Servicers Be Warned: There's No 'I' in 'Property Conveyance'

DALLAS — Working as a team with all stakeholders is the only way to successfully maintain a foreclosed property and see it through conveyance to the Department of Housing and Urban Development.

That was the key takeaway from a panel discussion at the Mortgage Bankers Association's servicing conference this week. Foreclosure attorneys, local code officials, vendors, contractors in charge of any necessary repairs to the property are just a few of the parties who should be deployed to ensure that all aspects of property preservation and conveyance are covered, experts said. Having a thorough understanding of the property in question is essential; going to see the property, understanding its environment and what the contractor and vendors are dealing with, are key to being able to turn the property over to HUD with as few dustups as possible.

"You can't just think of this in a linear way," said JK Huey, a senior vice president at Wells Fargo Home Mortgage, a point she reiterated several times when the panel got caught up in the well-known point-by-point responsibilities of servicers.

Preservation becomes a servicer's responsibility after a loan guaranteed by the Federal Housing Administration (which is part of HUD) has been foreclosed on and before a property is transferred, or conveyed, from the servicer to the department. Once HUD owns the property, it's off the servicer's books and can re-enter the market.

If a property is not maintained properly, or if there are steps missed in the path to conveyance, costs to the servicer can increase exponentially depending on what was missed.

"You think you're cleared after a year but we've seen [HUD] come back a year later because you don't have a clear and marketable title," said Jodi Gaines, chair of the FHA claims committee at the MBA and the panel's moderator.

It's in this light that collaboration becomes the drumbeat behind every detail. Homeowners association fees are especially problematic; servicers need to do everything they can to get any HOA fees or liens identified immediately.

"Do not use the 45 day window allotted to get a marketable title instead to determine whether there are HOA obligations. Do not do that. That's not what that's for," warned Matt Martin, the director of HUD's national servicing center.

"Conveying a property to HUD requires a team of people, and time," Lynette Richter, vice president of claims and property preservation at Bank of Oklahoma said. From BOK's perspective, pulling a property into acceptable conveyance condition can take "anywhere from 14 to 28 days" if the property was already in decent shape at foreclosure. If the property has fallen into disrepair, bringing it back up to code can take between three and five months.

Though at this point, according to Huey, "if your oldest [property] is 150 days, you're in good shape," indicating that even though servicers are obligated to convey foreclosed properties in the least amount of time possible, rapid conveyance is an industry pipe dream.