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"Because we have always done it that way" might
be the most dangerous phrase in business. And when
it comes to FHA claims, it is generally accepted as
common knowledge that mortgage servicers can
never be reimbursed for property preservation (P&P)
expenses incurred after the Conveyance Timeframe (as
defined by 24 CFR ยง 203.359(b)). e industry has
always done it this way, at least in recent memory.
Until now.
Over a year ago, we began asking why
this generally accepted practice existed. We
heard countless whispers that it was because
HUD auditors imposed multimillion-
dollar extrapolation penalties against FHA
mortgagees when they improperly claimed
P&P expenses that were incurred after the
Conveyance Timeframe. Perhaps due to my
own stubbornness, I was not satisfied with this
answer as it merely assumes the conclusion. So,
with the encouragement of fellow colleague
Alfred Minisee, we set out to find a substantive
answer as to why mortgage servicers could
never be reimbursed for such expenses.
e issue is more nuanced than it may
first appear. While the whispers of HUD
audit penalties may be true, it would be an
overgeneralization to assume that because
HUD auditors have imposed penalties against
mortgagees for improperly claiming P&P
expenses after the Conveyance Timeframe,
that mortgagees are always prohibited from
claiming P&P expenses after the Conveyance
Timeframe. e ultimate reason for HUD's
imposition of these penalties was likely
dependent upon other circumstances, and the
mere passing of the Conveyance Timeframe
Feature By: Baker Breedlove
A MULTIMILLION-
DOLLAR
MISCONCEPTION
