Vacant and abandoned properties
are potential targets for vandalism, weather damage and criminal activity. Additionally, they present an attractive
nuisance that poses a hazard to children and others who may be injured. To ensure the preservation of the mortgage
collateral and lessen the negative community impact of vacant properties,
Mortgagees must conduct regular property inspections. Mortgagees may include the cost of these
inspections in a claim for insurance benefits within the limits described in
this section. Claim amounts paid for
inspections are not included in the maximum cost limit per property.
Mortgagee must make an effort to determine occupancy before
incurring the expense of a property inspection.
The industry has developed a variety of tools, including the use of
“door-hangers” and “mailers” to assist a Mortgagee in determining if a property
is occupied or vacant. These tools ask
the occupant to contact the Mortgagee to confirm the occupancy status of the
property. The failure of the occupant to
respond within the prescribed time period indicates that a prompt visual
inspection of the property is required.
To avoid unnecessary inspections, occupants should be allowed a minimum of five business days from the date of the mailing or other contact to respond to the mortgagee. Reimbursement for an occupancy inspection may be denied by the Department if sufficient time is not provided for occupant response.
There are five types of property
inspections: Occupancy Inspections,
Initial Vacant Property Inspections, Vacant Property Inspections, Voluntary
Pre-Conveyance Inspections and Eviction Inspections. Form HUD-9519-A, “Property Inspection Report”
(now PDF fill-able) may be used to document and support each claimed
inspection/expense. Before and after
photographs are required on all property visits where any claimable property
preservation action is taken. Also, all
inspections are to be documented. Photographs
and inspection reports should be maintained in the Mortgagee’s claim review
file and must be provided to HUD or its contractors upon request. Information collection activity for
inspections and photographs is covered under the Office of Management and
Budget (OMB) Control Number 2502-0306 and documentation related to claim
submission and claim file retention are covered under OMB Control Number
2502-0429.
Mortgagees may be surcharged for
the cost of property damage if inspection reports are inaccurate, incomplete,
untimely or insufficient in determining a verifiable timeline as to when damage
occurred.
I. Occupancy
Inspections
When a
mortgage is in default, a payment is not received within 45 calendar days of
the due date, and efforts to reach the Mortgagor by telephone or correspondence
within that period have proven unsuccessful, the Mortgagee must make an
Occupancy Inspection in accordance with the guidelines herein to determine if
the property is vacant or abandoned (24
The Occupancy
Inspection may determine that the property is (i)
occupied (ii) vacant but obviously being maintained (e.g., doors and windows
secured, lawn is cut, For
If the
Occupancy Inspection establishes that the property is vacant but obviously
being maintained, on-going Occupancy Inspections should be conducted every
25-35 days following the previous documented telephone contact with the
Mortgagor or previous Occupancy Inspection so long as the mortgage remains in
default. Documentation should be
provided as to how the property is being maintained to justify that the
property is occupied by the mortgagor.
If the
Occupancy Inspection establishes that the property is vacant and abandoned, the
Mortgagee should document thoroughly the property damage, initiate preservation
and protection actions and the related measures required to secure the property
beginning with an Initial Inspection.
A.
Inspection without Monetary Default
Mortgagees
should also perform a visual inspection of a property where there is reason to believe
that the property has become vacant or abandoned, even if the property is not
in monetary default. Examples of
information that might indicate vacancy or abandonment include, but are not
limited to (i) written notice of code violation,
municipal lien, condemnation or demolition (ii) disconnection
of utilities or (iii) cancellation of homeowner insurance. Mortgagee should verify occupancy through
either (i) direct Mortgagor contact by telephone or
(ii) Occupancy Inspection. Mortgagees
should maintain file documentation supporting the need for and results of the
inspections on properties where there is no monetary default.
B.
Inspection During Bankruptcy
HUD
regulations provide that if the mortgage is in default and the Mortgagee is
unsuccessful in contacting the Mortgagor by telephone, the Mortgagee should
perform a visual inspection of the property to determine whether it is vacant,
and if so, protect and preserve the property.
In cases where the Mortgagor has filed bankruptcy, and the Mortgagee is prohibited
from contacting the Mortgagor, supporting documentation must be maintained in
the claim review file to confirm this prohibition.
In
such cases, Mortgagees will not be required to conduct interior inspections (or
perform other preservation and protection actions), until such time as there is
no longer a stay (prohibition) in place barring the Mortgagee from collection
activities, or the bankruptcy court has granted approval for the Mortgagee to
take any required preservation and protection actions.
The
Mortgagee should take all actions permitted under bankruptcy law and should
diligently pursue seeking any necessary permission from the bankruptcy court to
inspect and/or protect and preserve the property where no payments are being
made and/or there is a suspicion of abandonment. HUD will reimburse for such actions,
where: 1) the Mortgagee learns that the
property is or may be vacant, 2) the Mortgagor is not performing as required by
the bankruptcy court, or 3) bankruptcy is no longer a bar to foreclosure,
inspection or preservation and protection, which includes but is not limited
to, termination of the automatic stay or the trustee has formally abandoned the
property or permission is granted.
C.
Report Contents
The
Occupancy Inspection report should, at a minimum include the following:
· Date of the occupancy inspection.
· Identity of the inspector.
· Is the property occupied? If so, how was this determined?
· Identity and status (i.e., Mortgagor, renter, etc.) of occupants, if ascertainable
· A valid telephone number for the occupant, if ascertainable.
· Is the house locked or secured?
· Is there a For Sale sign on the property? If so, provide the Broker name and contact number.
·
Is the grass mowed
and/or shrubs trimmed?
·
Is there any damage apparent
from the exterior? Describe.
·
Is any exterior glass
broken? Describe.
·
Are any doors or
windows boarded? Describe.
·
Does the house appear
to contain personal property and/or debris?
If the
Inspection indicates that a property is occupied, the Mortgagee or its agent
should attempt to verify the identity of the occupant(s). If it is not clear whether a property is
occupied, the Mortgagee should review such occupancy indicators such as (i) checking utility meters to determine if they are on (ii)
contacting the listing broker if there is a for sale or rent sign on the
property (iii) observing general maintenance and (iv) speaking to
neighbors. A drive-by inspection alone
is not acceptable evidence of occupancy or vacancy. Documentation to support the occupancy
determination must be provided along with a copy of the inspection report.
II. Initial
Vacant Property
Inspection
An
Initial Vacant Property Inspection, also called the “Initial Inspection”, is performed
on the date a Mortgagee first takes physical possession of a property by
securing it. Securing should take place as soon as reasonably practical, but no
more than five calendar days following the determination that the property is
vacant and/or abandoned post foreclosure or 15 business days following the
determination that the property is vacant and/or abandoned,
pre-foreclosure. If the Initial
Inspection identifies an imminent source of property damage or a health and
safety hazard (e.g., flowing water, collapsed roof, gas leak), the Mortgagee
must take immediate action to remediate the damage/hazard. Where emergency permission could not be
obtained in advance of the repairs, the Mortgagee shall submit an over-allowable
request immediately following completion of the work and substantiate the
emergency nature of the repairs.
In some instances the Initial Inspection will take place on the same date as the Occupancy Inspection. In these cases, the Mortgagee may only claim the cost of the Initial Inspection. The Initial Inspection report establishes the condition in which the Mortgagee first found the property, and may be of critical importance in distinguishing between Mortgagor and Mortgagee neglect, following conveyance.
A.
Report Contents
Mortgagees should be diligent in
documenting property condition through written descriptions and photographs
during each inspection but especially at the Initial Inspection. The Initial Inspection report should describe
(i) the condition of the
property when the Mortgagee or its agent arrived; (ii) actions taken by the
Mortgagee to preserve and protect the property during the initial securing; and
(iii) required actions to be performed.
At a minimum the Initial Inspection report should include:
· Date of the initial vacant property inspection.
· Identity of the inspector.
· Date of last occupancy inspection.
· Is the house locked or secured?
· Is the grass mowed and/or shrubs trimmed?
· Is there any apparent damage? Describe.
· Is any exterior glass broken? Describe.
· Are there any apparent roof leaks? Describe.
· Does the house contain personal property and/or debris? List all and document with photographs.
· Are any doors or windows boarded? Describe.
· Is the house winterized? If not, when and where applicable, initiate winterization service (see Attachment 7).
· Are there any repairs necessary to adequately preserve and protect the property? Describe.
·
Which appliances are present?
· Describe any P&P actions completed during initial securing.
· Describe any additional P&P actions required.
B. Posting Signage
During the Initial Inspection, Mortgagees should post a small sign no larger than 8.5” x 11” on an interior window or the front door of a property. The sign should not include information about pending foreclosure or the M&M Contractor, but should contain the Mortgagee’s toll free telephone number and/or the telephone number of the Mortgagee's local representative to contact in case of emergency. There is no allowable cost to post signs.
III. On-Going Vacant Property Inspections
On-going
Vacant Property Inspections are performed after the Initial Inspection and
securing have occurred. The Mortgagee
should inspect a vacant or abandoned property every 25-35 days following an
Initial Inspection, or more frequently as prescribed in local variations (see Local
Variation from General Requirements, page 15), to determine whether any
subsequent or additional preservation and protection action is necessary.
Vacant Property Inspections should include both interior and exterior assessments
of property condition.
At a minimum the Vacant Property Inspection report should include the items listed in 2A above.
Voluntary
Pre-Conveyance Inspections
A number of Mortgagees have requested the opportunity to conduct a joint property inspection with M&M contractors prior to conveyance. HUD encourages, but does not require, Mortgagees or M&M contractors to conduct Pre-Conveyance Inspections. Pre-Conveyance Inspections may significantly reduce post-conveyance disputes between Mortgagees and M&M contractors by allowing each party to agree that properties are in conveyance condition or identify additional requirements that should be met prior to conveyance. This is especially beneficial when properties will be conveyed damaged, as it will allow the Mortgagee to demonstrate that the damage is not surchargeable, thereby reducing the likelihood of demand letters, re-conveyance, or other sanctions.Pre-Conveyance Inspections should be scheduled no earlier than five calendar days prior to the scheduled conveyance date. HUD will allow Mortgagees to claim the cost of one additional inspection, claimed at the rate of a Vacant Property Inspection, provided the Pre-Conveyance Inspection does not coincide with the regular inspection schedule. Mortgagees should contact the appropriate M&M
contractor directly for further information on procedures regarding voluntary
Pre-Conveyance Inspections in their contract areas. The M&M contractor, using HUD’s
inspection form, will perform voluntary Pre-Conveyance Inspections.
At a minimum the Pre-Conveyance Inspection report should
include the items listed in 2A above.
V. Pre-Eviction
Inspections
Mortgagees are required to perform a Pre-Eviction
Inspection within 72 hours of a scheduled eviction, whenever there is any doubt
that a property is still occupied. The
Pre-Eviction Inspection will be reimbursable as an Occupancy Inspection. When an Occupancy Inspection is already scheduled
for the same week as the eviction, only one inspection fee will be
reimbursed. Mortgagees are reminded to
confirm the scheduled eviction the day before or morning of the scheduled
eviction to be eligible to claim one hour of labor per person for a canceled or
rescheduled eviction. Mortgagees should
document in the claim review file, the name of the person or place called, the
date and time of the call and results of the call.
At a minimum the Pre-Eviction Inspection report should
include the items included in the Occupancy Inspection as listed in 1C above.
VI. Inspection Cost and Frequency
The reimbursable cost limits for Inspections are as
follows:
|
Property Inspection Cost
Schedule (NATIONWIDE) |
|
Occupancy Inspections (Exterior) |
$20 |
|
Occupancy Inspection (Addt’l
Units) |
$10 |
|
Initial Vacant Property Inspection (Interior) |
$35 |
|
Initial Vacant Property Inspection (Addt’l
Units) |
$30 |
|
Vacant Property Inspection (On-going) |
$30 |
|
Vacant Property Inspection (On-going/Addt’l
Units) |
$25 |
The cost of inspections is not included in the overall
P&P maximum. Generally, not more
than 15 inspections per calendar year may be claimed unless indicated otherwise
under local variations. In cases of a
declared natural disaster see Mortgagee Letter 2005-41.
Local Variations from General Requirements
Properties should be inspected twice per week, year-round in the following zip codes (hot-zones):
60639 60641 60644 60647 60651 60653
During all inspections, inspectors
should verify that all properties are winterized and if not notify the servicer
to arrange for winterization immediately as
Properties should be inspected twice per week, year-round in the following zip codes:
90001 90002 90003 90220 90221