The length of the foreclosure process has spawned new challenges for servicers, such as increases in code officer involvement, vacant property registration programs, hazard insurance claims for repeated vandalism at the same property, and conveyance timelines for FHA loans.

Each panelist was asked to share what attributes to the timeline increases. The panel confirmed that FHA ICC requirements, government expansion of loss mitigation efforts, court delays, and more savvy borrowers and attorneys all are factors to the timelines. They reiterated the importance of detailed documentation of the delays, which will be required for FHA mortgagee requests and claim filing.

Reducing Expenses
The release of ML 2016-03 clarifies the rule on self-curtailment of property preservation expenses for missed due diligence timeframes. The panelists highlighted the following creative approaches to reducing timeframes to limit out-of-pocket expenses:

• Preparing for conveyance 60 days prior to foreclosure sale
• Mitigating damages and neighborhood blight at time of initial secure
• Completing work immediately and not waiting for over allowable approval
• Staying on top of critical milestones in servicing

Deterioration
Property preservation and maintenance of vacant properties has its share of challenges. The longer a property sits vacant, the faster it deteriorates. As a result, Fannie Mae, Freddie Mac and FHA are holding servicers accountable for the deterioration and decrease in value.

The panel shared how they are adjusting processes or proactively implementing preventative measures to avoid deterioration. Suggestions included immediate mitigation of damages, even before the insurance adjuster is dispatched; repairing to a neighborhood-like standard, thorough documentation and review of first time vacancy condition; and identification of a property score or indicator that can be tracked for changes.

It is a common best practice to complete necessary work not only to mitigate deterioration, but also to aid timely conveyance of the property and seek bid approval after the fact.

Updates
HUD shared several FHA updates, including an overview of the new MCM contract award issued to ISN Corp in October, 2015. Stats were shared on the number of mortgagee requests, demand letters issued and Part A reviews completed following the transition from the prior MCM contractor.  

The highlights and intentions of Mortgagee Letter 2016-02 and the data used to determine the property allowables was also discussed. HUD looked at average expenses claimed in recent years and it came out to roughly $2,680. Because of aged inventory and increased foreclosure timeframes, they doubled the amount to spend and came up with $5,000 as the maximum property preservation allowable. All preservation work needing to be completed after the cap is met will require HUD approval for reimbursement. 

Overcoming Challenges
While the new property preservation guidance offers significant lift to servicers with increased property cap and the introduction of many new allowables to preserve and protect, a few challenges arose with the effective date being retroactive to February 1st.  HUD staff will work with the MBA P&P working group and servicers to find a creative solution for implementation.

HUD also recognizes some ambiguity in the language and will work with the MBA working group to solicit a consolidated list of questions and provide guidance where applicable. An example where clarity may be required is in regards to the frequency of monthly inspections. It was reiterated by HUD that the recommendation is to continue using 25-35 rule from prior mortgagee letters. 

Mortgagee Letter
Mortgagee Letter 2016-02 was released the same day as two other letters, ML 2016-03 and Ml 2016-04. ML 2016-03 is guidance to servicers on claim ability of expenditures when due diligence timeframe requirements were not met. While ML 2016-04 provides guidance on when automatic extensions are granted for due diligence milestones, and when extensions will require approval.

The MBA National Mortgage Servicing Conference & Expo was held in Orlando, FL.