Technology Helps Improve Vendor Management and Performance
The rapid increase in REO volume has created problems for REO departments at servicers and outsource management companies. Seldom mentioned are the issues that REO agents also face in scaling to meet the rapid rise in REO volumes, which in some regions has grown tenfold over the last year. These REO agents' challenges need to be addressed by servicers if they want these important vendors to optimize their performance and maintain healthy business relationships. New technology can help to improve REO agent management, increase REO agents' efficiency and help them to successfully scale in response to the increasing level of REOs.
REO agents are impacted by spike in REO volumes. Many REO agents have been overwhelmed by the fast-rising REO inventory. However, while they face similar issues to those of REO departments, they lack the necessary automation and IT support, staff and financial resources to fully respond to them. I speak with REO agents across the country each week. Many agents report that they have gone from handling 10 to 20 REOs to 100 to 200 in less than 12 months. These agents have had to scale their REO operations to meet the increased volume by adding people to perform occupancy checks, property preservation, BPOs and closing. Agents that had a team of two or three now have teams of six to 10 people. It takes time for them to recruit the right employees, train them on the REO business and their clients' business rules and then efficiently manage these team members.
The increased REO volume has had a high financial impact on vendors' personnel costs, as well as the money they advance on behalf of their clients for payment of services such as rekey, trash out, lawn cuts and utilities to maintain the property. Agents pay their team's salaries each week but then have to wait 60-90 days in some cases to get reimbursed for REO costs. Some agents have told me that they had to increase the outstanding reimbursable expenses in their REO inventory by $50,000 over the last six months. Expense management is big issue and is straining many REO agents.
How technology can help with the rise in REO volumes: There are several ways that a servicer can use technology to work more effectively with REO agents.
Measuring vendor performance can help to better distribute workload across agents and identify new agents to handle the increased load.
Automating the REO process with workflow to speed assignments, routing, approvals and decisions -- together with converting paperwork to electronic files -- can reduce the time spent per REO by the agents.
Motivating all REO agents to improve their services by making their vendor performance and rankings visible, not only drives better results for REO departments, it also helps agents to increase their competitive advantage.
Measuring vendor performance helps better distribute work and cultivate new agents. The best performing REO agents get business from many different servicers, so they are the first to increase their REO volumes. Being able to measure their performance by task for each REO can tell asset managers when these agents are overloaded and have reached their limits. In this case, asset managers can use a vendor measurement and scoring system to identify those vendors that are performing well and can handle more REO assignments. The key is that work is spread among agents so that task completion and holding times can be managed even as the numbers of REOs rise. Low REO volumes in the last several years shrunk the number of REO agents and made recruiting new REO agents a key concern of servicers. A vendor measurement and scoring system allows servicers to consistently assign, process and monitor all processes and orders placed with REO agents. It also serves to assist in identifying and managing the best performing new agents.
Automating the REO process to reduce the time agents spend per REO. Many REO departments still operate with several systems (task management, website, Excel, Word and fax) to manage their REOs. By linking vendor management with REO management and adopting a Web-based REO system, REO departments can integrate and collaborate with their REO agents, and automate their workflow and business rules. This allows servicers to streamline the inefficiencies in the REO process by eliminating multiple systems, manual management of vendors and paperwork.
Converting documents and photos to electronic files decreases work and saves time related to faxes and emails. Meanwhile, automating vendor collaboration, so that agents only interact with the REO department when needed, reduces the total time per REO for agents and allows them to handle more properties.
Agents are telling me that some servicers are increasing agent mindshare and effort for their REOs by speeding the payment cycle to less than 30 days or giving weekly aid to their agents. REO departments that have an online expense management system can help their vendors to keep track of expenses and speed reimbursement so that the agents can improve their cash flow management. Implementing such a system for vendors can turn an REO department into a preferred client that gets better attention and service.
Motivating REO agents to improve their service via visible performance rankings. One way to motivate REO agents is to let them know how their performance ranks with the other agents with whom they compete for business.
Incorporating analytics in the form of operational reporting and vendor measurement/scoring can give REO departments insight into the time it takes agents to close properties, the value received for those properties and how quickly it took to complete each of the various steps within the REO process. With this knowledge, asset managers can contact agents on an exception basis when there are specific problems.