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HW fOcus / a cOncentrateD lOOk at inDustry issues / special eDitiOn Of HOusingWire magazine / 2011

Default servicing

Copyright 2011 by HousingWire • 2701 Dallas Pkwy, Ste 200 • Plano, TX 75093 • 469.893.1480 • www.hwfocus.com • Reprinted by permission


Going above and beyond

Servicers and vendors become more accessible

By Chad Mosley

/ perspectives

22 / HW FOc U s / D e FaU lt servicing

The rate of mortgage delinquencies

in recent years has resulted

in record-setting volumes

of properties in different stages of

the default servicing cycle.

In response to these unprecedented

volumes, servicers have

partnered with entrusted vendors and other industry stakeholders

to re-evaluate and reinvent the most effective way

to manage properties by executing quality inspections and

preservation services.

Investor guidelines and conveyance standards have

long provided the industry with benchmark operating

procedures and guidelines outlining reimbursable services.

In identifying ways to go above the norm for field

services work, servicers are having inspections and work

orders performed at a greater frequency. While these

initiatives are often not reimbursable by investors and

may require additional resources, they promote greater

transparency between parties, help reduce neighborhood

blight and uphold servicers’ social responsibility to our

nation’s communities.

A few examples of how default servicing leaders make

a difference: performing more frequent lawn care than is

required by investor regulations; performing quality inspections

pre-sale in addition to regularly scheduled inspections;

Posting real-time contact information on properties to

clearly communicate the responsible party; and performing

REO inspections as a third-party, independent assessment.

Typically, grass cuts on properties in the default process

are conducted twice a month. This frequency is directed by

what is required and what is reimbursable by investors. Instead

of making macro-portfolio decisions, some servicers

are developing strategies based on regional variations.

In warmer climates with larger amounts of precipitation,

some servicers are conducting lawn care more frequently, at

their own expense. Not only is this approach helping prevent

unsightly yards from emerging in our neighborhoods,

but ensuring these vacant and abandoned homes look like

any other property in the neighborhood, which ultimately

helps maintain property values.

Leading servicers are also going above and beyond the

norm in the way of pre-sale property inspections. With

more emphasis on reducing neighborhood blight and helping

stabilize communities, servicers are challenged with ensuring

properties adhere to a complex and evolving assortment

of state and local municipal codes.

Leading servicers have learned to conduct inspections

and property reviews as an additional quality control measure.

These servicers request more inspections than are required

by a property’s investor. This helps ensure the properties

are secure, preserved and maintained. It also allows

the servicer to better monitor the property for changes that

impact the safety and soundness of the surrounding community

while quickly responding to issues.

And servicers are starting to make the appropriate party

reachable around the clock should an issue arise at a defaulted

property. A notification is posted at each property

that includes a direct line of contact for reporting any property

damage or safety threats.

Code officers, law enforcement and neighbors no longer

have to wait until the next business day or next inspection

cycle to report timely updates. REO managers as well as

some investors are now using third-party inspections on

properties in their portfolios. These are in addition to regular

inspections conducted by the assigned real estate agent

or property preservation provider.

By conducting weekly or bi-weekly inspections on vacant

REO properties, problems can be identified and fixed

more quickly. Identifying damages, such as a water leak,

early in the process can result in saving thousands of dollars

in repairs down the road.

Some will ask how these seemingly simple process enhancements

can make a difference. But when extrapolated

over the thousands of properties, the impact on how lenders

can effectively manage distressed properties is quietly carving

out new and progressive servicing standards.

With more emphasis on reducing

neighborhood blight and helping

stabilize communities, servicers

are challenged with ensuring

properties adhere to a complex

and evolving assortment of state

and local municipal codes.

A single-point of contact, aesthetically noticeable maintenance

services and additional inspections all contribute

to enhanced preservation practices.

And though the recognition earned from these efforts

may not be great, the result of seeing these properties properly

maintained in our nation’s communities and neighborhoods

is exemplary.

Mosley is a vice president at Mortgage Contracting Services, which provides preservation, inspection and REO property maintenance.

Copyright 2011 by HousingWire • 2701 Dallas Pkwy, Ste 200 • Plano, TX 75093 • 469.893.1480 • www.hwfocus.com • Reprinted by permission

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