Market Gets More Transparent
At SourceMedia's Mortgage Servicing conference, held in Dallas in April, we gathered some prominent industry executives to discuss issues facing loan servicers, including asset management, default trends and other challenges facing servicers.
Participating were Rick Glass, head of R.T. Glass & Associates; Vic Draper, executive vice president of ProVest; Cheryl Lang, president of Integrated Mortgage Solutions; Caroline Reaves, president and COO of Mortgage Contracting Services; and Bill Roberson, regional vice president for the mortgage and bank division of SWBC.
Ted: Let's talk about one of the big issues facing lenders today, REO management. With defaults rising, is there a shortage of workers available to provide the property maintenance that servicers need? Are new people entering the field?
Cheryl: This is probably not the time for new players to be coming in. We need experienced subcontractors, contractors and Realtors. Anyone who thinks they can jump in and really know the business is going to be surely mistaken. It's important that you maintain a level of experience to help you complete the work you are doing. Let the new people start some other time.
Caroline: I think we have a benefit of the origination market being down right now, of being able to tap into those vendors, those contractors. We always cross over as origination starts picking up and defaults are still up, that's when we are going to have to struggle. And we did initially, when origination was still going but we started seeing defaults creep up. The contractors that were building were also the contractors that do our rehab work. We do have a lot of contractors coming in that used to do building work, that are now coming into the rehab market, which has been nice for us. It's been very good for us to have new contractors who say, "I do need to do this kind of work after all."
Vic: One of the things Cheryl just mentioned is that with the influx of new properties, most of which will take place over the next 18 to 20 months at a minimum. It seems like with this influx of having good people who have been doing this for many years having their expertise has been very important. But at the same time we have the scrutiny that is coming out of D.C., the scrutiny from our own camp - lenders, servicers, GSEs and so forth - whether it be about fees or anything else. One of the big topics that was discussed at the REOMAC conference was character, regarding the abuses that may be prevalent or may start taking place in this period. We are in unprecedented times. There is a lot of concern right now, whether it's fraud or whether its people just not getting their invoices done correctly. There was a lot of talk about unscrupulous people, even though they may have been around for a long time. What job are they doing? Who are the vendors that they are hiring? What's taking place? We need to make sure we are very careful.
Caroline: We put in a vice president and a whole staff of quality control people to look at vendors. We look at work that is coming in and make sure there are photos that support that, because you know there are a lot of people who will come in and say there are 100 cubic yards of garbage. We made one and put it up in a building to show how much it was so our QC people could tell. When we go out in a community, anytime we have people on the road for a conference or whatever, they have to go out and look at least three properties personally. Right now quality control is so big and we don't want anybody taking short cuts. You have the cities coming in and looking at these properties and they are doing higher scrutiny and we don't want people saying work has been done when it hasn't been done. We've had to let many contractors go, even ones that we've had for a long time. So we've actually for a while had to reduce the number of vendors and then grow the number again just to make sure they conform to the quality control process.
Cheryl: It's hard to keep up with it. You can trash out a property and turn around and next week it's just as bad as it was before. People are dumping there.
Caroline: Some contractors are dumping on the property next door. They clean up one and somebody else comes in and they dump it on the one next door.
Cheryl: We actually have municipalities, especially in Ohio, where the police will actually call us and say, "Is this one of your contractors because we are stopping every pickup truck that we see that has been to a vacant property."
Bill: It's all over the place, even nice homes - exceptionally nice homes - are going to foreclosure.
Caroline: I don't know if you saw the article in The Wall Street Journal that talked about people coming in and trashing properties. People who were leaving were trashing the property. And if you read the article, I kind of felt it was a little bit like they were saying they were justified in doing that.
Bill: The Litton Group is one of our clients and there is a product that's been called cash for keys. We build that into our claims service.
Caroline: We go in and do an inspection to make sure the property is in good condition and believe me some of the property that I have seen that people have just trashed, they go with a hammer and hit the walls all over the house just to get the company back.