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MortgagePoint » Your Trusted Source for Mortgage Banking and Servicing News 32 November 2023 C O V E R S T O R Y Working to Different Standards O ne of the challenges outlined by those we interviewed was the simple reality that different participants—such as FHA and the GSEs—have different standards, processes, and allowable fee levels. This can mean that even when one of those agencies advances positive change on this front, vendor companies may still be facing the same issues with other properties as the expectations are set at different levels. "Something as basic as removing a cubic yard of debris can vary from $40 (Freddie Mac) to $50 (FHA and Fannie Mae) to $60 (VA), depending on the inves- tor," explained Maher. "Reoccurring lawn maintenance also varies significantly based on lawn size and investor. Freddie Mac only uses two different fees based on lawns larg- er or smaller than 10,000-square-feet, while FHA has 12 different prices for these same lawn sizes, depending on the state. Recently, we've seen both of the GSEs re-evaluate pricing for a number of fees, including both inspections and some common property preservation items. These have been incred- ibly helpful, but because FHA has a larger proportion of the delinquency volume, movement from HUD and the other government investors would be incredibly impactful in aligning the industry." Greenbaum added, "All investors and insurers want to preserve and protect the vacant properties as they go through the foreclosure process. Overall, there are more similarities than differences, and the fundamentals are present in all guides." "Getting consistency in the preserva- tion space would go a long way in solidify- ing the currently fragile business model to ensure the long-term survivability of our critical industry, which does more to sta- bilize communities than any of the other default providers combined," said Ray. Another thing many of the vendors and related industry trade groups are advocating for is a more consistent and regular review process to re-evaluate these fees and ensure they keep pace with the economic realities on the ground. So, what are the evaluation and update processes already in place, where are there wins to be celebrated, and where does work remain to be done? The Lay of the Land M aher told MortgagePoint that updates to allowable fees have seen some improvement since COVID, if only due to the necessities of the momentous changes that the global health crisis required. John Thibaudeau, VP, Single-Family Real Estate Asset Management, Fannie Mae, told MortgagePoint, "Operational and material costs, especially those that are influenced by inflation or supply challenges, are important for Fannie Mae to acknowledge with our vendors when pricing discussions arise. It's important that our pricing is reflective of current market conditions as well as sustainable for our vendors." Edelman acknowledged the pressures facing property preservation vendors, telling MortgagePoint, "We know right now there are enormous economic pressures and that we need to adjust our current allowable fees. I can assure you that this work is in progress." Edelman also noted that, in between those updates, HUD will reimburse for ac- tual vendor fees "where it's reasonable." She continued, "We have our contractors use a cost estimator service. If their servicers can submit the receipts for what they actually paid, the vendor uses the cost estimator, which is updated regularly, to make sure the fees are reasonable, and then we will reimburse [for these over-allowable fees]." Edelman explained that HUD is cur- rently using a contractor, ISN Corporation, which is FHA's Mortgagee Compliance Manager, that checks fees against Blue- book to determine if they are in line and reasonable. The cost estimator tool HUD uses is updated quarterly and is calculated by ZIP code. "Our communication with our Mort- gagee Compliance Manager and daily communication with the servicers are im- portant in making sure we are paying the correct cost for a repair or preservation," added Edelman. In the meantime, however, the vendors we spoke to were able to pinpoint several specific pain points where they feel correc- tion or adjustment is needed. "FHA is still using the same line-item allowable fees that were published in Mortgagee Letter 2016-02," said Maher. "While FHA has made some adjustments to what services are included in the $5,000 cost limit per property, the line-item allow- able fees remain unchanged." Ray focused in on similar problems, saying, "In the case of FHA … pricing is less than it was in the 1990s on some allowable line items. In 2008, HUD paid "Maintaining and preserving vacant properties is important to us, and we know it is important to the residents and communities where these properties are located." —Sarah Edelman, Deputy Assistant Secretary for FHA's Office of Single Family Housing