www.hudclips.org 


DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT
WASHINGTON, D. C. 20410

June 16, 1981
OFFICE OF THE ASSISTANT SECRETARY FOR
HOUSING - FEDERAL HOUSING COMMISSIONER             IN REPLY REFER TO:
Mortgagee Letter 81-26
TO:       ALL APPROVED MORTGAGEES
SUBJECT:  Property Inspection Fees
 
     This Mortgagee Letter is intended to clarify the Department's
policy on the subject issue.  Mortgagee's responsibilities for
property inspections and applicable rules for reimbursement are found
in 24 CFR 203.377 and 203.402(g), and paragraphs 72, 112a and 145c
of HUD Handbook 4330.1 , Administration of Insured Home Mortgages.
 
     It is HUD's intent to permit mortgagees to be reimbursed for the
cost of any mandatory inspection which is performed.  This includes
any inspection made after the mortgagee learns that the property is
vacant or abandoned, or after it has been unable to contact the
mortgagor by telephone during the initial 45-day period of a
delinquency.  Reimbursement for the latter inspection is allowed
regardless of whether the property is found to be vacant or occupied,
and regardless of whether the mortgagee's representative also talks
to the mortgagor about the delinquency during the course of the
inspection.  Once the property has been found to be occupied,
however, no further inspections are required by HUD and reimbursement
would not be allowed.  Although mortgagees are required, as a last
resort, to visit the property in an attempt to arrange a face-to-face
interview to discuss a delinquency (24 CFR 203.604) this is not a
reimbursable expense.  However where a visit to the property to
arrange an interview is combined with the initial inspection to
determine whether the property is vacant, reimbursement would be
authorized for the initial inspection.  Where a visit to the property
is made solely for arranging an interview or conducting an interview,
no reimbursement would be authorized.
 
     Reimbursement for the expense of performing the mandatory
inspections is made only if the mortgage is reinstated or a claim for
insurance benefits is made.  The amount of reimbursement is dependent
on the allowable fee for such an inspection as permitted by the local
HUD office having jurisdiction over the property.  A mortgagor may be
charged a fee for an inspection mandated by 24 CFR 203.377 if he/she
later reinstates, and the charge is not inconsistent with state law
or the security instrument, whether or not the property is
subsequently vacated.  The cost of an inspection may not be used to
increase the seriousness of a delinquency, nor may payment for such
costs be deducted from any payment made by the mortgagor for any
purpose while the account is delinquent.  Reimbursement from the
 
_____________________________________________________________________
                                  2
 
mortgagor would come after the account was reinstated, and not made
part of the total cost of reinstatement.  If no reinstatement occurs
and title is later conveyed to the Secretary, the inspection fees may
be included in the mortgagee's claim for insurance benefits.
 
     Mortgagee Letter 79-6 dated April 11, 1979, Subject:  Inspection
Fees, is hereby rescinded.
 
     For further information, contact Richard Buchheit, Director,
Single Family Mortgage Servicing Division, Washington, D.C. 20410.
Telephone (202) 755-6700.
 
                                        Sincerely,
 
                                        Philip D. Winn
                                        Assistant Secretary
 
_____________________________________________________________________