VA Servicer Handbook M26-4 Appendix G — (whole document)

VA Servicer Handbook M26-4 Appendix G — whole

Effective 2025-12-16 · VA article last updated

APPENDIX G. PROPERTYPRESERVATION REQUIREMENTS AND FEES a. Inspection Requirements. In accordance with Title38, Code of Federal Regulations (C.F.R.), Section 36.4350(i), loan servicers are responsiblefor inspecting the property securing a VA-guaranteed loan immediately afterbecoming aware that its physical condition may be in jeopardy. Unless a lossmitigation option is in place, a property inspection is also required beforeday 60 of delinquency or before commencing liquidation action, whichever isearlier, and at least monthly after liquidation proceedings have been started,except when it has been determined that the property is owner-occupied. b. Inspections During Liquidation. VA regulations donot specifically require monthly inspections after the start of liquidation proceedings whenthe security property is owner-occupied. However, because of the potential forabandonment of the property during the liquidation proceedings, and the factthat other servicing activities may not result in direct contact with theborrower during this period and may not readily lead to discovery ofabandonment, VA believes regular monthly inspections should be conducted duringthis time. Therefore, VA will allow regular inspections during liquidationproceedings to be included in the eligible indebtedness for claim computationpurposes, even when the inspections confirm that the property remainsowner-occupied. c. Vacant or Abandoned. When a servicer receives notificationthat a property is vacant and unsecured, they must make appropriate arrangements toprotect the property from unnecessary deterioration due to vandalism orneglect. An inspection must be immediately scheduled and completed to documentthe condition of the property, in order to verify if the occupants haveabandoned the property. All circumstances should be considered when making thedetermination as to whether a property is vacant or abandoned. For example,the presence of a “for sale” sign at a vacant property usually means it has notbeen abandoned, but remains under the care of the owner or the owner’s realestate agent. The absence of personal property, the lack of yard maintenance,and changes to the owner’s mailing address may indicate that a property hasbeen abandoned. Loan servicers are required to protect, and preserveproperties when they become abandoned, and to report to VA under 38 C.F.R. 36.4317(c)(10)via the “Occupancy Status Change” event in the VA Loan Electronic ReportingInterface (VALERI) application. d. Interior Inspections. Following a determinationthat a property has been abandoned, a visual “exterior only” inspection may not reveal anyemergency repairs or environmental/fire hazards, which, if not addressed atonce, may pose damage to the property. Early detection of problems is criticalto minimize loss in the event the property is acquired by the servicer andpossibly conveyed to VA. Therefore, subsequent inspection reports on abandonedproperties must include completion of interior inspections. e. Local Requirements. Servicers must ensurecompliance with all city, county, or other ordinances concerning property preservation. Most securityinstruments have a provision that permits the servicer to take action toprotect the property securing the loan, to advance any reasonable amountnecessary and proper for the maintenance or repair of the security, and to addsuch an advance to the guaranteed indebtedness. The removal of hazardousmaterials, the correction of hazardous conditions, and the avoidance of liensare primary concerns. In order to avoid liens, whenever local codes requiremore extensive protection than stated in the VA guide, servicers should followlocal code requirements. f. Risk for Loss or Damage. Under 38 C.F.R. 36.4323,servicers bear responsibility for any loss due to damage or destruction of the property orpersonal injury sustained in respect to such property from the date ofacquisition by the servicer to the date such risk is assumed by VA. Risk isassumed by VA on the day successful electronic acceptance of the “Transfer ofCustody” event is indicated in the VALERI application. If the “Transfer ofCustody” event is rejected, risk remains with the servicer. Servicers mustfile hazard insurance claims and obtain a settlement for covered losses. Inaccordance with 38 C.F.R. 36.4329, insurance loss proceeds must be applied toreduce the total indebtedness if not used to restore the property. g. Reimbursement. Subject to the maximumguaranty payable, VA reimburses servicers via the claim under guaranty for property inspections andpreservation costs incurred up to the date of loan termination, or theexpiration of 210 days from the due date of the last paid installment, plus theforeclosure timeframe for that state, whichever is earlier. All reimbursementsare subject to the maximum allowable amounts, but actual expenses in excess ofthe maximum allowable amount may be appealed by the servicer. It is not theintent of VA to attempt to regulate the amounts that servicers may pay for theservices performed, but to standardize the reasonable maximum amount that VAreimburses for such services. If a servicer advances funds in excess of VA’smaximum allowable amount, the servicer will be paid only the maximum allowableamount on the claim. The servicer will have 30 days to submit an appeal withall relevant documentation to evidence the actual costs, date, description andproof of completion of work to justify exceeding the maximum allowablereimbursement. h. Pre-Approvals. VA does not issue pre-approvalsfor any property preservation item. The servicer is responsible for taking appropriate measuresto protect and preserve the security for the loan. The decision as to whataction to take to preserve and protect the property is at the discretion of theservicer, and it is independent of the amount that VA reimburses. If there areunusual circumstances that support an additional expense, the servicer maysubmit an appeal claim via the Servicer Web Portal in the VALERI application. i. Specific Preservation Requirements. In orderto establish uniformity in the preservation of properties, VA is providing the following directions forspecific activities: securing, debris removal, boarding, equipment repair orreplacement, hazard abatement, utilities, winterization, and yard maintenance. 1. Securing. Properties must be secured to preventunauthorized entry and to protect against weather-related damage. All windowsand doors must be secured. Broken glass should be replaced, unless the openingis to be boarded. All exterior doors shall be secured. Do not install newlocks on exterior doors unless entry will be required by the servicer prior totransfer of the property to VA (e.g., to allow entry for an appraiser orinsurance adjuster or to perform winterization). Non-working locks should bereplaced when necessary to secure the property. Lock changes are included inthe maximum allowable amount for securing the property. If a property requiresthe installation of a padlock or lockbox, VA will reimburse as long as theservicer does not exceed the maximum allowable for securing of the property. Pleasenote that fees for debris removal, boarding, equipment repair or replacement,hazard abatement, utilities, winterization, and yard maintenance are claimedseparately from securing fees. When applicable, the servicer is responsiblefor the following additional securing activities, which are claimed separatelyfrom the overall “securing” fee: re-securing the property; temporary roofrepairs; securing in-ground swimming pools; securing above-ground swimmingpools; securing hot tubs or spas; and maintenance of pools, spas, and hot tubs. (a) Re-securing the property. Re-securing theproperty is reimbursable, provided the initial securing of the property hasbeen violated and is no longer effective. Although the re-securing fee maximumallowable amount is zero, VA will review re-securing fees on appeal, at whichtime documentation to evidence the actual cost, date, and description of workcompleted must be submitted to justify re-securing the property. (b) Temporary Roof Repairs. Roof damage leftunattended exposes a property to deterioration, moisture accumulation, and moldgrowth. Repairs, such as tarping/patching/replacing loose shingles, should bemade immediately upon discovery of roof damage. In all cases, the mostcost-effective repair method should be used. (c) Securing In-Ground Swimming Pools. Servicersare required to comply with all local ordinances pertaining to swimming pools. In-ground pools (including any hot tub or spa that shares the same filteringsystem as the pool) must be secured, but not drained. Pools (including the hottub or spa that shares the pool filtering system), must be covered with material in such a way as to prevent an individualfrom accidentally falling into them. Fences must be secured to restrict accessto the pool. (d) Securing Above Ground Swimming Pools. If theproperty has an above ground pool in good condition (i.e., built-up withdecking or other infrastructure that will support a pool cover) treat it as anin-ground pool. Above ground pools that are in poor condition, or that cannotbe secured, should be removed. (e) Securing Hot Tubs or Spas. Servicers shoulddrain and secure portable hot tubs and spas. If a hot tub or spa is outdoors,cover it in such a way as to prevent an individual from accidentally fallinginto it. (f) Maintenance of Pools, Spas, and Hot Tubs. Servicersmust perform monthly maintenance and chemical treatment of operational poolsand in-ground hot tubs or spas that are attached to the pool filtering system. Servicers must comply with city, county, and other local ordinances regardingmaintenance of non-operational swimming pools. This is a per occurrencecharge. 2. Debris Removal. Generally, cleanup of the property or removal ofdebris will be the responsibility of VA, once custody of the property istransferred following a foreclosure sale, or deed-in-lieu (DIL). However, servicersare required to remove unhealthy or hazardous materials from the exterior, andinterior of properties prior to transferring custody of vacant properties, andmust adhere to the local municipal health and safety requirements regarding theproper disposal of said materials. For clarification, examples of health andsafety hazards include, but are not limited to, highly flammable chemicals,decaying food or other organic matter, dead animals, broken glass or othersharp objects, and large quantities of paint or paint products. Servicers arefurther required to check with the local municipality for health and safetyhazard requirements. For all debris removal other than vehicle removal,reimbursement is provided per cubic yard of debris removed, up to the maximumallowable amount. The itemized invoice of work completed must indicate thenumber of cubic yards removed. 3. Boarding. The boarding of windows and doorsshould only be done in those geographic areas where previous experience hasshown vandalism and/or theft to be an ongoing problem, where local ordinancesrequire boarding, if windows are broken, or where special conditions exist thatmake it necessary. Reimbursement for boarding expenses is provided on a “peropening” basis, up to the maximum allowable amount. For those properties whereit has been determined by the loan servicer that boarding is necessary andrequired, the itemized invoice of work completed and materials used mustinclude the amount paid per window or door. The following requirements shouldbe followed: (a) Windows. Secured with 1/2" plywood or polycarbonate/clearboard. (b) Doors. Secured with 5/8" plywood or polycarbonate/clearboard. (c) Other Openings. French doors and slidingdoor openings should be secured with 3/4" plywood or polycarbonate/clearboard. 4. Equipment Repair or Replacement. The servicer must repair or installequipment required in maintaining utilities or properly winterizing a property,including sump pumps, water wells, and septic systems. Pumping water from thebasement, if applicable, is also required as part of equipment repair orreplacement costs. 5. Hazard Abatement. Hazard abatement (e.g., removing environmentalhazards such as asbestos and radon) is not required, except to avoid theplacement of a lien against the property by a local government. Although thehazard abatement maximum allowable amount is $0.00, VA will review hazardabatement fees on appeal, at which time documentation to evidence the actualcost, date, and description of work completed will be submitted to justifyhazard abatement on the property to avoid placement of a lien. 6. Utilities. Utilities should be turned offunless required to protect the property. This typically involves themaintenance of electrical service for homes to maintain operation of a sumppump, or the maintenance of heat at a minimum temperature of 55 degrees Fahrenheitin northern states to prevent freeze damage. For units that are attached toother units or dwellings, water services and utilities should remain on only ifthose systems are shared with other units. In some cases, it may be more cost-effectiveto maintain utility service rather than disconnect the service. For example,in some rural areas, large fees may be charged to re-connect water service. Servicersshould use proper judgment to determine the most cost-effective method ofmanaging utilities when re-connection fees exist. 7. Winterization. Winterization includesdisconnecting the water service and a thorough, complete draining of allplumbing and heating systems. The uses of air pressure to clear the systems,or the adding of antifreeze to the systems are both acceptable, provided thatfreezing is prevented. Properties should only be winterized once per year. Ifthe initial winterization has been violated and is no longer effective, theproperty should be re-winterized. On the claim under guaranty, the servicerwill claim re-winterization expenses as a winterization expense, and will entera different date from the initial winterization expense. Utilities should beturned off except for those properties that require them to remain on due tolocal weather conditions, Homeowners’ Association (HOA) requirements, safetyconcerns, or where large fees may be charged to reconnect service (as discussedin previous paragraph). When a sump pump is used to keep a basement or a crawlspace dry, check to make sure the pump is operable and to ensure that theproperty has not been damaged by flooding. (a) Winterization. Winterization is not required,nor will be reimbursed, for properties in Hawaii, Guam, Puerto Rico, or theU.S. Virgin Islands. Winterizations are allowed during any month of the yearin all other States. (b) Snow Removal. Snow removal is not required,nor will be reimbursed, for properties in Hawaii, Guam, Puerto Rico, or theU.S. Virgin Islands. In the jurisdictions where snow removal is required,these services must be conducted between October 1 and March 31. However, snowremoval is allowed during any month of the year in the following States:Alaska, Colorado, Connecticut, Idaho, Iowa, Illinois, Indiana, Massachusetts,Maine, Michigan, Minnesota, Montana, North Dakota, Nebraska, New Hampshire, NewYork, Ohio, Oregon, Pennsylvania, Rhode Island, South Dakota, Utah, Vermont,Washington, Wisconsin, and Wyoming. (c) Special Requirements. When applicable, the servicermust comply with the following guidelines for winterizing properties with: dryheat; wet, radiant, or steam heat; reduced pressure zone valves; and pools,spas, and hot tubs. (1) Dry Heat. The hot water heater and alldomestic water supply and distribution piping should be thoroughly drained. All faucets and valves should remain open during the process and then closedafter draining is completed. Adequate amounts of antifreeze are to be placedin all fixture traps, including toilet tanks and bowls. (2) Wet, Radiant, or Steam Heat. In addition tothe requirements for dry heat systems, the house boiler system should bethoroughly drained. All radiator vents should be opened during the process. Bleeder pins should not be removed from the radiators. Any radiant heat pipingshould be drained and blown dry with the use of air pressure and an adequateamount of antifreeze is to be placed in the radiant piping. Note that steamheat system winterization shall be classified as “radiant heat” in the servicer’sclaim under guaranty. (3) Reduced Pressure Zone (RPZ) Valves. An RPZdevice is a type of backflow prevention device used to protect domestic watersupplies from contamination. Servicers should contact the local healthdepartments and/or state and local agencies regarding any jurisdictionalrequirements for the installation and/or use of the RPZ device on all wet heatsystems. (4) Pools, Spas, and Hot Tubs. Supply linesshould be winterized, but units should not be drained. 8. Yard Maintenance. When applicable, thefollowing yard maintenance activities are the responsibility of the servicer:grass cuts, shrub trimming, and snow removal. (a) Grass Cuts. Lawn cutting (initial andsubsequent cuts) includes mowing the lawn, weeding, edge-trimming, sweeping ofall paved areas (e.g., sidewalks, driveways, patios), and removal of all lawnclippings, related cuttings, and incidental debris (e.g., newspapers, flyers,bottles). These services are included in the cost allowable for an initial cutand subsequent cuts (re-cuts). Servicers should not order lawn maintenance ifHOA dues cover the service. (1.) Initial Grass Cut. Upon notice of vacancy,an initial grass cut should be performed. An initial grass cut is defined asthe first cut for each calendar year prior to termination of the loan. Initialgrass cuts may be completed when needed during any month of the year in thefollowing States/territories: Alabama, Arizona, California, Florida, Georgia,Guam, Hawaii, Louisiana, Mississippi, Nevada, New Mexico, Puerto Rico, SouthCarolina, Virgin Islands, and Texas. Initial grass cuts are allowed from June1 to September 30 in the State of Alaska. In all other States, initial grasscuts are allowed between April 1 and October 31. (2.) Grass Re-Cuts. After the initial cut, grassshould typically be re-cut twice a month during the periods listed above forinitial cuts in each area. However, depending on the level of rainfall in thearea, one cut per month may be sufficient, while in other areas, more frequentlawn cuts may be needed. (b) Shrub Trimming. Overgrown shrubs or tree branches that arehazardous or obstruct doorways, public walks, and driveways shall be trimmed orremoved. (c) Snow Removal. The servicer should maintain asafe and accessible property throughout the winter season. Snow should beremoved from the entry, walkway, porch, and driveway following a minimumthree-inch accumulation. Servicers must comply with local codes and ordinancesgoverning the removal of snow and ice. 1. Maximum Property Preservation Allowances. VAwill pay no more than the maximum amount listed below on the guaranty claim. Servicers will have 30 days to submit an appeal with all relevant documentationto evidence the actual costs, date and description of work, and proof of itscompletion, to justify exceeding the maximum allowable reimbursement. Re-securingand hazard abatement must be appealed with documentation. DESCRIPTION OF SERVICE MAXIMUM ALLOWANCE PropertyInspections Initial property inspection $25 Monthly property inspection $25 Securing Initial securing of the property $230 Re-securing of property 0 Temporary roof repairs $460 Securing in-ground swimming pools $1,210 Securing above-ground swimming pools $460 Securing hot tubs or spas $60 Maintenance of pools, spas, and hot tubs $115 DebrisRemoval Amount paid per cubic yard $60 Max allowable for 1 unit $690 Max allowable for 2 units $865 Max allowable for 3 units $1,035 Max allowable for 4 units $1,210 Vehicle Removal $245 Boarding Windows with ½” plywood or polycarbonate/clearboard $740 Doors with 5/8” plywood or polycarbonate/clearboard $345 Other openings with ¾” plywood or polycarbonate/clearboard $460 EquipmentRepair or Replacement Sump pump repair $60 Sump pump installation $460 Pumping water from basement $1,725 Water well (pump, tank, and lines) $180 Septic system maintenance $780 HazardAbatement 0 Utilities Electricity $900 Gas $900 Oil $1,800 Propane $1,800 Water and sewer $2,250 Winterization Dry heat – 1 unit $160 Dry heat – additional units $85 Wet heat – 1 unit $230 Wet heat – additional units $145 Radiant heat – 1unit $290 Radiant heat – additional units $145 Reduced Pressure Zone (RPZ) Valves $220 Pools, Spas, and Hot Tubs $460 YardMaintenance Initial cut up to 5,000 s.f. $115 Initial cut 5,001 to 10,000 s.f. $145 Initial cut 10,001 s.f. or larger $175 Re-cut up to 5,000 s.f. $90 Re-cut 5,001 to 10,000 s.f. $100 Re-cut 10,001 s.f. or larger $125 Trim Shrubs $50 Snow Removal $70 Article Feedback Email Print Was this article useful?

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