More Active Field Servicer Engagement in 2012 Agenda
Borrower engagement is opening the way to an equally engaging relationship between servicers and field servicers.
To help avoid additional foreclosures from occurring, says Dale McPherson, president and CEO of Field Asset Services, a preforeclosure, REO and renovation field services provider based in Austin, Texas, the field services industry “must be proactive and begin delivering banks and servicers vital property information.”
Today’s marketplace demands far more than continued emphasis on quality field services and new programs, he says, and field service providers need “to take initiative to preempt future problems,” keep the servicer-field servicer communication open and deliver the knowledge banks need to make business decisions.
This need to take a preemptive approach to future problems is turning extensive property data reporting and improved communication between mortgage servicers and their field service providers into their No. 1 priority in 2012.
Field service providers “can begin making a difference today by taking greater initiative, developing expertise” and becoming trusted partners to mortgage banks, McPherson says.
The task at hand during this year, FAS executives say, is responding to increased demand for a number of services including more protection and maintenance services during preforeclosure, the emergence of new institutional investor interest in purchasing single-family residence REO properties, which will generate new demand for remodeling services as investors begin to purchase for rent.
Demand for service quality and innovation in the area of mobile technology that allows vendors and contractors to work more efficiently from the field also is expected to increase.
Furthermore, according to McPherson, “transparent, preemptive and guaranteed work” along with access to key property data and reports, will be demanded at every point in the field service process as banks and servicers try to reduce expenses and increase sales opportunities.
Higher investor demand suggests mortgage banks will step up their game and review their REO inventory to decide what types of repairs make sense financially. According to Greg Tolander, COO of Field Asset Services, on average housing repairs bring prices up by 50%.
To ensure repair cost efficiency FAS has developed “local, boots-on-the-ground partnerships” that allow its representatives to complete repair operations faster and negotiate the best possible cost for the service provided. It uses standardized property repair prices nationwide based on average market parameters. “We took it one step further by creating three specific categories that fit different demographics in different neighborhoods,” Tolander said, and by negotiating contracts with major appliance providers and manufacturers of tools to keep the cost down.
Higher cost efficiency also means closer cooperation with other parties in the bank-owned property management chain including municipalities to ensure code violations, HOA and compliance fines are mitigated, he said.
Both executives join a growing chorus of market insiders who strongly recommend open and frequent communication with municipalities as the best way to stay in compliance and avoid costly fees.
This fairly new market dynamic is making clear the best strategy going forward is “proactive property preservation” that leads to closer relationships between field service providers and municipalities, McPherson says.
Mortgage banks need to be aware about stricter code compliance guidelines imposed by local municipalities as the inventory of vacant properties continues to grow.
“Cities and local municipalities across the nation are becoming more vigilant towards issuing code violations to reduce blight and improve neighborhood conditions,” said McPherson warns.
Costs soar due to longer foreclosure timelines that have extended to nearly 21 months. Over time fines can add up and even exceed the value of the property itself in some cases, he said, so only awareness about code compliance trends, the compliance process, and communication with municipalities can help property preservation companies, banks, servicers and agents “manage this new level of code compliance more efficiently and cost-effectively.”
While the list of violations varies across the nation, FAS research based on data gathered from its 30 mortgage and asset management companies nationwide who service over 130,000 active properties on a recurring basis shows some violations tend to be cited more often than others.
Also data show certain states have placed higher numbers of violation fees compared to other states.
The top 10 list of code violations that can cost mortgage servicers a lot of money consists of high grass and weeds, eyesore trash at the curb including abandoned vehicles, graffiti, structures that are visibly open or vacant, debris, property conditions that do not comply with the minimum housing standards of habitability, substandard structures such as dilapidated sheds or detached garages, unmaintained or unsecured swimming pools, dead trees and landscaping, and vacant property registration.
As expected the top five states with highest violation citations are some of the most affected by the foreclosure crisis in the country. It includes Florida, California and Nevada, along with Illinois and Texas.
Knowing “which states cite the most violations and which violations are cited more than others” can help banks and servicers take a preventive approach to REO management in these areas, McPherson says.
For example, municipalities in Florida usually focus on pool and lawn maintenance, and that data help banks direct their property managers in their field service operations “before a violation is cited.”
To achieve that goal banks and REO managers need keep open and develop relationships with the municipalities to ensure ongoing, direct communication and information exchanges.
FAS has developed a database with over 10,000 code enforcement personnel contacts that represents nearly 5,000 municipalities across all 50 states. In 2011, FAS boasted a 91% success rate on mitigating code compliance fines and HOA fees on behalf of the company’s customers.
Tolander recalls an extreme case in 2009 when FAS was assigned a property in Coral Springs, Fla., that had been issued citations in 2008 for an overgrown lawn, roof discoloration, a stagnant pool and exterior maintenance.
Fines for these violations were accruing in the amount of $125 per day for 927 days, plus additional penalties, equaling a total fine of $434,654.50, he said.
FAS representatives managed to bring the property into compliance working with city officials to get a majority of the fines and penalties waived. Thanks to that mitigating effort and the established relationship with the municipality, he explained, in the end the fine was reduced by 99.89% down to $457, which equals $434,197.50 in savings.
Ultimately the goal is to take a preventive approach that initiates a damage assessment process during the time a property is going through the foreclosure process but is not yet foreclosed. Once properties are vacated however, management turns into a more challenging task. Often these properties attract fees and fines that need be mitigated down preferably not in a court of law, he said, but by leveraging established relationships with municipalities.