REO Vendors Work On Setting Themselves Apart
In a people-driven, dependent business, REO vendors are making it a priority to set themselves apart from other outsource firms.
C.J. Gehlke, founder and chief executive officer of Newport Beach, Calif.-based REO Nationwide, believes the "cut" is made directly from the knowledge base, experience, work ethic and commitment.
REO Nationwide, which has been in business since the early 1980s, provides REO disposition services and valuations, including BPOs, CMAs, appraisals, single orders and high volume. The firm also does consulting.
"The fact that the company responds quickly makes us different from the competition," Ms. Gehlke says. "We don't want things to go unsolved for more than 24 hours without making an additional effort to resolve the holdup. After 48 hours, we enact an alternative plan. Failure is not an option and there is always something that can be done."
Ms. Gehlke understands that no outsource service can be all things to all people. That is why interaction with clients is crucial to the success of her business, the CEO says. She says vendors must make a constant effort every day to speak with clients who manage REO within the servicing, asset management and real estate departments of banks, finance companies and some small credit unions. Many banks outsource to three or four different companies to liquidate REO, she observes, which is another reason why outsource companies need to stand out among the pack.
REO Nationwide drives business by asking particular questions of the client. What do you like? What do you dislike? What do you like most about your other vendor choice? What would you change about your other vendor choice? "We get enough answers to give our clients a program we are sure will work for both them and us. We will not sell anything until we know what the client really needs and can use."
The top three states with new foreclosure rates in the U.S. in July were Alabama, Colorado and Illinois. According to Ms. Gehlke, aggressive financing has pumped up homeownership to record numbers. She said homeowners of all income levels have been able to purchase homes and more expensive ones at that with some of the more relaxed loan programs available in the recent low interest rate mortgage origination boom. Interest-only loans and no-documentation, stated-income mortgages have allowed people to qualify more on the basis of a low initial payment, rather than on what they can afford based on more traditional methods of evaluation, she said.
Although new foreclosures decreased 16.9% in Texas for July, the state seems to be leading the way to the highest residential foreclosure rate in the nation with 10,499 active properties. Considerations for the increase in Texas foreclosure rates include lending practices such as subprime loans that are too easy to obtain from the Federal Housing Administration and non-judicial foreclosures - the fact that Texas has one of the quickest procedures for disposing of delinquent mortgages. According to REO Nationwide, land in Texas, as is the case with much of the Midwest, appreciates slowly, making it difficult to mature and provide the holder with some equity. Regional economies and personal misfortune have also played a part. "Job layoffs, divorce and serious illness or injury are the reasons most often cited by mortgage bankers and the Department of Housing and Urban Development," the company said.
Foreclosure.com ranked Texas as 41st based on foreclosures on a per-capital basis, but last place fell to Indiana. According to REO Nationwide, many of Indiana's circumstances don't apply to Texas. However, the prevalence of FHA loans and the appreciation rate are similar. The Indiana foreclosure rate began to noticeably deviate from the national rate at the same time that FHA-backed loans increased in Indiana, based on a 2003 report from the National Association of Realtors. The Mortgage Bankers Association reported that these loans had a national delinquency rate of 12.22% in the third quarter of 2004. Ms. Gehlke says this is higher than the 10.39% delinquency rate noted for subprime loans.
REO Nationwide is currently following the economy with bated breath. "There is a lot on the Fed chairman, the loss of pensions, credit cards, etc., that play a primary role in what the industry looks like going forward," said Ms. Gehlke.
Technology is still a "business" where entrepreneurs are trying to sell their wares, according to the CEO. "The business has not yet evolved to 'best practice' yet where there is a standard to adhere to. It's at best a mess of trial and error with some paths eliminating the ability to work with one company unless you 'belong' to their software choice," she said.
"In the end, it may be that lenders will have to write their own programming to avoid being held hostage by the company from whom they purchase the software."
And now, more than ever before, she says it's crucial to motivate real estate agents to obtain a good BPO. "The days of giving your favorite real estate agent a handful of good listings in metropolitan areas are dwindling. Many portfolios are located in rural America and are in towns we have never heard of," she said. "The value of some of these assets is under $25,000. OK, some are even under $10,000. Real estate agents are not standing in line for this work today."
Agents have learned to say "no thanks" and ask a lot of questions before saying yes. Is the BPO guaranteed to be a listing? How much does it pay? When is it due? Is the form more than one page? Are a lot of photos required?
According to REO Nationwide, in an ever-increasing number of states, real estate agents cannot be compensated with money for BPOs. "The person ordering the BPO isn't always the person assigning listings. In order to keep real estate agents doing BPOs, we must do everything possible to put it back in their hands."
A BPO assignment is an opportunity for a real estate agent. Less seasoned although savvy agents can increase their REO skills and expertise. "There's exposure. It's good to be known as a good REO agent. They can put their name in front of the lenders more often by doing BPOs."
Electronic options do not reflect the entire picture and appraisals are still expensive, she adds. "If we choose to retain BPOs as an option, we must clarify the benefit of the real estate agent so they will continue to provide us BPOs in the future. You can choose to work with an outsource company that lists property. If you can, list with them. If you cannot control the listing activity from your department, at least use an outsource company that lists assets from some of their clients." (c) 2007 Mortgage Servicing News and SourceMedia, Inc. All Rights Reserved. http://www.mortgageservicingnews.com http://www.sourcemedia.com