HUD Expected to Raise Some Property Fees

Representatives of the field services industries have lobbied HUD to revise procedures and allowable costs for property maintenance work, and HUD is likely to bend to at least some of the requests.

Several people who have been involved in the effort say they expect HUD to revise its guidelines for property preservation and protection, which govern servicers' responsibilities for managing real estate acquired through foreclosure and the allowable costs that lenders can be reimbursed for.

Marc Insul, chairman of the National Association of Mortgage Field Services and president of Fidelity National Field Services, Solon, Ohio, said that the HUD property protection and preservation issue is a top concern of the field services industry this year.

He said the industry wants "to get work done with prices that are more in line with the times."

He said the industry needs to have changes made so that they can be fairly compensated for the work they provide to the mortgage servicing industry.

Earlier this year, HUD revised its guidelines for the first time since 1997 (Mortgagee letter 2020-10), adjusting the allowable costs for field services work and raising some of the price limits, but that revision has received a mixed reaction from servicers and their vendors.

Under the new mortgagee letter, field service providers have raised some question about the "reasonableness" of compensation guidelines. In addition, because some fees have been aggregated, there are questions about how to interpret the new guidelines and what lenders need to do when special circumstances require an exception.

Paul Magaha, a vice president at First American Field Services who heads the NAMFS Washington liaison committee, said he is optimistic that HUD will come out with revisions to address the concerns of servicers and their field service vendors.

He said field service firms have "found pluses and minuses" in the guidelines that HUD issued this year.

In some cases, allowable costs were reduced. In others, the costs were not raised as much as the industry believes is necessary, he said. For instance, the allowable costs for making sure abandoned, foreclosed properties are prepared for winter have been cause for complaint.

The maximum costs for securing a property that has been abandoned has also been a sore point.

"HUD is currently working on clarification and some cost increases in response to feedback on these issues," Mr. Magaha said. He praised HUD officials for working with the industry on these issues.

The HUD guidelines may extend beyond the role field service firms play on loans guaranteed by the Federal Housing Administration. Freddie Mac has its own guidelines and Fannie Mae requires servicers to meet a "reasonableness" standard, but the HUD standards are sometimes extended to conventional loans.

Some firms, such as First American, use the HUD guidelines for determining allowable costs on conventional loans not guaranteed by Fannie Mae and Freddie Mac.

The guidelines provide lenders with clarity and a framework for understanding field service fees, Mr. Magaha said.

A HUD spokesperson confirmed that based on industry feedback, the department is "reviewing a few of the expenses" covered by the payment schedule for property maintenance. He said the department may make some changes in the next few months.

In the interim, he pointed out that HUD's single-family homeownership centers can authorize exceptions that are requested by lenders in cases where the guidelines do not seem reasonable based on specific requirements in selected areas.

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