Bundling the Power of Default Risk Management Tools
Bundled services never get out of fashion. Service demand indicates mortgage loan servicing process challenges from loan default to foreclosure management are carving out a new market for innovative default risk control and loss mitigation solutions.
In times of crisis the focus of all service providers is on execution quality, data transparency and “solutions that are relevant, now,” says Kevin Wall, who was recently named senior vice president of default services for CoreLogic. “Right now the industry is craving for service providers like CoreLogic to be innovative in their solutions.”
That demand is driving product and technology development. CoreLogic will introduce an end-to-end default management technology platform at the MBA National Mortgage Servicing Conference in Orlando. The new module system consists of a flexible loss mitigation tool that “manages the default continuum through the investor claims process” either end-to-end using the entire platform or selectively through a single module such as bankruptcy or REO management.
A new valuation product also will be introduced at the conference. Constructed as “a gap valuation product” it is designed to solve the gap between a broker price opinion and a full interior-exterior appraisal. The goal is to provide a “credible, certified valuation, as compared to a price opinion” that results in a hybrid between a traditional BPO augmented with CoreLogic statistical valuation data analytics and a true valuation.
Specific to field services and property preservation costs CoreLogic is developing a tool designed to assist the management of FHA properties, a very complex compliance process that requires servicers to follow certain deadlines.
As a large outsourcer of investor claims and property preservation companies, CoreLogic is merging into a single tool existing solutions that enable servicers to fulfill a wide spectrum of services that start with the inspection process, the property preservation and rehabilitation process, the process of preparing a property for a conveyance and post-conveyance sale, and also the investor reclamation process for the claims’ reimbursement.
Using the expertise gathered in both property preservation and the investor claims market spaces, Wall said, CoreLogic plans to bring to the marketplace a unique solution that offers greater transparency of information to the banks currently monitoring or managing large portfolios of government-insured properties. It is a cost-effective solution designed to reduce servicing losses, he said.
CoreLogic is getting a lot of requests for another type of service. “The momentum is building up as the tide is turning in property preservation,” he said, as billions are being directed towards the property disposition process and neighborhood stabilization. “The question is: What is the right strategy around property repair?”
According to Wall, there is “an increased appetite” to make some repairs that not only help stabilize neighborhoods but at the same time “are more reflective of the true value of the property, versus selling in an as is, distressed state.” It still is the beginning in the implementation of that strategy. So far CoreLogic has only taken “tiny steps in that direction,” he said, but it marks the beginning of a specialized service option that focuses on the rehabilitation and construction activity for which demand is building up. “For the first time we see folks starting to consider it as a strategy versus an option,” he said. Some servicers are entertaining the idea of a cost-effective REO rehabilitation rather than taking a loss by selling these homes in their as is condition.
The problem with a solution where an REO is kept out of the sales market for an additional 30, 60 or 90 days to make the repairs is the obvious risk associated with investing capital today in the hope there will be a sensible return on that investment tomorrow. “Because the inventory is aged so much,” and the magnitude of overall REO management costs starting from the beginning, Wall argues, the whole process can turn into an economic challenge and a tough financial decision to make. “It requires additional cash as well as extending that marketing time.”
That kind of decision-making also requires supportive data and analytic information that helps answer basic investment cost related questions. First and foremost: Will the neighborhood property values support that type of investment going forward?
An equally important component of the REO management process is the preservation process and the entities that provide the required preservation quality process.
Property preservation is empowered with data analytics. Data help control repair costs as much as execution.
Continued innovation in bedding analytics and data into operational decisions, whether it be, just in making sure that the claim is filed properly, or the assignment of the single point of contact process, “transparency and continuity throughout that entire default continuum,” says Wall, whose over 20 years of experience in various leadership positions from both sides of the mortgage srevicer-service provider relationship for major companies, include Morgan Stanley, Centex Corp., Wells Fargo & Co. and Norwest Financial and many of the outsourcing operations for CoreLogic.
That experience helped create a well-rounded awareness of the sensitive and increasingly challenging nature of the mortgage servicing industry and is the reason why in his new position Wall will focus on the development of new solutions. More specifically his goal is to use the CoreLogic technology, outsourcing services and data analytics to design new mortgage default risk management solutions.