Fannie Mae details new property preservation pricing
[Update 1: Clarifies pricing is for vacant homes still in foreclosure] Fannie Mae released a new guide for how much property preservation companies can charge the government-sponsored enterprise for maintaining vacated homes still in the foreclosure process. The new pricing will go into effect Sept. 1 and compared to the current guideline, Fannie is more exact on its pricing, though it does not disclose pricing for homes in REO. A spokesman said that pricing is determined through private negotiations with national companies. In guidance issued last December, Fannie would pay up to $100 for an initial lawn cut on a maximum 10,000 square feet yard and $150 for a yard up to 15,000 square feet. Other pricing caps were given for continued maintenance on lawns of this size. But in September, Fannie got specific on larger yards. For instance, the GSE will pay up to $225 for the initial cut on a yard measured between 35,001 and 43,560 square feet and $175 for every cut after that. The price changes for every 10,000 square feet below 35,001. Fannie also determines when the lawns can be re-cut, depending on the state. For example, the first mow of a REO lawn in Michigan must be between April 1 and Oct. 31 with subsequent allowance for two monthly cuts between those dates. But in Nevada, another state hard hit by the foreclosure crisis and one that is significantly less green than Michigan, the initial cut can come at any time and the lawn can only be re-cut once a month for the entire calendar year. New pricing was given for clearing trees, shrubs and vines at a maximum of $250 once a year. In Hawaii and Florida, the price doubles. Roof repair also became more specific. In previous guidance, a property preservation company could charge up to $400 for tarping or patching a 10-by-20 area. Under Fannie's new guidelines, companies can charge up to $2 per square foot for a total cost of $800. Even chimney caps were added to the guidance at a maximum of $250 per cap. Fannie does not want to replace a roof unless the servicer determines it’s a necessity for resale. Then, the servicer must take at least two bids for the work. Other often overlooked expenses remained the same. Fannie will pay up to $100 for cleaning out the refrigerator and $75 for cleaning a toilet. Fannie will pay up to $60 each to replace a knob lock on the front door. Fannie builds into its "foreclosed property expense" the amount received from representation and warranty payments and the fair market value of the actual REO on its balance sheet. As home prices went up during the second quarter, Fannie actually reported a $478 million income under its foreclosed property expenses. In the same quarter last year, Fannie reported a $480 million loss. Overall, the GSE reported a $5.1 billion loss in the second quarter and so far owes the Treasury Department $89.1 billion in bailouts. Write to Jon Prior. Follow him on Twitter @JonAPrior.