HUD's Evolving Property Preservation Rules

By Chambers, Kellie | Mortgage Banking, April 2016 | Go to article overview

HUD's Evolving Property Preservation Rules


Chambers, Kellie, Mortgage Banking


The Department of Housing and Urban Development's property preservation requirements have evolved dramatically over the years. Recent changes reflect marked improvements in the requirements field service companies and servicers must follow.

Rules, regulations, guidelines, laws--whatever you call them--they are important for keeping the peace and informing people of what is or is not permitted in a particular situation. They also can be a whole system or set of rules made by the government of a town, state, country and the like. [paragraph] Perhaps the most critical set of rules governing the housing and mortgage field services industries are investor guidelines. [paragraph] Late last year, the Department of Veterans Affairs (VA), Fannie Mae and Freddie Mac updated their field inspector regulations. After consulting with industry officials and best practices, the Department of Housing and Urban Development (HUD) released its latest mortgagee letter (Mortgagee Letter 2016-02) early this year, outlining changes in property preservation practices. [paragraph] Property preservation mortgagee letters date back almost 50 years, and are designed to provide guidance to mortgage servicers and their field services partners in preserving properties. Several years after Safeguard Properties, the largest mortgage field services company in the United States, was established, HUD Mortgagee Letter 1997-31 was in effect. This is the first set of guidance that impacted Safeguard and was in effect when I entered the industry. [paragraph] At the time that Safeguard first got into the business, property preservation guidelines and pricing varied by state--and in many cases by city. These rules were defined by the local HUD servicing offices throughout the country, resulting in several hundred pages of unique, printed guidelines for servicers and their field service vendors to reference when performing work in the field.

In 2002, HUD released updated preservation guidelines and pricing, introducing the concept of uniform national preservation rules with regard to property-securing expectations, including when to board up the property, when to winterize and many other routine preservation actions.

Mortgagee Letter 2002-10 offered significant efficiencies to the servicer by eliminating several city- and state-specific guidelines and implementing more national standards. Despite the effort, Mortgagee Letter 2002-10 still contained state-specific pricing and introduced the concept of second bids to support large overallowable requests for work outside of the guide. Mortgagee Letter 2002-10 was replaced with minor updated guides in 2005, 2007 and 2008.

Following the releases in 2005, 2007 and 2008, several industry working groups comprised of servicers, field services providers and industry organizations collaborated with HUD at several conferences and meetings to brainstorm on solutions to the challenges with the existing guidelines.

During these sessions, servicers shared data and loan-level examples of the costs HUD was incurring as a result of allowable limitations and time-consuming requirements--such as the 15 days to obtain, submit and receive approval on second bids--and time lost in faxing paper between entities.

It was not until HUD released several mortgagee letters in 2010, including Mortgagee Letter 2010-18, that property preservation rules were substantially updated to take advantage of the new technologies available and adopted by servicers and their vendors.

HUD answered the concerns discussed in industry working groups by introducing a technology solution for lender requests to be submitted electronically, replacing the fax machines and paper. It also introduced the concept of one mortgagee compliance manager (MCM) designed to help eliminate the varying opinions and interpretations by the prior management and marketing contractors, further continuing the concept of standardization across the country and moving away from state and local variations. …

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