Crisis Brings Additional Responsibilities on Field Servicers
The new era in field services has changed the job description for both field service companies and their employees.
The Department of Housing and Urban Development guidelines are constantly changing, says Joe Bada, founder and CEO of Five Brothers, a property preservation company that covers all aspects of field services. “The industry has changed dramatically,” he says, demanding that field servicers implement more transparent and logical processes that draw data and knowledge from many different sources.
“Requirements for the people in the field are much, much higher. Now clients require a lot more detailed information about what is happening with the properties.” He recalls how in the past a field assessment about a roof, for instance, was just an estimation of repair costs. Now it has to include its exact square feet, “even how many shingles are going on the roof, or how much paper.” The bank would approve, or dismiss such assessment but would not require details. Today’s cost estimator looks quite different. The average REO repair price is soaring and it is common knowledge that HUD is facing significant loan losses.
A hot industry topic is the effect of the more complex and stringent property conveyance guidelines on FHA loans. HUD has added new business rules and protocols on electronic data filing into the HUD system. Banks have to develop the appropriate technology and expertise to comply with costly and increasingly complicated requirements.
Mounting regulatory pressure combined with the need to automate mortgage-servicing systems can compromise a bank’s ability to service FHA loans properly, Bada says. It means third-party field services providers like Five Brothers need to be one step ahead of demand. Unless services comply with the guidelines in a timely fashion using efficient technology losses incurred from unrecoverable servicing fees can be high. “Compliance requires a lot of expertise!”
Five Brothers works with banks “to find out what their pains are” to create efficient systems that help expedite FHA loan processing.
For example, to submit a vacant property claim servicers must file a P-260 form with HUD no later than 30 days from the time a property becomes vacant. “Time is critical,” he says, because first field servicers need to discover which properties are vacated and complete the paperwork. It takes about 20 days to go through discovery, the actual property inspections, collateral evaluation, data recording and compiling a coherent report. Only under special circumstances it is possible to apply for an extension. “The risk they face if they do not file on time, or do not explain the situation properly is costly penalties.”
The firm’s flagship software FiveOnline helps gather and e-file into the HUD system property information and then follow up on behalf of lenders and serivcers who have 24/7 access to all the data. Monitoring systems include the date and time images are taken or an inspection is conducted.