www.hudclips.org U. S. Department of Housing and Urban Development Washington, D.C. 20410-8000 December 5, 1991 OFFICE OF THE ASSISTANT SECRETARY FOR HOUSING-FEDERAL HOUSING COMMISSIONER Mortgagee Letter 91-49 TO: ALL APPROVED MORTGAGEES ATTENTION: SERVICING MANAGERS (Single Family) SUBJECT: Single Family Claims for Insurance Benefits: Changes in the Requirements for the Preservation and Protection of Insured Properties This Mortgagee Letter provides guidance and clarification of preservation and protection requirements, many of which were introduced or clarified in Mortgagee Letter 90-34 (September 19, 1990) titled: Single Family Claims for Insurance Benefits: Requirements for the Preservation, Protection and Inspection of Insured Properties - Including Mortgagees' Responsibility for Damaged Properties. Effective with the issuance of the 1992 Regional P&P guidelines, mortgagees must follow all new policies and revised procedures. Field Offices have been encouraged to assign a staff member and a backup person to respond to verbal inquiries from mortgagees. This will lead to a uniformity in interpretations within the same Field Office. Attached to this Mortgagee Letter in a list of the current Insured Housing Management Specialist (Regional Property Disposition Specialist) and phone number within each Region. The Department encourages mortgagees to forward comments and/or suggestions for future Regional preservation and protection improvements to the Insured Housing Management Specialist. Future Regional guidelines will include both Regional and Field Office contact persons and phone numbers. If mortgagees encounter problems that cannot be resolved at the respective Field Office, please contact the appropriate Regional Office. In developing these changes, consideration has been given to comments received from HUD Region/Field Offices, field service companies and mortgagees, both individually and through a survey conducted by the Mortgage Banker's Association (MBA). Mortgagees should pay particular attention to the future maximum limits and changes in the debris removal procedures as published in each Region's guideline and/or as referenced in this Mortgagee Letter under the subject of Limits. _____________________________________________________________________ 2 NOTE: To make this document easier to reference, new or recent changes are presented first and then followed by clarifications of existing policy. Both sections are alphabetized for quicker reference. CHANGES BOARDING All 1992 Regional guidelines will state that the cost of boarding is not to be included in the maximum limit. All properties require individual permission to board, unless the property is in a Regional guideline pre-approved geographical boarding area. Field Office boarding variations must be approved by Region and are to be included with each new annual Regional issuance. In all cases, mortgagees must still request permission to exceed maximum per opening cost limits. CLAIM PARAMETERS The automated claims system at HUD Headquarters monitors the amount claimed for property protection and preservation (P&P) costs by comparing the total amount claimed to fixed parameters. Claims that exceed these parameters will be manually reviewed. Mortgagees are advised that they must include a copy of the appropriate Field Office authorization to exceed either the maximum allowable limit or individual item limits, as well as a copy of Part C for all cases where the total of line 110, Part B, exceeds $500. DEBRIS BROOM SWEEP All 1992 Regional guidelines will be revised to indicate that broom sweeping is not considered as a separate cost in addition to interior debris removal. Until then, mortgagees should be alert to the fact that some Regional guidelines already disallow the cost of broom sweeping if debris is removed. There should not be a separate cost for debris removal in addition to a separate cost for broom sweeping in those identified Regions. _____________________________________________________________________ 3 DEBRIS REMOVAL Effective with the publication of the 1992 P&P Regional guidelines (excepting those Regions and/or Field Offices that do their own debris removal), the Regional Offices will use one of two debris removal bidding methods. For each individual property, mortgagee debris removal procedures must conform to the method identified by the particular Regional guideline that applies. Regional Offices will use one of the two following debris removal bidding methods. 1) One bid will be required from the mortgagee and the Field Office would obtain another bid from a HUD source; or 2) the mortgagee will be required to provide two bids, with the possibility of the Field Office securing a third bid from a HUD source. All bids submitted by the mortgagee should have a printed company letterhead but will not be rejected as long as the bidder's name, address and telephone number appears on the bid. The Department will continue its policy of not reimbursing mortgagees for the costs of obtaining bids. When a mortgagee has determined that it will be necessary to exceed the published costs limits to remove debris, a mortgagee should review the appropriate Regional guideline to determine if one or two bids is required. At the time of providing the bid(s), the mortgagee should indicate for what purpose, type of debris and how much P&P expenditures have been made to date. The Department allows a mortgagee's field service company to collect independent competitive bids for debris removal and also to be one of the bidders on the same debris removal job. HUD Field Offices will establish source lists of an adequate number of qualified vendors who are willing to provide debris removal services. These vendors will meet all HUD contractor requirements and provide free estimates. These lists will be made available to any mortgagee. A mortgagee may utilize any individual or firm to accomplish preservation and protection services. However, the mortgagee shall remain fully responsible for the actions of its agents and the actions of its agent shall be considered the actions of the mortgagee. Method I Procedure Upon the receipt of the bid from the mortgagee or field service company, the Field Office must: 1. Obtain an additional bid from one of the Field Office's sources, determine which bid is acceptable, and instruct the mortgagee to either: _____________________________________________________________________ 4 A. Remove debris based upon the mortgagee's bid (when the bid is accepted, the dollar amount will be stated on the approval letter); B. Remove debris based upon HUD's bid amount via their own source or via contracting directly with HUD's bid source at the stated bid amount; or 2. Instruct the mortgagee to convey "as is" with debris. Method II Procedure Where the mortgagee utilizes a field service company to secure multiple bids, there is the possibility that independent and competitive bids will not always be forthcoming. Therefore, this optional procedure has been established to assist in the prevention of possible abuse in the bidding process where multiple bids are required. The field service company, upon finding that debris removal limits must be exceeded, must develop its bid and immediately send that bid to the appropriate HUD office. A second independent and competitive bid should then be obtained by the field service company and forwarded separately to HUD. Upon the receipt of the required bids, the Field Office will do one of the following: 1. Accept one of the bids (when the bid is accepted, the dollar amount will be stated on the approval letter). 2. Not accept either bid and secure a bid from the Field Office's vendor list. If acceptable, the mortgagee will be provided with the approved costs and vendor to remove the debris. The mortgagee can: A. Remove the debris based upon HUD's bid amount via their own source or B. Contract directly with HUD's bid source at the stated bid amount. 3. Not accept any bid and the mortgagee will be advised to convey "as is" with debris. MAXIMUM LIMITS Where appropriate, 1992 Regional guidelines will reflect an increase in preservation and protection costs relative to the maximum amount before which prior approval is needed and also for multiple units within a property. This increase may reflect not only debris removal but other types of P&P costs. _____________________________________________________________________ 5 SIGNS Generally, it is not desirable to have signs on a property which would indicate it is vacant. However, it is prudent for the mortgagee to post a small sign attached to the inside of a window or on the front door which would provide basic information (including a phone number) as to who to contact for emergency or other purposes. Effective with the 1992 guidelines, mortgagees are required to post such a sign no larger than eight and one half by eleven inches. A number of field service companies indicate that they are already doing this. CLARIFICATIONS BIDS Bids are required from a mortgagee for debris removal only. Mortgagees should always be competitive on all other preservation and protection services undertaken should the property eventually be conveyed to HUD. CLAIMS-REVIEW OF CLAIMS BY FIELD OFFICE Field Office responsibilities in monitoring protection and preservation costs include evaluating whether the services claimed were actually and properly performed. If the service(s) were not performed or not performed properly, the Field Office will request reimbursement or require corrective action. On site claim reviews by Irving Burton and Associates (IBA): (i) verify the accuracy of information entered on the claim form, (ii) determine the sufficiency of supporting documentation, (iii) evaluate mortgagee controls over claim processing, (iv) identify errors resulting in claim overpayment, (v) disclose problem areas and (vi) evaluate mortgagee compliance with applicable requirements. Specifically, IBA will evaluate whether individual services claimed by mortgagees were in excess of allowable limits or inappropriate for reimbursement. In cases where a mortgagee's claim has exceeded the maximum cost limits without prior Field Office approval, or has claimed inappropriate services, IBA will recommend reimbursement to HUD. _____________________________________________________________________ 6 EXISTING WARRANTIES The Department is not authorized to reimburse mortgagees for repairs to properties other that P&P related expenses. This is a reminder to mortgagees that while undertaking repairs to a property, mortgagees should always be aware of existing warranties on properties that have been built within the previous 10 years. If a property meets the age criteria, the mortgagees may want to verify active warranties. Appendix 10 of HUD Handbook 4145.1 REV-2 titled: List of HUD Accepted Insured 10-Year Protection Plans, provides a list of acceptable plans. DEBRIS-DUMP FEES AND UNITS OF MEASURE New Regional guidelines will eliminate vague terms such as "pickup truck" load or "dump box" without quantifying the volume. Cubic yard measurements or costs per ton which will incorporate dump fees will be used to the extent possible. Regional Offices have been instructed to properly consider and appropriately approve reimbursement for debris removal when the debris also contains hazardous waste, non-compactibles (steel, cable, concrete, construction materials), tires, and items such as appliances, mattresses, springs, etc. When securing bids, the additional costs of non-general refuse should be factored into the final bid and clearly indicated for Field Office review. Most residential properties will have very limited hazardous waste. Questions regarding hazardous waste removal procedures should be directed to local health and or environmental departments for guidance on removal. While checking with the health or environmental source be sure to seek approved sources/locations to deliver items to. In some cases access to approved registered hazardous waste haulers with approved storage facilities will be less expensive than having to pay an excessive cost to deliver one item to an authorized disposal site. EXTENSION REQUESTS Please note that Mortgagee Letter 91-33 dated July 24, 1991, and titled Extension of Time Requirements for Single Family Claims for Insurance Benefits sets forth HUD's policy on extensions. Please note that effective September 1, 1991, all extension requests must be submitted on Form HUD-50012 (a sample of which was included with the aforementioned Mortgagee Letter). Please reference the aforementioned Mortgagee Letter for further clarification. _____________________________________________________________________ 7 INSPECTIONS-FREQUENCY Mortgagees should pay particular attention to those Regional guidelines which may require inspections to be as frequent as weekly and/or bi-weekly dependent upon seasons. This is permissible when situations such as freeze damage can cause even greater damage if not caught in time. The costs of inspections may be minor compared to potential property damage. Any questions concerning preservation and protection procedures should be addressed to the respective HUD Field Office which has jurisdiction over the specific case involved. Very sincerely yours, Arthur J. Hill Assistant Secretary for Housing - Federal Housing Commissioner Attachment _____________________________________________________________________ ATTACHMENT REGIONAL INSURED MANAGEMENT SPECIALIST (REGIONAL PROPERTY DISPOSITION SPECIALIST) REGION I John McInerny (617) 565-5112 REGION II Alice Oxner (212) 264-5063 REGION III Ken Corr (215) 597-3196 REGION IV FRANK HEMBRE (404)-331-4124 REGION V Alice Gueno (312) 353-3929 REGION VI Ruth Pompa (817) 728-2701 REGION VII Jim Hollis (913) 757-3812 REGION VIII Lynn Swanson (303) 844-4959 REGION IX Jim McClanahan (415) 556-3880 REGION X Renee Greenman (206) 442-4373 *U.S. Government Printing Office: 1991 - 312-218/60006