Housing Slowdown Augurs Need for More Default Technology
Lenders and servicers are currently concerned about the effect of falling housing prices and resets on adjustable-rate mortgage loans that might drive up defaults. Some say rising rates could push up ARM reset payment levels along with a housing market collapse that creates a huge amount of defaults.
Other factors that are impacting defaults are the large number of investors that have driven up housing prices above sustainable levels in many markets, the large amount of fraud in certain markets, and the potential rise in interest rates, along with a potential economic downturn that could increase unemployment, according to Ture Anderson, director of product management at Remend.
"There are a number of perfect-storm predictions for the mortgage industry that everyone is concerned about. At this point, everyone is watching and waiting to see which way things will go," said Mr. Anderson.
He described three main areas where servicers are looking at adding new technology in the default management area. Servicers are interested in improving their ability to report and forecast what is going on in their operations. "Remend has just introduced a new product called Remend Analytics that allows servicers to track and measure vendor performance from multiple data sources and provides them with a dashboard along with vendor and service level agreement reporting."
Mr. Anderson said his clients want to improve their loss mitigation operations, because servicers want the ability to configure workflow for each type of loan, including prime and subprime. "This will help them to have a best execution in terms of decreasing defaults and reducing loss severity on the loans."
Servicers are also working to increase accuracy of valuations. They want to be able to pull in multiple data sources to compare with the valuations that they are getting. "There is worry about the valuation risk associated with properties. Servicers want to be able to efficiently manage their valuation operations to track vendor performance and to have a fast turnaround time on valuation orders."
Remend Analytics, which was formerly called Remend Information Hub, provides the means to consolidate vendor information from multiple sources. The solution provides servicers with comprehensive analysis and reporting that enables management and operating teams with timely operational and performance reporting on individual vendor activity. The direct benefits to mortgage servicers include allowing servicers to proactively monitor events and completion of tasks. Critical items, such as claim reimbursement or foreclosure filings, can be completed in a timely manner, preventing penalties from investor groups and improving rating agency reports.
"Continuous vendor performance will improve performance and relationship management with top-performing servicer providers," added Mr. Anderson.
The solution is designed to monitor, measure and report on vendor performance against service-level agreements and provide historical and trend information. It allows servicers to monitor the performance of their bankruptcy outsource providers, as well as individual attorneys and vendors performing various default services. Performance is defined by the servicer and measured by the outsourcer or attorney against service-level agreements.
The company also has an interactive reporting feature, which is a highly interactive interface that lets users design their own reports, quickly monitor and navigate to relevant information. "Servicers want something that's easy to deploy, that provides access to operational data, and that leverages the information from your existing core servicing systems."
Mr. Anderson speaks with REO agents almost every day from all over the country. In Michigan and Detroit, they are saying the number of properties entering redemption that are being assigned to agents has increased dramatically. "This is related to the problems in the auto industry."
In Denver, Mr. Anderson said foreclosures are up and the agents are starting to see increases in REOs. "In Texas, the agents I have talked to say that they may increase their REO business 50% to 100% this year given the level of new REO assignments. In Georgia, specifically Atlanta, defaults from first-time homebuyers on new construction homes are way up along with the large number of defaulted loans due to fraud."
In Florida, rising defaults are due to overspeculation from investors and fraud, he observed. REO numbers are increasing in Chicago and agents are getting more assignments from servicers.
In Southern California, home prices are starting to drop while foreclosures are way up and listings are staying on the market much longer than last year. "They are not seeing the level of REOs rising as fast. There is much concern about the potential impact of resets for the ARMs products that could push a lot of people into default."
Prices are coming down in Sacramento and other areas of Northern California. "The Bay Area is seeing rising inventory of unsold homes and the start of price decreases. The REO volumes are still relatively low."
Remend's main focus is providing servicers, outsourcers, investors and MBS issuers with default management solutions. The company first designed Remend REO Agent after agents continued to tell the company that there was no solution on the market that allowed them to efficiently manage their REO properties and their REO teams. "The agents were managing properties on Excel spreadsheets, Word documents and in a contact manager. They were inputting information into the servicer's online REO systems and didn't have a good way to track tasks and organize the work of their teams. Many agents were also doing expense management in Quicken.
"Our feeling is that if we made that REO Agent more productive then that would only help the servicer improve their default performance. We partnered with Salesforce.com to be one of the first OEM partners in their AppExchange to deliver Remend REO Agent to the market."