As
you may be aware, M&Ms are authorized under the new M&M contract to
complete conveyance work that they report the mortgagee has left undone and to
claim reimbursement for that work from HUD. When this occurs, the M&M
will send a "Non-performance
letter" to the servicer--not a monetary demand letter as under the old M&M
contract, but a letter advising the servicer that performance has failed to
meet HUD's guidelines.
HUD will be reviewing the record of these non-performance letters as a means for
evaluating the performance of our clients, the servicers. Our clients, in
turn, rightly view these letters as reflective of Safeguard's
performance at their properties. It is therefore of the utmost importance
that we perform all work in strict compliance with the guidelines (unless
otherwise instructed, as in the case of a conflicting local ordinance or
specific client instructions) and that we thoroughly document all work and the
complete property condition.
Since the implementation of the new contract, several of our clients have
provided us with copies of non-performance letters they've received, and we have
researched the claims by the M&Ms that gave rise to each letter. In
most cases, we are able to provide documentation to demonstrate that work was
completed according to HUD's regulations, and our review enabled our clients to
respond accordingly to the M&M. However, we have received some
non-performance letters which were apparently valid and/or where we could not
provide adequate documentation to challenge the M&M's claim.
Here is a list of the most common complaints leading to the issuance of
non-performance letters:
1) Removal of Exterior Debris - All exterior debris must
be removed and properly disposed of. Moving debris to the
curb for city trash collection is not sufficient. If the debris can not
be removed for the allowable, a bid should be submitted for approval. Be
aware of property boundary lines, to assure that you are removing all debris on
the subject property. as there may be debris that should be removed.
2) Reglazing vs. Boarding - As specified in the HUD guidelines, window
openings should be reglazed. Contractors must submit bids to reglaze in
addition to bids to board. If the window can not be reglazed (due to
damaged/missing frames, location in high vandalism areas, etc.), you must
provide photo documentation and clearly state the reason for submitting only a
bid to board. (*Please note that this does not apply to HUD
pre-approved boarding areas.)
3) Missed Sump Pumps - Please be sure to report all sump pumps.
Please inspect the all floor areas for a hidden sump pump hole. You must
also verify the operability of the sump pump on the initial visit and all
subsequent visits to the property.
4) Missed Crawl Spaces - Please be sure to report all crawl
spaces. The entryway to the crawlspace and interior of the crawlspace
need to be secured and documented with photos.
5) Inside of Appliances - We've received several letters for moldy,
rotten food left behind in refrigerators and freezers. Please be sure to
fully assess all areas and take photos of the inside of appliances to document
their condition. Please also reexamine and continue to document the
condition of appliances on return visits to the property.
6) Handrails - Per HUD, if handrails were previously installed at the
property and are now missing, they must be replaced. Damaged handrails
must be repaired. We have received a great many letters have been received
concerning this issue. Be sure to take photos of all steps,
stairwells, and staircases to show whether there were handrails in place at one
time. Photos demonstrating no previously existing handrails should show
no holes or marks on the wall or other similar indicators. Please note,
however, that even where there was no previously installed handrail, if the
absence of a handrail creates a threat to safety, you are required to submit a
bid to install a handrail.
7) Damages - Several properties have apparently been conveyed with
damages that were not reported by the contractor. Most of the damages
brought to our attention are due to mortgagor neglect (damaged screens doors,
damaged siding, loose gutters, broken locks, unstable steps/handrails, exposed
wires/electrical outlets, unfinished repairs, peeling paint, etc.).
However, these properties should not be reported as having no damages.
"No damages" should be reported only when a property is in nearly new
condition. Almost all properties have some sort of damage due to
mortgagor neglect, and this must be reported. Failure to report all damages
at a property may result in reconveyance.
In almost every case, the key to avoiding a non-performance letter is providing
complete and comprehensive photo documentation. Taking adequate photos to
document the condition of the property--not just at the initial visit, but also
at all subsequent visits to the property--is the best way to ensure that all
work has been completed correctly and all damages or property issues have been
identified and documented.
If we receive non-performance letters on a property where you completed work, you
maybe asked to provide additional information/documentation to help us dispute
or verify the claim. It is imperative you respond to these requests within
24 hours.
Thank you for your continued cooperation.
If you have any questions about the foregoing, please contact your regional
coordinator.
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