Preservation and Protection Questions and Answers

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NOTICE: The Department of Housing and Urban Development delayed implementation of the revised requirements for the preservation and protection of properties that secure FHA-insured single-family mortgages. These requirements, which are provided in Mortgagee Letter 2007-03 became effective on April 30, 2007.

This additional time was provided in response to the industry's request. Also at the industry's request, the Department simplified several reimbursement schedules and integrated those schedules, including related clarifications into the mortgagee letter attachment. To ensure that you have the most updated version of this mortgagee letter, please use only those copies of the mortgagee letter that were downloaded from hud.gov on or after the effective date of the mortgagee letter, April 30, 2007. If you have any questions regarding this issue, please contact the National Servicing Center through the FHA Resource Center.

The Department will periodically add to this list of Frequently Asked Questions (FAQ), related to Preservation and Protection issues.

About Mortgagee Letter 07-03

Frequently Asked Questions document, revised May 12, 2008 by adding Question & Answer L5 regarding the securing or replacing of a shed door.

About Mortgagee Letter 03-05

At the request of the industry, the Department is clarifying the debris removal guidance that was provided in Mortgagee Letter 2003-05, page 4. The guidance cautioned mortgagees that second bids were to be independent and competitive and that the second bids were not to be channeled through the same national field service company that the mortgagee may have used to obtain the initial bid.

The Department delayed enforcement of this requirement until June 20, 2003. During that delay, mortgagees were not considered to be in violation of this requirement in circumstances where a national field service company provided the initial bid and also provided assistance to the mortgagee in obtaining the second bid.

Questions and Answers to clarify the second bid for debris removal requirements identified in Mortgagee Letter 2003-05, issued April 4, 2003:

1. My company uses a national field service provider company. Is it permissible to use only my national field service provider for both bids?

Each bid must be provided by a separate contractor and both bids must be separate and independent. The second bid is to be an independent and competitive bid and must not be channeled through the same source.

2. Then, am I required to use two separate national field service providers in order to get two independent and competitive bids?

No. The mortgagee may obtain the second bid from any firm of their choice, provided that the second bid is independent and competitive and was not channeled back through the same national field service provider.

3. Can the national field service provider that I am using provide me with names of companies that may perform debris removal for the purpose of obtaining the second bid?

Yes, The mortgagee should use all resources available including referrals from peers, trade associations and even yellow pages in obtaining the second bid since the lender remains accountable to ensure that the two bids are both independent and competitive.

4. Can the national field service provider that I am using order the second bid?

Yes. The national field service provider may order the second bid for debris removal, however the completed bid must be submitted directly to the mortgagee and not channeled back through the national field service provider. This will ensure the bid is independent and competitive.

5. What is meant by "channeled"?

The Department expects that the second bid is independent and competitive and that there is no appearance that the entity that provided the first bid altered its bid or provided information to the second contractor regarding the property. The second bid must be based upon an independent evaluation at the site and not based upon information provided by the first contractor. In addition, there must be no appearance of a conspiracy in the development of the two bids.

6. Can the field service provider obtaining the second bid meet the primary contractor at the property site for access inside, if necessary?

Yes. The primary contractor can meet the secondary contractor at the property for access. This will not always be necessary as lock codes are the same in each region, and if a contractor has previously done work on a FHA-insured mortgaged property, he is likely to have the designated key.

7. Can the second bid go directly to the management and marketing (M&M) contractor?

Under no circumstances may the mortgagee allow field service providers or contractors to process and submit either bid directly to the M&M contractor without the mortgagee's review and approval of both bids. Both bids are the responsibility of the mortgagee to ensure that each is independent and competitive. The bids upon approval by the mortgagee, may then be forwarded to the M&M contractor.

8. If the second bidder is the lowest, how is that contractor compensated?

The mortgagee may either pay the contractor directly, or may use its national field service contractor to issue payment to the contractor that performed the work.

9. Was there an extension beyond June 20, 2003 for the implementation of this part of ML 2003-05?

No. The provisions of ML 2003-05 were effective June 20, 2003.