Fannie Mae & Clear Boarding Abandoned Properties

Fannie Mae Will Reimburse for Clear Boarding of Abandoned Properties

Servicers should be aware of a new Fannie Mae Servicing Guide update with respect to the reimbursement for property preservation expenses. Building on its own internal policy of using clear boarding to secure vacant properties in REO status where there is a risk of vandalism or local law requires boarding, on November 9, 2016 Fannie Mae announced changes to its Servicing Guide that will permit servicers to seek reimbursement for the expense of installing clear boarding over doors and windows of abandoned properties prior to foreclosure sale.

Servicing Guide Announcement SVC-2016-10 informs Fannie Mae servicers that Servicing Guide section F-1-06, Expense Reimbursement, has been updated.  The Guide (page 782) now provides that Fannie Mae will reimburse a servicer for clear boarding expenses as follows:

Small = < 75 UI* = $130

Medium 76-100 UI = $160

Large 101-125 UI = $190

X-Large >126 UI = $210 

[*UI means united inches.]

Fannie Mae will continue to reimburse for plywood boarding, at $0.90/united inches.

The Guide already requires servicers to “perform all property maintenance functions as necessary to ensure that the condition and appearance of the property are satisfactorily maintained.”  This includes taking “whatever action may be necessary to protect the value of the property… [including] that the property is protected against vandals and the elements.”  Specifically, the servicer must “[s]ecure a vacant property by… securing all windows and exterior doors….”  However, this forthright mandate is rendered less clear by the caution that “[p]roperties should not be boarded unless absolutely necessary to prevent vandalism, secure the property, or where required by law.”  Guide § E-3.2-12.  Of course, only in hindsight, if ever, may a servicer know whether boarding was “absolutely necessary to prevent vandalism [or] secure the property.”  Arguably, boarding abandoned property as a matter of course is the only way to be sure of accomplishing these requirements.

While the Guide change, effective November 9, 2016, now authorizes the servicer to elect the use of clear boarding over plywood, the servicer must determine the estimated costs in advance.  If the estimate exceeds the published Fannie Mae reimbursement limit, the servicer must submit a request for excess cost approval through Fannie Mae’s HomeTracker system.

Clear boarding has obvious advantages over the use of plywood.  It is reportedly much stronger and more resistant to removal or destruction.  It also helps preserve the appearance of the property, and by extension the neighborhood, because its use does not so readily mark the property as uninhabited or abandoned.

Published by Hutchens Law Firm on December 5, 2016