P&P General Sessions August 24, 2010

Transcription

1 P&P General Sessions August 24, 2010 Overview Robert welcomed the property preservation contractors to the second day of the conference, and reiterated that Safeguard is dedicated to the principals of protecting the clients collateral interests. Alan opened discussions by indicating that throughout his 15 years with Safeguard, he has not witnessed as many changes within the industry or the unprecedented partnerships that have developed in recent months to address issues. Most of the contractors in the audience have been with Safeguard for over five years, and 50% reported that this was the first vendor conference that they have attended. A majority of the contractors traveled to Cleveland from other mid-west locations; others traveled much greater distances to attend.

2 Sessions 1 & 2: HUD ML Updates to Preservation & Protection Guidance, Cost Schedule, Securing Requirements, Emergency Allowables, Winterizations and Yard Maintenance Moderator Alan Jaffa, Safeguard Properties CEO Guest Panelists Daryle Deveso, M&T Vicki Beever, Chase Michelle Schultz, Chase William Collins, HUD Matt Martin, HUD Marie Sigler, CITI Mortgage Lorrie Pond, SunTrust Quanda Turner, Bank of America Jodi Gaines, CRFS Safeguard Properties Nancy Runyon, Director Vendor Management Kellie Chambers, Director P&P Operations Steve Meyer, Director Hazard Claims Amanda Lamb, Manager P&P Operations Karen Sebor, Manager P&P Coordinators Updates to Preservation Directors from the property preservation, high risk and hazards claims, and vendor management departments discussed the major changes noted within the newly released Mortgagee Letter , which went into effect on July 13, HUD representative William Collins explained that the overarching objective of the release is to convey properties in a better condition and more quickly, while also reducing overallowable requests. A significant change to the guidelines lies in the definition and qualification of conveyance condition. HUD considers this state to include the removal of all debris, personals, dust and dirt from the property, thereby placing it into a broom swept condition. This function is not to be confused with full REO style maid services. With the requirement of broom swept condition, contractors should be aware of the increased liability pertaining to the removal of items that could be considered personal property from the homes. Discarded items are considered to be personal property if they have a current garage sale value of at least $500.

3 Being well versed in jurisdictional regulations is highly advised. Swing sets continue to present uncertainty with respect to how these are to be addressed. HUD guidelines state that if the set poses a safety hazard, it should be removed. Conversely, if it adds value, it should remain. The new guideline cost schedule changes include a larger per-property allowable of $2500, a bidding threshold of $1500, and the elimination of second bids. Exhibit B details the maximum property preservation allowables for routine preservation items. Bidding, Bid Desk & Bid Cost Estimator In response to the new direction from HUD that bids less than $1500 no longer need pre-approval for completion, Safeguard created a Bid Desk for vendors to call for guidance and approval. The Bid Desk will allow contractors to call while on-site to obtain pre-approvals for work outside of the scope included in Exhibit B. Robert confirmed that this will greatly assist with completing work correctly the first time and avoiding countless trips back to a property. It was recommended that contractors look into obtaining a variation of this software for use in their own shops. As compared to previous practices, bidding will now be more detailed, and although the amount between old and new may not vary, line items within the scopes of work will be required. Safeguard will be using the Bid Cost Estimator software to approve work as well as validate bids prior to submission to HUD. The software requires more line itemization of bids, thus greater detail of the scope of work being bid. The bid cost estimator programs used by Safeguard and HUD do account for fair reasonable pricing of work based on cost averages obtained at the zip code level. The cost averages are an average of big box stores (such as a Home Depot), locally-owned hardware stores, and regional suppliers. The pricing accounts for reasonable and fair overhead and profit margins. Emergency Allowables Failure to immediately address emergency damages is a common cause of mortgagee neglect. HUD requires emergency situations be addressed immediately and bid after the fact with good photo documentation supporting why it has been completed. Examples of possible emergencies include, but are not limited to, flooded basements, broken sump pumps, running water, leaking roofs, inability to winterize, and boarding of severely damaged properties. Vendors are required to call Safeguard when further damages to the property can occur and emergency action needs to be taken. It is never acceptable to

4 leave a property with water intrusion of any kind, or unsecure without direction from Safeguard. New Repair & Securing Guidelines The new guidelines also state that a property can no longer be conveyed to HUD with a tarp on the roof, a rule that has the potential of applying to all loan types in the future. Crews should arrive at a property fully equipped to make all necessary repairs. As an immediate exception, it was noted that a roof tarp is acceptable should the damage be found as extensive, such as the presence of a hole. Both Safeguard and HUD share the objective of completing repairs that are more permanent in nature and put the home in a marketable condition. Securing requirement changes include the elimination of the maximum securing allowable. Contractors should never leave a property unsecure. Windows will generally no longer be permitted to be boarded. While waiting for additional, permanent materials, a temporary plastic cover to prevent further damages from the elements may be installed. This is a positive shift regarding maintaining the integrity and overall image of the neighborhood. Pools As a replacement to boards and mesh, commercially-available safety covers have been introduced as the preferred product when securing in-ground pools. These covers are anchored directly into the concrete surrounding the pool, and will therefore increase safety and enhance the value of the property. Safeguard has required that contractors keep in stock several of the most common sizes, to expedite the installation process. A vendor commented that many pools in the southern and western regions of the nation are uniquely shaped and are not of standard size, in which case custom covers must be ordered. Mold Per HUD ML guidelines, only the active source of moisture causing mold will require remediation and cure. HUD does not consider the removal of mold to be a convey issue. Prior damages including flooding or an old roof leak now fixed or mildew growth in the bathrooms will not require repairs if the mold growth will not worsen When bidding to remove mold much detail should accompany the bid to support why it needs to be removed and how it will worsen if it is not removed. Emergency action should be taken to remove wet, moldy debris or carpeting to avoid mold growth. When in doubt, call Safeguard for guidance. All mold growth following the initial secure will be considered mortgagee neglect, thus need repairing at no charge prior to conveyance.

5 Seasonal Guidelines: Winterizations & Grass Cuts There are no modifications to the current winterization policy and procedures, and in most states the season remains October 1 through March 31. Contractors are to winterize a property regardless of whether the cost to date exceeds the $2500 cap. General winterization training and certification will be scheduled by Vendor Management Field QC Reps in the near future. The question was raised regarding how to address shared wells when ordered to complete a winterization. The first option is to isolate the line; secondly, the heat may need to be turned on and maintained. Common lines were also noted as a potential issue when winterizing multi-family or attached units for which the same lender may not be servicing all of the loans within the unit. Repair to neighboring properties may result from damages due to not maintaining the heat in the vacant unit because of shared walls. Communicating these issues is vital. Contractors are completing an average of 250,000 grass cuts per month. There will be no specific changes to current procedures, as the front and back yards are expected to continue to be maintained, clippings removed, and shrubs trimmed. At this time, the bid cost estimating software does not account for large lots in excess of 15,000 square feet or variations in grass height. Until the programming is adjusted vendors are able to submit bids to perform grass cuts where the situation does not allow for the cut to be completed for the allowable.

6 Session 3: Pre-Sale Considerations Occupancy Determination, Securing Requirements, Debris Removal and Personal Property Moderator Alan Jaffa, Safeguard Properties CEO Guest Panelists Daryle Deveso, M&T Vicki Beever, Chase Michelle Schultz, Chase Marie Sigler, CITI Mortgage Lorrie Pond, SunTrust Quanda Turner, Bank of America Jodi Gaines, CRFS Richard Adzema, Department of Veterans Affairs Safeguard Properties Nancy Runyon, Director Vendor Management Kellie Chambers, Director P&P Operations Steve Meyer, Director Hazard Claims Amanda Lamb, Manager P&P Operations Karen Sebor, Manager P&P Coordinators Reporting Occupancy Incorrect determination and reporting of the property s occupancy status creates the potential for mortgagee neglect. Best practices to determine the occupancy status include reaching out to the neighbors, looking into windows, and inspecting meters to determine whether the utilities are active, and photo documentation to support the presence of personals or animals. Lenders are held to strict timelines. Discrepancies in first time vacancy dates raise flags in the servicers systems, and any damages reported during the time period in question may be scrutinized to determine whether they re the result of mortgagee or mortgagor neglect. Once properties have been accurately reported vacant, routine monthly inspections will begin, during which time access to the interior is imperative. This is obtained via the lock box, which is installed on the initial securing order. Vendors are required to confirm operability of the lock box and a working key placed inside on each visit to the property. Good Neighbor door hangers are excellent tools for providing neighbors with Safeguard s contact information. Neighbors are instructed to call us in the event

7 that the property is vandalized or incurs damages. Alan noted that Safeguard receives numerous calls from neighbors, and servicers noted that they appreciate the program. Vendors were reminded that it is not acceptable to discuss why they are completing work at the property with any neighbor. Simply state that the mortgage company required the property be protected. With new tenant protection laws in place, vendors were asked to avoid reporting name unknown as the occupant. The servicers on the panel stressed that the contractors in the field need to make contact with occupants whenever possible and try to obtain their names. Furthermore, the servicers rely on the contractors to relay the message to the occupant that they need to call their mortgage company. Again, vendors are reminded not to answer questions or provide information regarding the property, other than to state, your mortgage company asked that you call them. Emergencies and Other Issues Emergency allowables are in place to pump standing water out of a basement, repair leaking roofs, as well as to replace non-functional sump pumps. Flooded basements were noted by a servicer as critical, contributing to mortgagee neglect and affecting conveyance. Vendors are required to call Safeguard while on site and obtain approval to complete repairs. Code violations are also deemed critical, and Safeguard and our clients all require full documentation of the issue. Removal of the violation notice posted on the property is never acceptable. Vendors should be prepared to write down critical information contained on the posting and provide up close photos of the posting. Safeguard will contact the city and take action based on the information obtained. Properties for Sale Vendors were reminded of the requirement to make three attempts to contact the broker prior to changing the locks at a property that is actively being marketed for sale; the same holds true for For Sale by Owner properties. Contractors were asked that the calls be made in advance of going out to the property, and to allow 24 hours between each attempt. Lock boxes removed during the initial secure should be left at the property so that they can be reclaimed by the broker. Clarification was offered as to when it is acceptable to secure the primary door when realtor lock boxes are identified at the property. Contractors should not take any actions that would hinder or interfere with the sale of the property. Should the realtor obstruct the preservation services at a vacant property,

8 Safeguard must be notified immediately, as this information is beneficial for the servicer s report of the maintenance history of the property to an investor. Properties listed for rent will be addressed with the same approach as those for sale. Debris Removal and Personal Property Prior to foreclosure sale, the property and its contents legally belong to the mortgagor. Therefore, only items, both interior and exterior, presenting a direct risk of infestation or other threats to health and safety should be removed. The presence of personal property does not prevent the servicer from protecting their collateral. Vendors are required to complete the ordered work to preserve and protect, including the roof and winterization, and provide a full property condition report. Failure to document the condition of the property due to personals is cause for mortgagee neglect. Many clients have notified Safeguard of threshold values for personal property, both interior and exterior, to trigger an eviction within property eviction states. Rules for timing and regulations for removal vary per servicer and jurisdiction and work orders will reflect these parameters. It is critical to read work orders thoroughly and act according to the clients instructions. One vendor noted concern regarding liability, including the bids for storage, return of the occupant, and potential lawsuits for the value of missing items. Storing volumes of personals present new challenges and impacts to both the contractor and the storage facility. Safeguard will monitor the issue if it does arise and provide direction at that time. Another question was raised regarding how to handle and care for animals left behind at a vacant property. Contractors were advised to call from site and walk through the circumstances so that the regional coordinator can offer guidance in accordance with the client s specifications.

9 Session 4: Quality Control Moderator Alan Jaffa, Safeguard Properties CEO Guest Panelists Daryle Deveso, M&T Vicki Beever, Chase Michelle Schultz, Chase Marie Sigler, CITI Mortgage Lorrie Pond, SunTrust Quanda Turner, Bank of America Jodi Gaines, CRFS Safeguard Properties Nancy Runyon, Director Vendor Management Kellie Chambers, Director P&P Operations Steve Meyer, Director Hazard Claims Amanda Lamb, Manager P&P Operations Karen Sebor, Manager P&P Coordinators Safeguard reaffirmed its unwavering commitment to continue future investments in quality control. Additional resources including staffing, enhanced processes, and training are on the horizon. Ongoing education relating to the lessons learned and expertise established as a result of the ML will certainly be forthcoming. Regardless of a company s size and work volume, formulating an effective quality control program is a wise business decision and a good investment. Feedback from many of the contractors revealed that 51% currently have varying forms of internal QC measure in place to oversee between 76% and 100% of their completed jobs. Robert explained the potential for substantial consequences associated with not having an effective QC program in place. These include extrapolations and offsets, which are penalties imposed by HUD that will result in close oversight of all activities by the servicer and their future reimbursements for work completed at the property. The panel also gave the examples of HUD issued demand letters and reconveyances. Exterior debris remains as the leading cause for the issuance of demand letters, while unreported property damages are the primary sources for

10 reconveyances. The risk and financial loss from not removing interior and exterior debris is a noteworthy justification for quality control. When asked, how are contractors affording the costs of additional staff to complete QC? Safeguard responded, How can you afford not to QC? Safeguard s Field QC Reps take approximately 5-10 minutes to adequately inspect a property. This allows for roughly 20 to be reviewed each day. This small investment of time could greatly impact a vendor s performance and profits. Vendor Programs An overview of Safeguard s processes and performance expectations shed light on the general criteria found within the P&P Vendor QC Form. A sample of Safeguard s Vendor QC Form was provided as a tutorial, as this tool will soon be implemented and vendors will be required to complete and submit these forms on demand when requested by Field QC Representatives. Internal review and feedback by Safeguard s Field QC Representatives will improve both the accuracy of work and the comprehensiveness of updates. Many vendors hope to expand their work volume to include additional zones. This effort needs to be taken with caution, as Robert candidly noted that the losses in quality control, due to reasons such as expansion, have contributed to the downfall of businesses in the past. HUD Demand Letters HUD confirmed that every Part B line item will be thoroughly reviewed, and therefore, should a demand be refuted, photo documentation is critical. To be rescinded, the compliance documentation contending the demand is reviewed by multiple representatives at HUD. Safeguard confirmed that they carefully review every demand issued by HUD and documentation by the contractors has been successful in overturning the findings on approximately 76% of the cases. HUD Reconveyances To assist with preventing a reconveyance, for which the financial impacts are grave, full inspections and quality control efforts are critical. Costs to the servicer not only include repairs, but also the ongoing maintenance and the recompletion of any work that is no longer eligible as a claim. Unreported damages are the number one reason for reconveyance. It is critical for contractors to inspect and document every room including closets, attics, crawlspaces, and basements. Additionally, all rooms should be inspected on each visit to confirm and document the property condition has not changed.