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58 is not dispositive of whether the expense can be claimed. at is to say, the expiration of the Conveyance Timeframe, in and of itself, does not prevent mortgagees from claiming P&P expenses incurred after the Conveyance Timeframe. e implications of this distinction are tremendous. Mortgagees and their vendors assume hundreds of millions of dollars in losses attributable to nonreimbursable P&P expenses every year. While we recognize that the primary goal for mortgagees and their vendors is to convey properties on time, it would be shortsighted not to take a multipronged approach to minimizing losses. After all, the United States Government Accountability Office reported that in 2017, 72% of properties were not conveyed on time—a staggering number. In today's environment, with unprecedented forbearances and historically low interest rates, margins are razor thin. As such, this issue has never been more important. Armed with the CFRs and HUD's guidance, we set out to persuade public opinion. However, habits are hard to break. Even with the generous support of trade groups, we were routinely told the only way to resolve the issue was by obtaining written clarification from HUD. So we did. On May 1, 2019, we submitted a letter and memorandum to HUD outlining why mortgagees are permitted to claim P&P expenses after the Conveyance Timeframe in certain instances. We argued that, despite the commonly accepted view to the contrary, HUD's guidance is both clear and favorable to mortgagees. On February 4, 2020, the Deputy Assistant Secretary for Single-Family Housing at HUD graciously responded and flatly stated that "[f ]or properties where the P&P actions are performed in accordance with HUD guidance and all other FHA requirements are met, expenses incurred outside the Conveyance Timeframe can be reimbursed so long as they are incurred prior to the date of conveyance." We believe this statement made on behalf of HUD is the last word needed on the subject. Nevertheless, some in the industry have clung to their prior practices, even in the face of the HUD letter. To allow you to understand the issue and decide for yourself, we present much of the analysis contained in MSI's memorandum to you here. To begin, HUD's Handbook applies the following standard in determining whether P&P expenses are reimbursable: HUD will reimburse Mortgagees up to the Maximum Property Preservation Allowance, or as permitted by HUD as approved over-allowable, for property P&P actions so long as: (i) the actions are performed before the date of conveyance, even if the Mortgagee renders payment after conveyance; and (ii) the actions are performed in accordance with HUD guidance. [Handbook 4000.1 IV.A.2.a.ii(D)(1) (emphasis added)] Stated differently, mortgagees may claim P&P actions and expenses that satisfy the following three requirements: (i) P&P actions must be below the maximum allowance or approved in form of an over-allowable; (ii) P&P actions must be completed before the actual conveyance to HUD (not the Conveyance Timeframe); and (iii) P&P actions must be performed in accordance with HUD guidance. As to the first requirement, we assume P&P expenses are below the maximum allowance or approved in the form of an over-allowable, as this has always been a requirement. Next, as to whether the P&P actions are completed before the date of conveyance, it is important to note that there is a clear distinction between the date of conveyance and the Conveyance Timeframe. e date of conveyance is the date the mortgagee actually transfers the property to HUD. In contrast, the Conveyance Timeframe relates to the amount of time mortgagees are allotted to convey properties to HUD. Properties routinely have conveyance dates outside the Conveyance Timeframe. us, the Conveyance Timeframe cannot be synonymous with the date of conveyance. e handbook is clear—P&P actions must be performed "before the date of conveyance[.]" Id. erefore, mortgagees may claim P&P actions to HUD if they are performed after the Conveyance Timeframe, provided that the P&P actions are completed prior to the date of conveyance. e last element requires P&P actions be performed in accordance with HUD In today's environment, with unprecedented forbearances and historically low interest rates, margins are razor thin. As such, this issue has never been more important. Feature By: Baker Breedlove

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