Are Mortgagees exempt from state and local Preservation & Protection laws for properties with FHA-insured mortgages?

An Authority Having Jurisdiction (AHJ) refers to a state or local government, Homeowners’ Association (HOA), or other organization responsible for enforcing the requirements of a property-related code or standard including state law and local ordinance.
 
Mortgagees are not exempt by HUD policy from adhering to state and local laws relating to the Property Preservation and Protection (P&P) of properties securing FHA-insured Mortgages.
 
The Mortgagee must review the AHJ requirements, including those relating to occupancy of the Structures, to determine applicability for repair or remediation prior to conveyance of the Property to HUD.
 
Where state or local law inhibits the Mortgagee performing HUD’s required Property P&P actions, such as connecting or disconnecting utilities, the Mortgagee must send the Mortgagee Compliance Manager (MCM) notice of the restriction on the Property P&P action and a proposal on how the Mortgagee will otherwise protect the Property from damage.
 
Where the AHJ requires additional or more extensive P&P actions than required by HUD for conveyance, the Mortgagee may submit an over-allowable request via P260.  The Mortgagee must upload with its request, all documentation supporting the proposed additional work requirements and expenses necessary for compliance.
 
Where state or local law inhibits the Mortgagee performing HUD’s required Property P&P actions, the Mortgagee must note the restriction in the Claim Review File and include a copy of the notice to the MCM’s approval or denial of the Mortgagee’s proposal, and the applicable state, local, or AHJ requirement.
 
Additional questions may be directed to the HUD National Servicing Center at (877) 622-8525.

For policy information see Handbook 4000.1 Sections  III.A.2.t.ii.(C)(5) & IV.A.1.c. available at
https://www.hud.gov/program_offices/administration/hudclips/handbooks/hsgh

All policy information contained in this knowledge base article is based upon the referenced HUD policy document. Any lending or insuring decisions should adhere to the specific information contained in that underlying policy document.


Topic Number: KA-04440