HUD Mortgagee Letter & Conveyance Condition. Introduction. Objectives. In this module you will learn about:. • Conveyance Condition • Securing • Debris • Roof • Winterization • Documentation. Highlights of New HUD ML.
HUD Mortgagee Letter & Conveyance Condition
In this module you will learn about:
• Conveyance Condition
Effective July 13, 2010, HUD Mortgagee Letter (2010-18 HUD ML) outlining cost allowances, time frames, and procedures for preserving and securing properties as well as placing properties into conveyance condition is in effect for all FHA Insured Properties.
New Guideline Expectations
• Documents are not submitted electronically through HUD’s P260 electronic information system
• All bids submitted will be checked for accuracy with third party cost estimators
Change to Conveyance Condition Standards
• Remove all interior debris and the property left in broom swept condition
• Properties will no longer convey with a tarp on the roof
Additional Securing Expectations
• Both a deadbolt and knoblock will now need to be changed per access
*Please visit “Forms & Docs” in PPW for a copy of the HUD Mortgagee Letter
A property must be undamaged by fire, flood, earthquake, hurricane, tornado, boiler explosion, or mortgagee neglect and be left in a safe and sanitary condition. A property must be secured, the lawn maintained, winterized (as applicable), and must not contain interior or exterior debris or personal property. The interior must be in broom-swept condition, and vehicles must be removed. If a property is damaged due to mold resulting from the mortgagee’s failure to protect and preserve, the mortgagee must remediate the cause of the mold and complete and other required P&P actions to minimize further mold and/or water damage prior to conveyance of the property. Properties will no longer convey with a tarp present. All repairs must be made pre-conveyance.
What this means:
Properties are not required to be left in broom-swept condition and interior debris including personal property must be removed. A property cannot be conveyed with damages with directly impact the safety or sanitation of the property. Properties will no longer convey with tarpaulin or boarding, unless required by local jurisdiction.
It is extremely important to have all conveyance condition work orders turned in on time. Our Clients have very specific time frames given to them by HUD to complete work. If the work is not completed on time, it may not be reimbursed by HUD. Therefore, if Vendors do not turn their ICC work orders in correctly and on time, there may be possible chargebacks. Here are some possible conveyance related circumstances that may result in chargebacks:
• Losses incurred by Universal or the Clients due to delayed conveyance
• Incorrect determination of conveyance condition
• Failure to thoroughly document the property condition at each visit
• Insufficient completion photos documenting all work performed
• Failure to submit bids for all items preventing conveyance condition
• Excessive bidding on items that do not have a standard allowable
• Failure to supply new before photos on bid approved work
• Issues resulting in property re-conveyance
• Failure to report damages
All aspects of a property need to be inspected to determine if any issue exists which would make the property unsafe, unsanitary, or damaged. This includes the interior, exterior, roof, and perimeter of lot. Provide wide angled photos of each interior room, all exterior walls including crawl space and roof, electrical meters, plumbing, and mobile home foundations.
If the property condition is not adequately documented by the photos, conveyance condition issues that are found may be charged back to cover the cost of repairs needed.
Both knoblocks and existing deadbolts are to be changed when securing an FHA property.
• Initial Secure (Pre-Sale) – One entry door, as specified on work order
• Final Secure (Post-Sale) – All entry ways that provide immediate access to the living area, attached garage, or basement.
- Double lock sliding doors
- Secure overhead garage doors only if no other locking mechanism exists. Place padlock in the track.
HUD prefers re-glazing in lieu of boarding windows unless local law requires boarding or if the property is situated in a high crime area and is prone to vandalism.
• Provide bids to re-glaze all broken windows
• Boarding is not to be completed unless written approval is received or work order instructions state to board and bid after the fact
• If bidding to board a window, include a bid to re-glaze too
Properties are no longer considered in conveyance condition if there is a tarp on the roof, regardless if the tarp was pre-existing. Active leaks need to be repaired or patched prior to conveyance.
• Repair/patch roof within the HUD allowable
• If the repair exceeds the allowable, submit a bid to repair/patch the damaged area
When an active leak is found, repair the roof for the HUD allowable. For Clients that allow bid after the fact (BATF), tarp temporarily only if the repair cannot be completed for the allowable and BATF. In additional submit a bid to repair the damaged area. BATF and invoices submitted for tarping that exceed the HUD allowable will not be accepted. For Clients who do not allow BATF, complete or bid tarping or repair for the Client allowable.
Do not remove any debris, hazards, or personal property without prior written approval. Submit bids in cubic yards to remove interior and exterior debris, hazards, and personal property.
Bids need to be separated by type and location: Interior debris, Interior hazards, Exterior debris, Exterior hazards, and Personal Property.
Broom Swept Condition
In order for a property to be ICC, no debris may be present and the property must be left in broom swept condition. Ensure all rooms, cabinets, closets, crawl spaces, attics, basements, sheds, etc are included when completing and bidding the removal of debris.
On FHA properties, floors, bathtubs, sinks, showers, and counters cannot be dirty which includes being covered in dirt, cobwebs, insect remains, or any other debris. The exterior and interior of appliances are to be free of dist, dirt, hazardous materials or condition. Such appliances include but are not limited to refrigerators, dishwashers, ovens, stoves, laundry appliances, and interior HVAC units.
The cost to put the property in broom swept condition is included in the cost per cubic yard of the interior debris allowable. A separate fee may not be charged. If a property is not conveyed in broom swept condition, the debris removal may be subject to a chargeback.
Secure pools with a cover that prevent entry, either deliberate or accidental. Fences need to be secured to restrict access if applicable.
• Secure in-ground pools including hot tubs or spas that share the same filtering system
• Bid to board pools. If local code does not require pools to be boarded, bids to secure a pool using a safety cover are acceptable
• Bid monthly pool service if required by law
• Bid to remove above-ground pools if they are in poor condition, non-functional, and can not be covered. Also include a bid to fill in the depression.
Grass cut season is April 1 – October 31 for all states except Alaska (June 1 – September 30). An initial grass cut is permitted at the beginning of each grass cut season. Initials may be completed when needed during any month of the year in the following states/territories: AL, AZ, CA, FL, GA, GU, HI, LA, MI, NM, NV, PR, SC, TX, and VI.
Properties are to be winterized between October 1st and March 31st, unless climatic conditions require earlier and/or extended winterization treatment periods.
Follow HUD Regulations
In such cases where a local jurisdiction has determined a property to be uninhabitable and mandates demolition of a property, obtain approval from Universal. Report violation or demolition notice to Universal.
If a property is damaged due to mold resulting from the mortgagee’s failure to protect and preserve, the mortgagee needs to remediate the cause of the mold and complete and other required P&P actions to minimize further mold and/or water damage prior to conveyance of the property.
• Report all mold and upload a damage report
• Provide bids to remediate source of mold
• Provide bid to clean and treat contaminated materials
Follow HUD Regulations
• Utilities are to be inactive unless needed to protect the property (sump pump, dehumidifier, etc.)
• At condominiums keep water services and utilities on if the systems are shared with other units
• Where there is an existing sump pump, check to make sure it is operational. If it is, leave the electricity active to prevent flooding.
• If the water supply source is a public system, contact the utility company to turn off the water at the curb. Do not cut water lines or remove water meters.
• If the water supply is a private well, turn of f the well at the breaker panel and tape off the breaker, disconnect the water supply line between the property and pressure tank, and install a hose bib on the pressure tank side of the breaker.
Determining ICC Status
Determining ICC Status
Once conveyance condition status has been determined, report it in PPW.
Conveyance Condition reporting is one of the most critical issues involved in completing a work order. Failure to correctly determine, report, and bid Conveyance Condition status and issues are the leading causes of follow-up work orders, late work, and chargebacks.
Notate ICC Status in the “Comments/Notes” box on the “Bid/Completion” page. Also include bids for all items notated.
A condition called reconveyance is the result of a property being conveyed with issues that render the property unacceptable to HUD. This happens when a Vendor reports a property is ICC when it is in fact, not ICC. Reconveyance takes place at the expense of the Vendor who failed to identify the Conveyance Condition issues in order to remedy prior to conveyance. Any losses incurred by the Client may be charged back to the original Vendor who claimed ICC status incorrectly.
Once a property has conveyed to HUD, it is placed in what is called “Post Conveyance Condition.” This is most similar to the REO concept of Marketing Condition, meaning the property needs to be placed in a condition to sell on the open market. This involves repairs that are considered “cosmetic” including painting, carpet replacement, appliance replacement, etc. Submit bids to make the property attractive, appealing, and comparable to other homes in the neighborhood.
Change both knoblocks and existing deadbolts when securing FHA property for HUD.
Replace the locking mechanism on the specified entry doors to the key code listed on the work order.
• Initial Secure (Pre-Sale) – One entry door as specified on work order
• Final Secure (Post-Sale) – All entryways that provide immediate access to the living area, attached garage, or basement
If antique hardware exists, do not remove the hardware and instead secure with a padlock and hasp if no other locking mechanism exists. Provide clear documentation including photos that substantiate why a knoblock or handle set could not be utilized.
• Caution is to be exercised when removing locksets and replacing locking mechanisms. Do not damage or otherwise cause deterioration of the door upon which work was performed
• Document key codes and location of doors on the completion side of the “Bid/Completion” page in PPW
Additional Securing Guidelines:
Windows and Doors: Do not brace or nail windows or doors shut. Replace locking mechanisms on windows or doors if inoperable or missing.
Sliders: Double lock sliding doors as needed.
Detached/Attached Garage Doors and Outbuildings: Should be secured with a padlock and hasp if no other locking mechanism exists.
Overhead Garage Doors: If an automatic garage door opener is present, unplug it and leave the remote key in a kitchen counter drawer. Secure OVH garage door on the interior by installing a padlock in the track if no other mechanism exists. Doors need to be left in a condition that allows for opening and closing without use of an automatic opener when the padlock is removed. If the door is broken and will not open manually, submit two bids: One to repair and one to replace.
Boarding and Re-Glazing Guidelines
Provide bids to re-glaze all broken windows.
Include location of each window, dimensions per window, steps needed to re-glaze and materials to be used when bidding to re-glaze.
Boarding is not to be completed unless written approval is received or work order instructions say to board and BATF.
Only bid to board if required by local code or in high vandal areas.
Secure pools with a cover that prevents entry, either deliberate or accidental. Use of a standard tarp held down by sandbags or bricks is not acceptable. Pool safety covers should meet the American Society for Testing and Materials F1346-91 standard which requires that a pool cover be able to hold a minimum of 485 pounds per five square feet. If local ordinance requires the pool to be maintained, provide bids for monthly maintenance including utility activation needed and contact information for local utilities.
Provide bids to remove above-ground pools only if they are in poor condition, if they cannot be covered, or if they add no value to the property. If applicable, bid to fill in the depression.
What is Debris?
• Home improvement materials that match the structure or color of the house such as bricks, tile, and shingles.
• Items of no value not considered personal property including household cleaners, laundry detergents, soap, health and beauty products, cat litter, boxes, bags, etc.
Debris does not include:
• Free-standing appliances such as refrigerators, air conditions, washers, dryers, and permanently affixed vanity mirrors.
Everything other than appliances or fixtures connected to the property is to be removed.
Do not remove any debris, hazards, or personal property without prior written approval.
• Submit bids to remove interior & exterior debris,
hazards, and personal property in cubic yards
• Provide an itemized list of debris, personals,
and hazards in the comments
• Exterior debris includes all items outside the property’s main structure. Also includes items in sheds, detached garages, etc ONLY if the outbuilding is unsecure
• Interior debris includes all items found inside the property’s main structure and any secure outbuildings. Includes rooms, closets, cabinets, attics, basements, garages, etc.
All hazards are to be bid in cubic yards as a separate line item as debris. Bid at the HUD allowable for debris removal unless local codes require special disposal procedures. Hazards include but are not limited to:
- Paint cans
- Raw food/garbage
- Cleaning chemicals
- Pool chemicals
- Any other chemicals
- Glass, glass panes, broken light bulbs, etc
- Anything that poses a health risk
Properties can no longer be considered in conveyance condition if there is a tarp on the roof of a property, regardless if the tarp was pre-existing. If a tarp is present, provide a bid to repair/replace the roof. HUD now requires that an active leak be repaired or patched prior to conveyance.
Include dimensions of damaged area(s), dimensions of repair area(s), location(s) of the damaged area, materials to be used including but not limited to shingle type & rating, sheathing, underlayment, flashing, drip edge, and vent system when providing a roof repair bid.
If any interior damages exist due to the roof leak, submit a bid to repair the damage on a separate line item.
Refer to your work order for more specific details regarding procedures. Some Clients have allowables to tarp and BATF, some do not. Always refer to your work order.
Winterization season for all states is October 1 – March 31. Early or late winterizations can be performed due to climatic conditions.
For more detailed information on completing winterizations, see the Winterization module or refer to documents in “Forms & Docs” in PPW.
The new Mortgagee Letter 2010-18 requires the following types of written documentation as justification:
• Local Codes/Ordinances requiring procedures which vary from standard HUD expectations
• Reports from www.weather.com documenting climatic conditions outside of the October 1 – March 31 season
• Crime statistics or police reports when needed
Photo documentation is critical to establish both the property’s condition and as documentation of the work performed at the time of service. Provide before, during, and after photos from the same angle clearly demonstrating all work completed.
• Provide photos of the street sign, front of the property, property address, exterior walls, front and back yard, roof, basement, garage, detached buildings, porches, attic, and all interior walls.
• Provide wide-angled shots of every interior
room that depicts ceilings, floors, and appliances.
• Provide photos of all damaged areas and
violations and submit bids to repair when
During this module you learned about:
• Conveyance Condition