Field services are the first step servicers have to consider as they choose foreclosure sales and disposition strategies.
“It all depends on how aggressive servicers want to get not only in proactively marketing a property,” says Leo Esposito, a loss mitigation and asset disposition expert with ServiceLink, but also who they partner with, what they do to streamline the process as a whole, what do they do to accelerate liquidations, how effective is their network of field service partners, and whether they have found the right party to engage borrowers to show them the documents, execute them and then move through to the title recording process.
The primary challenge while going through all of those steps is that usually servicers have to deal with more than one entity, he says, because the complexity of the process increases proportionally to the number of partners involved. “It is easier to deal with a few vendors. Depending on the REO portfolio, the number can sometimes reach hundreds," Esposito noted.
Unless they partner with a few quality third-party service providers, servicers can face costly process quality problems. Nonetheless, every servicer is different. So deciding how many partners are necessary is only one of the factors that influence how servicer-vendor partnerships are being forged.
As a vendor that supports these types of services, including deed-in-lieu and short sales, says Salvadore Chaves, another loss mitigation veteran at ServiceLink, “we definitely see a migration towards a centralized model.” It means partnerships are contained with the providers who have the expertise and financial strength to support the kinds of transactions servicers need, which can be bundled field service operations, short sales and deed-in-lieu transactions.
It is critical to point out that often, depending on demand form servicers and investors, third-party service providers may be engaged more heavily with one form of liquidation versus another, Esposito says. Currently short sales are hot.
However, all these processes, repairs and maintenance, short sales, deed-in-lieu or getting title on an REO go hand in hand. At the end of the day true loss mitigation choices are determined by individual loan cases and the level of borrower engagement, so there is a limit to a servicer’s flexibility. Process on the other hand, he notes, is completely in the hands of the vendors who need to seamlessly feed data to servicers.
Loss mitigation today has really come down to three loan workout options: modifications, short sales and deed-in-lieu, so borrower engagement is a very important investment that will be part of servicing for the long term. This market need is driving servicer efforts to increase efficiencies through centralized operations, says Chavez.
“The type of service that appears to be in high demand by servicers today is the availability of centralized title and loan closing data. Most servicers prefer streamlined title information as they process loan liquidations,” he said. ServiceLink works with some of the country’s largest servicers that prefer simple and effective data exchanges with vendors. It makes sense, he added, unless they retain needed knowledge of existing lien types and post-retention liquidation strategies, servicers risk “ hundreds of millions of dollars in lost time and value.”