The servicing market has changed significantly since the mortgage market imploded in the mid-2000s where we saw dramatic increases in loan defaults and foreclosure volumes. These heightened volumes impacted servicers and those companies handling default services, property preservation and REO disposition. While REO, short-sales and foreclosures have existed for quite some time, the sudden influx of foreclosures and rapidly expanding REO inventories lead to significant growth opportunities in a sector that traditionally flew under the radar.
REO and property preservation no longer fly under the radar. The increases in foreclosure volumes also ushered in a wave of new scrutiny from the OCC, DOJ and CFPB. Servicers were forced to deal with a flood of new rules and regulations on the federal, state, and local municipality levels which resulted in greater scrutiny, higher fines and higher costs to perform the required property preservation and REO services.
Even though we are emerging into a more stable REO market, asset management servicing firms are still being pressed to be able to dispose of REO properties in a timely and compliant manner.
To improve results, stronger field execution is paramount. Servicers need to look for an REO asset manager with an experienced nationwide network of field service specialists who can act quickly and effectively to optimize the value and marketability of their REO properties. This involves much more than simply securing and maintaining the physical asset. The provider must be staffed with REO professionals – including vendor management specialists and broker specialist teams – capable of working closely with real estate professionals, vendors, title companies, law enforcement officials and attorneys to assure better outcomes at every phase of REO asset disposition.
A nationwide network that includes both brokers and field service professionals provides an up-close, informed view of each property, particularly if the asset manager also provides upstream pre-foreclosure services. This early and ongoing exposure arms the asset manager with the property-specific knowledge and experience needed to apply the most efficient, effective approach for each asset in the lender’s REO inventory.
The key is rapid deployment of knowledgeable field resources on a neighborhood-by-neighborhood, property-by-property basis that can accurately and compliantly deliver proven results. Providers who can perform at this level are re-defining responsive REO service.
Servicers can expect a number of benefits as they strengthen relationships with asset management companies capable of working effectively across both REO and pre-foreclosure fronts:
>> Shorter Asset Resolution Cycles – Actively managed brokers move REO properties in less time than do unmanaged brokers. Working with asset managers offering direct local monitoring of individual brokers, lenders can expect to move properties in 90 days or less. Re-assigning unsold properties to new brokers – a costly and time-draining process – is rarely needed. In addition, when resources are focused at the neighborhood and individual property level, there is a greater incidence of properties selling above asking price.
>> Reduced Costs – Lower commissions and/or fees, economies of scale, and stronger asset control with fewer compliance problems deliver substantial cost-saving potential.
>> Smarter Property Marketing – Experience-based knowledge of each property and neighborhood leads to smarter valuations and more productive selling strategies. With in-depth REO expertise and proven strength on the ground, well-integrated asset management firms are able to create and apply the right marketing approach for each REO property.
>> Pre-Marketing – With in-depth, experience-based knowledge acquired before a property becomes part of the client’s REO portfolio, asset management companies offering both pre-foreclosure and post-foreclosure services are uniquely positioned to create and apply the right marketing approach for each REO property. This includes recommending auction or traditional sales methods, preparing detailed property/market analysis, as well as providing turn-key auction management or assigning a broker, as appropriate.
>> Marketing – REO asset managers who can offer comprehensive property marketing services are helping REO properties return maximum market value in minimum time. Qualified providers offering direct local execution and oversight can mount complete marketing campaigns, including detailed weekly marketing reports. Most importantly, they can and assume full responsibility for individual broker monitoring/evaluation, a distinct advantage over the arms-length relationships characteristic of many REO asset disposition programs.
>> Closing Services – Well-qualified REO asset management organizations can provide the people and expertise to coordinate and certify closing documents, organize and attend the closing, collect and distribute funds, and disseminate closing information. All in strict accordance with client, legal and regulatory requirements (title procurement, HUD-1 review and approval, escrow/closing coordination). These capabilities and more are well within the scope of forward-thinking REO asset management organizations prepared to excel in the new integrated service environment.
Effective marketing is critical to successful REO asset disposition. However, to be consistently effective, REO Marketing is best understood as part of the overall asset management process, not a substitute for it.
With today’s REO inventories, not all properties are suited for sale through traditional channels. Alternate strategies, particularly for low-value, high-risk properties, must be identified, assessed and implemented, as appropriate. REO asset management providers with strong field service networks can be highly effective partners in helping to leverage these opportunities, whether bulk transactions, transfers to development agencies or public auction. That said, property-by-property marketing continues to represent the most effective alternative for the majority of REO assets.
Property-by-property optimization of REO assets requires independent process management and localized control. What’s needed is an REO asset management partner, who knows the property and its pre-sale history, can plan and execute property preservation/enhancement services, understands municipal ordinances and code compliance issue, and can objectively assess, select and manage local brokers.
The Right REO Partner
With in-depth, experience-based knowledge acquired before a property becomes part of the client’s REO portfolio, asset management companies offering both pre-foreclosure and post-sale services are uniquely positioned to create and apply the right marketing approach for each REO property. This includes recommending auction or traditional sales methods and preparing a detailed property/market analysis, as well as providing turn-key auction management or assigning and managing a broker, as appropriate
The right REO service provider can deliver maximum REO results in minimum time. Qualified providers offering direct local execution and oversight can mount complete marketing campaigns and property-by-property follow up, including on going detailed progress reports. Most importantly, they can assume full responsibility for individual broker monitoring/evaluation, a distinct advantage over the arms-length broker relationships characteristic of many REO asset disposition programs. Successful REO asset disposition means knowing the property and tailoring a marketing strategy to match; and second, being able to apply independent, on-the-ground monitoring of the disposition process. Integrated REO asset management companies with strong field service networks are uniquely qualified on both fronts.
Comprehensive Solution, One single Source
The fact is, disposition of REO assets is a multi-front affair. Success means winning a series of small but important battles. It takes knowledge of the property and local market awareness to critically assess BPOs and the brokers who provide them. It takes experience and follow through to evaluate and monitor property-marketing activities. It takes strong field presence to assure the grass is cut, trash is removed, interiors aren’t gutted or vandalized, the HOA isn’t ready to enforce a lien, and fines for municipal code violations aren’t accruing. It takes people, skills and know-how to negotiate cash for keys.
Integrated REO asset management providers with proven pre-sale and post-sale capabilities are in the strongest position to help servicers address these and other needs critical to REO asset success.
Improving and streamlining default and REO processes will remain a primary focus of servicers and their field services partners as regulatory compliance becomes more urgent and complex. The field service provider’s first step in navigating these realities will be to become an even more capable and efficient resource – a true problem-solving partner who understands both broad market forces and the servicer’s particular needs and business circumstances.