S E S S I O N # 4B a l a n c i n g A c t

M a n a g i n g R i s k A s s o c i a t e d w i t h P o s t - S a l e F H A P e r s o n a l s

Moderator:Linda Erkkila, Safeguard Properties

Panelists• William Collins, U.S. Department of Housing and Urban Development

Risk Management

Timely FHA Conveyance

Consumer Complaints

Servicer Costs

Current Practice ≠ Best PracticePersonals = = delays and inconsistencies:

• Most servicers instruct to stop work if personals present, and bid all personals, for servicer to make decision on individual basis, resulting in:• Time delays• Inconsistent decision making

• Most servicers instruct to NOT use the “self-help” allowable (ML 2016-02)• $300 for removal and storage of personals• $50/CY for debris removal

Navigating UncertaintyWhere to seek guidance:• Personal property removal must be considered on a state-by-state

basis• State law (statute), if any• Case law developed in the absence of state law

• Where to find guidance?• USFN matrix• Foreclosure firms engaged by servicer (for each state)• Servicer’s internal law department

HUD GMT and ReimbursementNo Statute re: personal property

removal (no state law)GMT clock starts at

possessionNo reimbursement of

storage cost

Statute (state law) mandates storage of personals and posting

GMT clock starts at possession

Reimbursement of storage costs

Statute (state law) mandates eviction or court order to remove

personals GMT clock starts after

eviction completedSheriff-directed storage costs

are reimbursable

Navigating State LawMany state-specific statutes on personal property removal – wide range of variations in procedures among the statutes (USFN Interpretations):• Maine: Mail abandonment letter – if no response in 7 days, can dispose; if

response, store personals for 14 days from date letter sent• California: If personals present, 18 days (if mailed) or 15 days (if personally

served) notice to remove personals (can be stored off-site or in property)• Michigan: Nothing in evictions laws allows for removal of personals; case law has

developed strict “no removal without eviction” precedence• Minnesota: Unless have proof of abandonment, there is no threshold for

personals and must proceed with eviction; store 28 days after eviction ordered

Navigating State LawSome state-specific statutes have highly specific, and often complicated, procedures to follow (USFN Interpretations):• Iowa: Good faith effort to contact owner and give 10 days to retrieve; auction

valuable and give to state fund; dispose of non-valuables; hold personals with sentimental value for 90 days

• Florida: Post notice describing personal property and address where it can be claimed, and may dispose of if no response after 15 days if mailed (10 days if personally delivered)

• Maryland: Follow the general evictions statute, and seek motion for judgment of possession

Considering Inherent RiskEven with state-specific statutes in place, risk is present in uncertainties:• If “abandoned” versus “vacant” is standard to be able to “dispose of” versus

“store,” can you get comfortable with distinction?• If a state does not set forth a threshold for property, can you get comfortable

setting one?• Should you always store in the property, versus remove to storage to avoid risk?• If a “sentimental value” clause if part of a statue, can you get comfortable

identifying those items?• If a statute sets a “reasonableness standard” for “effort” (to contact borrower) or

for “value,” can you get comfortable establishing those standards?

Navigating “No State Law” Best PracticeMany states have no specific statutes, and case law has developed best practice procedures to follow (USFN interpretations):• AZ: If > $500, mail and post to give 30 days’ notice to retrieve• DE: If have “reasonable” value, file for evictions of personals• OH: “Abandonment” is trigger; case-by-case decision; usually store• KY: Case-by-case analysis; usually store• WI: Dispose of in a “reasonable” manner; store if value (low threshold)• LA: Practically no guidance, and recommend sheriff’s order; if sheriff leaves it to

servicer, best option is to store • TX: Court order recommended, but some counties will not issue -- in those cases,

recommend post and store (although no post and store law in TX)

Recommendations Reduce Risk AND Speed Up Conveyance Timelines:• Be definitive – create a well-researched post-sale personal property matrix

• Build rules around the statutes/guidance available OR be conservative (always evict; or always post and store)

• Share the matrix with your property preservation vendor• Be consistent – where you retain individual review

• Set standards for decision making• Keep pace – do not jeopardize conveyance timeline

• Instruct your preservation vendor to use “self-help” where permitted to do so to: (1) remove debris and (2) remove and store personals

Afternoon Break2:45 PM – 3:00 PM

BRONZE SPONSORS

ALL-DAY BEVERAGE SPONSORS

S E S S I O N # 5Cracking the Code

P r o v i d i n g S o l u ti o n s t o t h e I n d u s t r y ’ s B i g g e s t C h a l l e n g e s

Moderator:Kellie Chambers, Safeguard Properties

Panelists• Jodi Gaines, Claims Recovery Financial Services• Michael Greenbaum, Safeguard Properties• Michelle Stevens, Altisource• Sherilee Massier, MSI – Mortgage Specialists International• Tracy Hager, Mortgage Contracting Services

Reconveyance• FSM Time to Inspect and

Report• HUD GTR Time to Reconvey• Lost Time on Market• ISN Administrative Time• Servicer Appeal Time• Remittance of Funds• Claim Reimbursement

Process

Reconveyance AlternativesBypass Agreement• Roof Repairs• Theft and Vandalism• Plumbing Repairs• Minor Mold and Water

Damages• Debris and Trash

Does Not Qualify• Structural• Violations• Termite and Third-Party

Inspections• Restoration of Utilities• No Viable Water Source

Reconveyance AlternativesPre-Conveyance Inspection• Pilot Program• Universal Adoption of Conveyance

Condition• Calibration Session• Demand in Lieu of Repair

Reacquisition by HUD• Email Communication• Large Files of Photos• Manual Photo Review• 30-Day Expiration• Second Reconveys

Alternatives for Reacquisition• Eliminate MCM review of property condition • Inspect jointly with FSM and Servicer’s field

vendor• Simplify title package recertification• Eliminate case-by-case requests for environmental

testing

Convey on Time• Pre-Sale Assessment• Delegated Authority• Bidding after the Fact• Personal Property Matrix and

Storage• Insurance Repairs Pre-Sale• Title Package Preparation

Convey on TimeTitle Package Prep – • Mobile Home Title Issues• 30-Year Title Search• HOA Title • Deeds Timely and Accurately• Code Violations

Convey on Time• Submit foreclosure chronology with first OA request• Insurance claim vendors to provide daily reporting to support

extension process and status for supplemental claims• Establish significant formality around pre-sale bids• Establish centralized database or work flow tool for loan

management – tasking, email, and Excel are not solutions• Track property to ICC in Pre-sale once secured

Conveyance Challenges

Low-Value Assets• Cost-benefit analysisRepeated Vandalism• Alternative securing options• Convey-as-is approval

Conveyance ChallengesSquatters• Alternative securing options• Possession defined based on presence of squattersConstruction Materials and Age of Home/Deferred Maintenance by Owner/Occupants• Universal definition of conveyance condition

PlumbingAppears on 63% of PNOIR Letters• Appealed 92%Pressure Test – What Does It Tell Us?• Vandalism and freeze damage easy to

discern• Old plumbing, corrosion, and dried-out

seals are hiddenWhen to Bid?

Water Seepage• Appears on 12% of PNOIR Letters

• Appealed 94%• Industry reaction = apply stain

blocker• Source and solution not readily

apparent• Requires foundation specialist

100% of the time

Water Seepage

VS.

Mold and Discoloration• Appears on 31% of PNOIR Letters

• Appealed 97%• Location, surface type, and source

determine how to bid or address• Fannie Mae = cut out and remove• HUD = treat/clean/drylock and

cure source• Freddie Mac = treat/clean

Dessicants vs. Dehumidifiers

Solving Problems

S E S S I O N # 6S t a n d a r d i z i n g O c c u p a n c y A s s e s s m e n t a n d S e c u r i n g P o l i c i e s

T a k e a D e e p D i v e i n t o t h e I n d u s t r y ’ s R e s p o n s e t o t h e N M S A ’ s R e p o r t

Moderator:Jim Taylor, Wells Fargo

Panelists• Rita Falcioni, U.S. Department of Veterans Affairs• Matt Martin, U.S. Department of Housing and Urban Development• Robert Klein, Community Blight Solutions

The Litmus Test…

NMSA’s Objectives and Goals• Now is the time for a uniform (harmonizing) national standard for the

identification and preservation of vacant and abandoned properties.• Focused on recommendations that protect the consumer from

additional hardship, reduce the risk of blight in communities, and support policies that make homeownership more affordable.

• Expediting the disposition of these vacant and abandoned properties through the default life cycle is critical to returning these properties to new property owners for the benefit of the consumer, communities, servicers and investors – insurers.

Six Opportunities

Definition of Key Terms

Mortgage Security Instrument

Premature Inspections Securing Timeframes

Property Inspection Report

Differences in Servicing Guidance

Definition and Use of Key TermsOccupancy Status• Vacant• Unoccupied• Abandoned• Occupied and by Whom

Securing a Property• Trespassing• Possession or Custody• Conversion• Securing• Preserve and Protect

Align and define the key terms used in the industry’s policies, investor guidelines, servicing policies, and mortgage security documents to reduce the ambiguity in the usage of these terms, including consensus on key risk drivers when securing a property.

Mortgage Security Instrument1. Ambiguity regarding the rights, obligations, and expectations versus case law2. Section 9 Requirements and Terms

• Borrower fails to perform the covenants and agreements, legal proceeding that jeopardize the lien, and Borrower has abandoned the property

• Although Lender may take action under this Section 9, Lender does not have to do so and is not under any duty or obligation to do so. It is agreed that Lender incurs no liability for not taking any or all actions authorized under this Section 9.

Encourage the customer to remain in their home. Resolve the terms of the mortgage security instrument and servicing guidance that may be ambiguous or contrary to existing lien theory laws (32 states).

Content of Property Inspection Report• No clear standard other than Fannie Form 30• Objective, discrete content that is actionable• Reasonableness of expectations vis-à-vis reimbursement for

inspection• Only supports the determination of the occupancy status

Create an industry standard, method and approach to measure and assess the condition of a property, including the use of a mobile application to consistently capture the property condition with each inspection and document proof of service to improve the quality of the inspection report.

Premature Inspection of PropertiesChallenging the value proposition of early DLQ inspections• Low rate of vacant properties observed• Diminished customer experience• Complexity and cost of billing, collection, and recovery

Inspect after 60 days past due, complete the initial inspection on or before the 75th day, with subsequent inspections completed thereafter every 25 to 35 calendar days while loan remains delinquent.

Securing Time Frames• Securing a consumer’s home when occupied only creates further

hardship, unnecessary claims, litigation, and media attention.• What constitutes a “reasonable” time frame to secure a pre-sale,

vacant and abandoned property?• How does the industry balance the prescriptive time frames,

claims of servicer error/neglect, and reasonable risk mitigation?• What situations would reasonably lead to deeming “server

neglect” or “vendor neglect” in failing to secure a property in time?

Illustrative Example

Establishing the occupancy status of any delinquent loan is highly situational and a single prescriptive time frame has proven to not be effective nor met the risk tolerance of all servicers – can we agree on 25 days?

Servicer Guidance for Initial Services

Harmonizing, simplifying and modernizing the investor guidance and expectations will reduce the claims of blight, and improve the clarity of roles and responsibilities of the investor or servicer.

• Create efficiencies by simplifying the guidance across all federal housing agencies for vacant properties

• Communities, consumers, and lawmakers don’t understand why there are differences

• Such complexity only exacerbates the risk that must be managed

Wednesday Evening Event6:00 PM – 9:00 PM

Join us tonight at Gordon Biersch Brewery and Restaurant.

SILVER SPONSORS