Freddie and Fannie Property Inspection Reimbursement and Urgent Property Condition Updates
Property Inspection Reimbursements
Servicers should be aware that Freddie Mac issued a new temporary reimbursement process effective for any property inspections related to insurance loss settlements performed on and after September 1, 2018.
Servicers must cease using the prior temporary reimbursement process announced in bll1814 Bulletin 2017-21 property-preservation-matrix svc1805 for inspections ordered in connection with insurance loss settlements. The prior process must only be utilized for disaster-related exterior property inspections completed in accordance with Section 8404.2, Property protection activities following a disaster.
According to the new announcement, servicers will be reimbursed for actual expenses incurred up to $40 per required property inspection, including those in Eligible Disaster Areas, regardless of whether the mortgage is current or delinquent and whether the property inspection is internal or external. Request for reimbursement of expenses incurred for Insurance-Related Property Inspections greater than $40 is allowed, but must be accompanied by documentation as to the reason for the additional expense.
For delinquent loans, servicers should use the new temporary process for reimbursement requests for expenses incurred in lieu of the Expense Reimbursement System’s request for pre-approval.
In addition, a table was provided in the bulletin to summarize when an inspection is required.
For complete details and instructions regarding how to submit reimbursement requests, please review Freddie Mac Bulletin 2018-14 .
In addition, Fannie Mae also updated guide sections D1-3-01, Evaluating the Impact of a Disaster Event and Assisting a Borrower and F-1-05, Expense Reimbursement, to reflect their previously announced policy changes related to increasing the maximum reimbursement limit per property inspection from $30 to $60. Servicers may begin submitting requests for reimbursement of this increased value.
Servicer Responsibilities for Urgent Property Conditions
Through Servicing Announcement SVC-2018-05 ., Fannie issued guidance to clarify the responsibilities of the servicer when addressing urgent property conditions in situations where the borrower refuses to make emergency repairs.
If the servicer becomes aware of any condition detrimental to the value of the property or that would require urgent repairs, Fannie reiterates servicers must remind the borrower of their obligation to maintain the property and take the actions described in revised Servicing Guide section D2-2-10.
For instance, if the borrower refuses to make or allow the servicer to make emergency repairs, the servicer must continue to inspect the property until a solution to perform repairs is determined and repairs are under way. Additionally, based on the payment and occupancy status of the mortgage loan, the servicer must determine if other legal or property preservation actions are necessary, as described.
In Guide section D1-3-01, Evaluating the Impact of a Disaster Event and Assisting a Borrower, Fannie inserted guidance advising that when a regional disaster occurs, the servicer must determine the extent of the damage to property in the disaster area through reasonable means, including but not limited to:
• Obtaining information from the borrower
• Using predictive modeling data or alternative technology like aerial photography, to estimate the likelihood of damage in a particular area or to a particular property; or
• Performing a property inspection when necessary.
Servicers should use Property Inspection Report (Form 30), and must exercise discretion when determining whether to obtain an interior or exterior property inspection. Servicers are permitted to request reimbursement for necessary disaster inspection costs. To request reimbursement, procedures in Requesting Reimbursement for Property Inspections and Property Preservation Expenses in F-1-05, Expense Reimbursement, should be followed.
To review complete details, please review the announcements, revised guide sections and Property Preservation Matrix and Reference Guide (August 2018 ) referenced above.
Proctor will continue to monitor these topics and provide updates as they occur.