The National Association of Mortgage Field Services (NAMFS) recently launched a campaign for pricing hikes to the Mortgagee Letter (ML) which Housing and Urban Development (HUD) utilizes to pay for most of the common tasks in the Mortgage Field Services Industry. The NAMFS request for $120,000 in order to lobby for pay hikes is an indicator of precisely how bad things are as generally the $138,107 salary paid to their Executive Director Eric Miller, as reported by the latest NAMFS IRS 990 tax return recorded, should covers these expenses. To date, NAMFS has collected nearly $40,000. The problem is that while NAMFS members may get a pay hike, the reality is that it will be too little too late — even if they do move any of that money to the boots on the ground. And it is those two points I want to talk about today.
The ML only covers a handful of expenses which directly impact Labor. The basics such as lock changes, winterizations, grass cuts, and debris removal probably represent less than 25% of Industry billing. Field Service Technicians understand that the ML basics are simply the ticket to being able to submit bids for repairs which comprises the other 75% of the billable expenses in the Industry.
So, when we address needed pay hikes, NAMFS members have to become honest in their dealings with Labor. First, terms like “HUD adjusted bid” is simply a lie. Take, for example, Single Source Property Preservation. They sent this email out, some months ago, which stated,
SingleSource has received recent communication from our contacts at HUD regarding an updated debris removal process. In order to meet HUD’s expectations, SingleSource has updated its requirements for debris removal including the requirement to provide a photo of each dumpster/trailer every time one is filled and hauled away, the measurements of the vessel used to haul away the debris, bid and service completion photos submitted on a labeled photo addendum (SingleSource can provide the addendum if needed) and a copy of the dump receipt. Failure to provide the required photos, measurements, or documentation outlined in this revised policy may result in a delay or reduction in your reimbursement.
HUD will also be approving trash outs at a maximum of 80 CYDS. If you have a debris removal over 80 CYDS, please submit your bid and photos as usual and we will obtain HUD approval. Once you have completed your 80 CYD debris removal (which will need photos of each vessel and a labeled photo addendum), please submit a bid for the remaining debris. We will obtain HUD approval and assign a new order for completion.
When we spoke with a Senior HUD official in the Procurement Department, the reply was as follows,
Interestingly, the guidance isn’t coming from HUD, but teeters on guidance given to some of the FSMs. For example, debris removal over 10CY is a cost reimbursable line item under their contract. Therefore, we do request photo evidence at the property with measurements to verify the amount of debris. Dumpsters are often easy to verify, if they’re one of the standard sizes, so that is one method often used for measuring. It’s worth noting that HUD doesn’t impose a cap on the amount of debris for a given property, provided the evidence supports it.
It is confusion at its best. Even if there were pay hikes the reality is that NAMFS members chargeback monies and simply pocket the profit and kick the principal upward to the financial institution. Ironically, since these are pass through expenses, HUD is supposed to be reimbursed, but it has never happened in history. Here is how National Field Representatives (NFR) put it when a request was made to present the HUD Demand Letter,
What we get from WF are spreadsheets containing hundreds of records/data with either a bill back or adjustment, which we then research and dispute or agree with if warranted. There is no specific individual document, like a HUD Demand letter specific to an loan, that we could send. We have never had this request before and these spreadsheets can not be sent to the rep as there is nothing listed that tells the rep which record is theirs, as the spreadsheets do not contain addresses or our unique account numbers, they only contain invoice number and loan numbers and lots of other data specific to WF and NFR. Also there is nothing that shows, to the rep, that it came from WF as it comes to us in an email as an Excel document attachment.
Adding fuel to the fire is the fact that NAMFS members go back years — Mortgage Contracting Services (MCS) will go back over 5 years — attempting to find reasons to chargeback Labor. HUD was extremely clear that they do not do this and it is driven by the NAMFS members themselves. Here is what HUD had to say,
HUD’s Mortgagee Compliance Management (MCM) contractor can and does adjust payouts of current claims to recoup monies for HUD when pre-conveyance services were not performed. However, this typically happens within the first month after title conveyance. I’ve never seen any go back 2 years. If you can get me an address or FHA case number, I will have the MCM GTR check to see if any adjustments were made from HUD’s end on a specific case/property.
When I recently spoke with a fairly large NAMFS member, I was informed that the NAMFS campaign will be good for everyone. It simply isn’t the truth. First, let’s say that NAMFS is successful in lobbying — and lobbying requires legal filings by both the lobbyists and their employers to which NAMFS would have to report — and gets a pay hike in the ML. The problem here is that a Prime Vendor usually farms out the work three tiers deep before it ever gets to Labor. As the target range would probably be around a 30% increase in pay, that would be eaten up before it ever hit the boots on the ground. And the Prime Vendors are loathe to track the money downward as it would tend to establish a Doctrine of Privity between they and Labor.
A lawyer recently wrote to Foreclosurepedia and had this to say about their theory of what is going on,
Paul: I think I may have at least in part figured out how MCS is making money on chargebacks…I think one of the keys is that MCS and its lender clients are not taking up the chargebacks individually. That would literally be unworkable due to the sheer number of chargebacks and detail involved. MCS is debiting their vendors in full for all full chargeback amounts but is then taking the chargebacks en masse, i.e. bundling them, to its lender clients and negotiating a settlement amount on a bulk group of chargebacks that may involve many properties and dozens of vendors. That settlement amount is less than the total chargeback amount that MCS has already debited from its vendors. The differential between the total settlement amount debited by MCS from its vendors and the settlement amount actually paid by MCS to its lender clients on the chargebacks is not passed back by MCS to its vendors but is retained as pure added profit by MCS. That is the reason that MCS must retain sole control over chargebacks vis-a-vis its vendors, why the MCS chargeback appeals process is futile for vendors and why, ultimately, whether a vendor suffers a chargeback or not has little to do with either the quality or timeliness of a vendor’s work.
Fact of the matter is that there are simply too many variables of fraud at play to ever believe that NAMFS members have any intention of allowing Labor to make a living wage. For every 50 cents in wage hikes — which is less than one penny by way of comparison to wage increases throughout the US right now — NAMFS members will concoct a scheme to chargeback a dollar. The NAMFS fraud aside, take for example the price of lumber. With stumpage rates up fourfold and futures more than double the 5 year pre-COVID average, it is impossible to survive when NAMFS members demand nearly 40% of all bids. Here is what Bloomberg had to say,
Prices are climbing amid tight supplies and a pickup in homebuilding. Western Canada is seeing reduced output and the U.S. south is grappling with labor shortages. The U.S. is also expected to double duties on a common Canadian wood next month, adding to costs.
Plastic resins which are used in virtually every product that Field Service Technicians consume has dramatically risen and shortages abound,
As it stands now, more than 60% of manufacturers are reporting resin shortages, according to survey data from AlixPartners. It expects the problem could persist for up to three years until production capacity catches up with demand.
And with respect to appliances — whose costs have skyrocketed without NAMFS members acknowledging — the average wait is between two to six months. Here is how the Wall Street Journal put it,
Shortages of dishwashers and refrigerators are likely to stretch well into next year, Whirlpool Corp.’s chief executive officer said, as supply-chain problems constrain production and consumer demand remains strong. The Benton Harbor, Mich.-based company has ramped up appliance production, but delays have grown as waits for components and other snags lead to back-orders of around six weeks for the average appliance, said Whirlpool CEO Marc Bitzer.
Welcome to the “Era of Depletion and Disruption,” as Axios describes it, or even more dramatically, the “Everything Shortage,” as The Atlantic calls it. And the fact of the matter is that we haven’t even begun to discuss Labor. No one is going to pay for a business license, vehicles, equipment, maintenance, General Liability, Errors and Omissions, dump fees, tools, materials, and a tax rate at over 35% to remove $25 a cubic yard debris. On average, NAMFS members pocket between 30 – 40 percent of the ML pricing as overhead and profit. Go no further than the $3 inspections which are farmed out by the Industry.
We haven’t even spoke about the cost of fuel and its meteoric rise; rents are up by 25% nationwide; inflation heading off the rails; sales of new homes dropped 24.3% YOY; construction prices have spiked by 12.9% the highest rate since 1979; and NAMFS members are still holding pay over a month — interest free!
The elephant in the room, though, is the simple and salient fact that ALL — not a few, not a couple — ALL Prime Vendors, contractors, subcontractors, and remote workers in the Industry will have to receive a COVID vaccination. Foreclosurepedia has covered this extensively and HUD — along with all other US government agencies — have confirmed it. And while the pricing is modest — less than $15 a year through CredPro which HUD has stated meets all their requirements — the reality is that in upwards of 50% of Labor will refuse to do it. With over 4.3 million people quitting their jobs in August, the reality is that whether or not HUD raises pricing on the ML, if NAMFS members do not ditch the fraud and begin to pay what Labor is worth, it won’t matter.
As a final note, lobbying for a ML hike isn’t that difficult. The general chain of command in HUD Single Family Asset Management (SFAM) is as follows: The Director, the Deputy Director. Below the Deputy are the Director of NSC and Operations Director. In regards to the M&M contracts (post-conveyance), the Operations Director is probably closest to the requirements. On the lender/loan processing side, the Director of NSC is probably closer to the pre-conveyance side of things. They are the most likely point-of-contacts in SFAM, depending on the issue. The last update to the pricing was in ML 2016-02, which was issued on February 5, 2016, and is available here. Typically, it’s the NSC who initiates the request for ML updates, but truthfully it could come from anywhere within Single Family Housing. Interestingly, in ML 2016-02, they dropped the cost of the inspection. However, they broke out a separate reimbursement for photographs of up to $30 — I certainly didn’t see a pay increase when that happened, though!
In closing, in the previous paragraph lies the roadmap that Eric Miller wants you to pay $120,000 for. Foreclosurepedia gave it to the Industry for free. And make no mistake that the venturing of NAMFS into lobbying is going to be monitored extremely close. Government ethics law prohibits former members of Congress, senior legislative staff and senior executive branch staff from lobbying their former department or agency for one year after leaving government. Moreover, though, a lobbyist who knowingly fails to comply with any provision of the law may be subjected to a civil fine, the maximum of which can be $50,000. Lobbyists are required to register as lobbyists under the Lobbying Disclosure Act (LDA) and Honest Leadership and Open Government Act of 2007 (HLOGA). The article you wrote is pretty explicit in what Montgomery, et al., do as is their website. To that point, if a person makes more than one lobbying contact and spend 20 percent or more during a given calendar quarter on lobbying activities (lobbying contacts and related support activities) and their employer has more than de minimis lobbying expenses or income (currently $12,500 for in-house lobbyists/lobbyist employers and $3,000 for outside lobbyists/lobbying firms), then they are a lobbyist according to the LDA and their employer must register and disclose them as a lobbyist.