The US Department of Housing and Urban Development (HUD) is always close to the chest with information when they know Foreclosurepedia is directly involved in the chain of communications. I don’t blame them; prudent, one might say. Less than 24 hours ago, I was cc’d on probably the second most historic email I have ever received in the Mortgage Field Services Industry. The most historic one still has not seen the light of day nor been discussed between anyone other than the drafter and myself. It is, how shall we say, an insurance policy to ensure that myself and my family never have a strange accident or a rash of bizarre suicides.
There were a series of emails which went out to multiple parties ranging from Safeguard Properties (SGP) whom service Federal Housing Administration (FHA) – Federal Housing Finance Agency (FHFA) insured and administered notes, all the way up to the HUD National Servicing Center. While initially simply documenting the grotesque contortions which SGP orders their Inspectors to go not to report upon SGPs non compliance with FHA requirements, an entirely separate portion delves deeply into aspects such as the Mortgagee Letter binding both Pre and Post Compliance Prime Vendors to provisions of the McNamara – O’Hara Service Contract Act (SCA), Davis – Bacon Act and even mentions the Federal Labor Service Act (FLSA).
There were no bones made about the fact that HUD, if notified, will investigate and notify the US Department of Labor (DoL) Wage and Hour Division (WHD) when SCA or Davis – Bacon Act violations present including, but not limited to the violation of prevailing wage — yes, this is Pre and Post Conveyance. Here is what kicked it all off,
I’m curious whether the labor concerns you identified extend beyond Safeguard or the other pre-conveyance servicers? We do run into various complaints from subcontractors regarding our prime FSM contractors. However, our dealings with these subcontractors typically needs to be maintained through the primes to avoid additional privity of contract issues. For example, we cannot intervene in negotiated rates for services between the prime and their subcontractors, unless HUD can demonstrate that the prime is not acting in accordance with either Service Contract Act (SCA) or Davis Bacon Act, which both have established prevailing wages depending on the type of service performed. If we do identify violations of either SCA or Davis Bacon, we are also required to refer them to Department of Labor (DOL), who maintains enforcement rights under both Acts.
Question: From the HUD Handbook and Mortgagee Letter 10-18 it made me believe HUD oversaw both pre and post conveyance default services of FHA/HUD backed assets, so even a prime contracted by a mortgagee was to adhere to HUD guidelines and was still under HUD scrutiny. Am I wrong? If so, who does over see pre-conveyance default services? What guidelines would the mortgagee and Prime utilize and be held accountable to?
The Mortgagee Letters would in fact flow down to the mortgagee’s prime pre-conveyance servicers. However, HUD holds the mortgagee accountable, and not the pre-conveyance servicer directly. It should be the mortgagees conducting the quality reviews of their primes. However, I’m guessing many would rather risk getting their FHA claims reduced as a result for non-compliance rather than putting the necessary infrastructure in place to conduct the inspections. Think of it this way, the FHA claim value is always going to be a better proposition than the risk they incur for non-FHA secured loans. A partial claim is still better for the mortgagee than absorbing the entire loss themselves.
Two monumental things occurred in this answer. First, HUD for the first time I am aware of publicly and in writing, through its agent or employee — and this guy is at the top of the food chain — admitted that HUD has oversight upon Pre Conveyance. Second, the term “flow down” is used. For those of you out there whom actually own Prime Vending Firms and additionally those of you whom write the Contracts thereto, we all know that the use of flow down is taboo in any setting. It is on this point that I want to elucidate in a manner which only a trained media professional such as myself is capable of doing,
The aforementioned merely scratches the surface of where this Q&A went between a gentleman whom termed himself as A Concerned Tax Paying Citizen and a High Ranking HUD Official. First, in full disclosure, the originating correspondence including myself in its circulation to both SGP Officials; the New York Times; Huffington Post; and a Member of the HUD National Servicing Center. I opined into the thread and invoked a very colorful statement which I am renowned for doing and in turn carbon copied others within HUD.
Washington DC may, from the outside, appear to be ignorant and disconnected; however, this is merely for display to the non Beltway participants. The reality is that rarely, if ever, does anything emanate from within the Organs of the Emperor’s Agencies unless it has received dutiful oversight. One of the cardinal sins is to expound upon answers — even answers to innocuous questions such as Where is the bathroom? — as this leads to horrific hearings in front of Congress.
There is no way, based upon my prior involvement with HUD, that these types of Policy Statements were issued without at least the tacit approval of those with a paygrade far above mine. All roads lead to Rome and the reality is that the Circus of Labor and Management must, from time-to-time, be nudged along their route.
Tomorrow, Foreclosurepedia will dedicate an entire two hour segment to dissecting the multi day, multi response to this historic Q&A. Both the Podcast and the entirety of the responses issued in writing will be available only to those whom are Industry Insiders. I am going to tell everyone something going forward. Foreclosurepedia, in conjunction with public interest groups both within and without the Industry, are going to publish both Prime Vendor and Regional and Otherwise Unspecified Order Mill pricing.
We are going to use data supplied both by Members of Labor and that which seeps on a daily basis from a plethora of third party applications to begin to build a Master Model of precisely how SCA and Davis – Bacon are being violated. Make no mistake whatsoever, that in the rest of the Q&A, Davis – Bacon and SCA are directly related to each portion of the foreclosure process. This information will be stored on both ISTAR Clear Base and a Mirrored Website so as to ensure its preservation. When it goes public — and you may bet your NAMFS Membership it is going to go public — we are going to force the investigations to commence forthwith.
If you are an Order Mill east of the Mississippi River, your information is going to be public no later than 10 July 2015. Period. It will be between you and your lawyers to explain to both HUD and DoLWHD why a third party with no financially vested interests, is incorrect and you should not be hauled upon the financial rack forthwith.