Winterization 2011 Are you ready?
As temperatures begin to drop around the nation, mortgage servicers routinely take special precautions to protect or winterize the homes under their guardianship. Vacant properties can be very susceptible to damage from cold and freezing temperatures if proper measures are not taken to protect them inside and out.
Annual winterization is based on the principle of ensuring steps are made to protect the value of the asset. With that said, servicers must remember that winterization should not be limited to performing procedures that focus on a property’s heating and plumbing systems. Rather, there are other preservation practices that should complement this process.
Winterization season has traditionally spanned Oct. 1 to March 31. By now, servicers have already begun surveying their portfolios to determine which properties must have been winterized before the start of October.
Fulfillment of winterization techniques has generally been common procedure; however, today’s higher portfolio volumes mean servicers must assure efficiency and balance in their available resources. Add to that, changes spelled out in the Department of Housing and Urban Development’s (HUD) Mortgagee Letter 2010-18 require some adjustments to servicers’ approach to effectively manage this process.
The Letter incorporates new language stating properties are still to be winterized during the established winterization timeframes “unless, climatic conditions require earlier and extended winterization treatment periods.”
This modification instructs servicers to revamp their customary preparation strategies based on location standard start date to emphasize properties potentially exposed to sub-freezing temperatures, thus creating the need for a more geographic approach.
This could require that servicers will need to research national historical temperature patterns and create strategies to address properties that typically experience sub-freezing temperatures prior to the traditional winterization period start date. In addition, they will need to develop a process to continually monitor weather patterns going forward in order to take precautionary steps to protect properties which may be subjected to pre-October freezing temperatures.
Once servicers determine which properties in their portfolio they will need to protect, they then must decide what precautionary actions to take. While typical preparation simply involves winterizing properties’ plumbing systems to prevent damage in sub-freezing temperatures, other measures should be taken to preserve a property as well as its value.
To start, proper securing of each property is invaluable. Cold weather increases the likelihood that animals – even humans – seeking any sort of shelter will find vacant homes as attractive places. Pools should also receive proper attention to avoid damage including broken pipes, cracked surfaces or mechanical failure. Roofs can undergo enormous pressure from snow and ice during winter months as well. Any noted deficiencies should be addressed as quickly as possible to prevent further deterioration and postponement of repair due to unforeseen inclement weather, which can ultimately cause delays in conveyance.
Property features that contribute to curb appeal are also critical during winterization months. The goal is still to move these assets off a servicer’s portfolio, so why cease any activity that has to do with maintaining their aesthetics?
The presence of debris can cause delays in conveyance as well. If exterior debris is not removed in a timely manner it can become covered in snow and sometimes even frozen to the ground. Once the temperatures rise, residual debris could result in a non-compliance citation for failure to comply with conveyance condition.
Shrubbery and landscaping is another feature that should be taken into consideration when winterizing a property. Protecting trees and shrubs not only preserves a property’s curb appeal, but it can also prevent damage by eliminating branches that could possibly fall on a property when covered in snow or ice.
Changes to the winterization requirements from Mortgagee Letter 2010-18 no doubt leaves servicers to expect a new set of challenges in the coming months if they do not prepare. A speculatively extended winterization period and larger portfolios in general require additional and more thorough quality control measures by servicers and their vendors. The good news is that servicers can minimize liability and costs while adding value to their portfolio if they properly prepare.
With an increasingly competitive real estate market, it is more imperative than ever to not only protect properties from damage but also preserve the details that give them personality and appeal to prospective buyers.
Service providers must hold training for their vendor networks to ensure a proper understanding of the new requirements for taking climatic conditions into consideration, and of the necessity for continuous preservation practices to supplement standard winterization procedure. With proper prioritization, monitoring and vendor training, servicers can ensure smooth operations without being subject to additional risk.
Tracy Hager is vice president of operations for Mortgage Contracting Services LLC, a national field service company providing property preservation, inspections and REO property maintenance to the financial services industry.