HUD Update of Preservation and Protection Requirements and Cost Reimbursement Procedures for Forward Mortgages and HECMs

This past Friday, the Federal Housing Administration (FHA) published Mortgagee Letter 16-02: Update of Preservation and Protection Requirements and Cost Reimbursement for Title II Forward Mortgages and Home Equity Conversion Mortgages (HECMs).

This Mortgagee Letter consolidates and updates property preservation and protection (P&P) guidance for properties securing FHA-insured mortgages. In addition to this, the mortgagee letter also:

  • increases the Maximum Property Preservation Allowance and adds, clarifies, and increases other line items;
  • emphasizes FHA’s current conveyance condition standards;
  • reminds mortgagees of FHA’s inspection requirements; and
  • details claims calculation and documentation requirements for property P&P actions.

This Mortgagee Letter is effective on February 1, 2016.

At the time of conveyance to HUD, the mortgagee must ensure that the property meets all of the following conditions:

  • The property is undamaged by fire, flood, earthquake, hurricane, tornado, boiler explosion (if a condominium) and Mortgagee Neglect;
  • The property is secured and, if applicable, winterized;
  • All insured damages including theft and vandalism are repaired per the scope of work indicated on the insurance documents;
  • Interior and exterior debris are removed, with the property’s interior maintained in “Broom-swept” condition;
  • The property’s lawn is maintained, and all vehicles and any other personal property are removed from the property in accordance with state and local requirements; and
  • The property has good and marketable title.

The term “Broom-swept Condition” means the condition of a property is, at a minimum, reasonably free of dust and dirt, and free of hazardous materials or conditions, personal belongings, and interior debris.

The entirety of the mortgagee letter can be found on HUD’s website here.

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