Mortgage professionals involved with the servicing of Federal Housing Administration (FHA) mortgage loans said the biggest challenge they face with those loans is "fulfillment of FHA property preservation and conveyance requirements," according to the February 2015 Mortgage Industry Outlook Report released Monday by The Collingwood Group and The Five Star Institute.
Thirty-nine percent of survey respondents who service FHA loans for their respective companies said that fulfilling fulfilling property preservation requirements was their toughest challenge. Unlike those loans serviced in the Fannie Mae/Freddie Mac servicing space, where a property is conveyed to the GSEs immediately after foreclosure, with FHA loans there is often a waiting period between foreclosure and conveying a property to FHA. The inbetween period can vary depending on the situation. During that period, the servicer is often responsible for everything from basic property preservation (such as installing locks or mowing the lawn) to more complicated issues (such as eviction, code-mandated repairs, or complicated title issues).
The additional resources a servicer must dedicate to property preservation when handling FHA loans are potentially costly, in addition to creating more opportunities for non-compliance with the FHA's servicing program rules. In some markets, according to the survey, an aggressive and diligent surveillance that can be expensive and difficult is often required to preserve a property for an extended period of time.
There was a three-way tie in the survey for the second biggest challenge servicers face when handling FHA loans: Loss mitigation program options, compliance with First Legal Action time frames, and compliance with due diligence time frames garnered 17 percent each. Rounding out the list of challenges were pre-foreclosure sale (short sale) program requirements and the execution of the FHA loss mitigation waterfall with 4 percent each.
The Collingwood Group conducted the survey in partnership with The Five Star Institute. A diverse group of mortgage industry leaders was polled, with the largest percentage of those surveyed coming from lending or originating (50 percent), followed by service providers (13 percent) and consultants/advisors/attorneys (11 percent).