U.S. DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT
WASHINGTON, DC 20410-8000
OFFICE OF HOUSING
May 13, 2010
MORTGAGEE LETTER 2010-18
TO: ALL APPROVED MORTGAGEES
ATTENTION: Single Family Servicing Managers
SUBJECT: Update of Property and Preservation (P&P) Requirements
and Cost Reimbursement Procedures
This Mortgagee Letter provides updated consolidated property and preservation (P&P) guidance for foreclosed properties that had been secured by FHA-insured mortgages, and provides cross-references to the compliance requirements within HUD handbooks, regulations and current P&P guidelines. This Mortgagee Letter:
Changes the process requirements for over-allowable expenses, including;
o Setting a per property allowable cost limit; and
o Mandating submission of all documents to the Mortgagee Compliance Manager (MCM) through HUD‟s P260 system;
Emphasizes FHA‟s current conveyance condition standards; and also,
o Re-introduces requirements for removal of interior debris and maintain the property in broom-swept condition; and
Reminds servicers of FHA‟s inspection requirements.
This Mortgagee Letter and its attachment (Exhibits A and B) supersede Mortgagee Letter 2008-31 (and its attachment) in its entirety.
Effective Date of Mortgagee Letter
The requirements presented herein are effective with the release of this Mortgagee Letter.
Changes to Over-allowable Requests
Pursuant to the guidance issued herein, a mortgagee may request over-allowable approval from HUD only if its property and preservation costs exceed $2,500 per property. This $2,500 property and preservation amount does not include one time major repair items – e.g. roof replacement and demolition. Exhibit B to this Mortgagee Letter lists the new maximum property preservation allowable cost schedule, which also includes a per item cost maximum. Property and preservation charges that exceed $2,500 per property must be pre-approved by HUD‟s MCM 2
through the web-based P260 internet portal. The process for over-allowable approval is described in Exhibit A, Section 1, page 5.
Mortgagee Compliance Manager
The MCM is the single point of contact designated by HUD to administer all mortgagee compliance functions, including property preservation activities. For additional information regarding the MCM, please see Mortgagee Letter 2010-16. The MCM will also audit all Single Family Applications for Insurance Benefits, form HUD 27011, parts B-D to evaluate the claimed amounts against the allowable charges in Exhibit B of this Mortgagee Letter to ensure that the Department is not overcharged.
HUD’s P260 Web-based Internet Portal
P260 is the Department‟s new web-based internet portal. P260 provides mortgagees and HUD real-time access to requests, notifications, approvals and document submissions for pre- and post-conveyance activities. For additional information on P260, refer to Mortgagee Letter 2010-16.
Conveyance Condition Standards
At the time of conveyance to HUD, a property must be undamaged by fire, earthquake, flood, hurricane, tornado, boiler explosions (for condominiums that were secured by mortgages insured under §234 of the National Housing Act), or mortgagee neglect. In addition, any debris must be removed from the interior of the property and maintained in broom-swept condition. These standards are fully described in Exhibit A, Section 2 “Acceptable Conveyance Condition.”
Generally, the mortgagee is responsible for three types of inspections:
Initial Vacant Property Inspections; and
Vacant Property Inspections.
These inspection types are fully described in Exhibit A, Section 6 (A) “Inspections.”
Information Collection Requirements
The information collection requirements contained in this document have been approved by the Office of Management and Budget (OMB) under the Paperwork Reduction Act of 1995 (44 U.S.C. 3501-3520) and assigned OMB control numbers 2502-0429 and 2502-0523. In accordance with the Paperwork Reduction Act, HUD may not conduct or sponsor, and a person is not required to respond to, a collection of information unless the collections request displays a currently valid OMB Control Number. 3
If you have any questions concerning this Mortgagee Letter, please contact HUD‟s National Servicing Center at (888) 297-8685. Persons with hearing or speech impairments may call via TDD/TTY on 1-877-TDD-2HUD (1-877-833-2483).
David H. Stevens
Assistant Secretary for Housing –
Federal Housing Commissioner