How to Build a Relationship With the Right Vendor
As REO inventory increases, some lenders opt to outsource the properties while others opt to avoid inventory pile-up through other methods.
Communication with the servicer should benefit the vendor because not only does the vendor have a chance to work through any problems, but the servicer also can find ways to help the vendor operate more efficiently, according to Allan Martin, CEO of Mortgage Contracting Services.
From an REO property preservation and management perspective, he says this is the time to fine-tune internal processes to place servicers in the best position to manage the delinquent properties that are flooding the market.
"One process that should be examined is the way a company manages its vendor network. Treating these relationships as a company and its contracted employee can lead to disconnected relationships where the proper level of communication isn't maintained," says Mr. Martin. "The best results are produced when vendors are treated as clients. The relationship then becomes a partnership that is based on mutual trust, respect and excellent communication."
He says banks and other servicers have had the luxury of being able to grow and stay ahead of the curve to meet the increased demand of the default market. However, vendors are often small business owners who do not have the financial ability to add staff members and space and then wait for the new business to come, according to Mr. Martin.
"With the current increase in REO volume, many vendors are overwhelmed as they try to scale their operations to meet the new demands."
In today's market, vendors can benefit greatly from a servicer guiding them through how to best respond to the recent growth in the industry, he said. "The relationship then becomes one that has added value for the servicer and cultivates loyalty."
For example, a vendor can fall 30 days behind schedule for a number of reasons. If the servicer speaks with them on a regular basis and has visited the site, they may know that it is a small operation run by one person. The servicer could convince the vendor that it would be worth investing in additional staff members. In the past, vendors have hired based on anticipated business that did not come so they are hesitant to do it again, but a good relationship with a servicer can overcome this barrier.
Mr. Martin says phone calls should be made weekly with the purpose of going beyond merely checking on the status of a project. Vendors may not see much value in communicating with a servicer when the update calls lead to a sense of feeling badgered. This does nothing to foster a positive relationship with the vendor or to build trust.
Instead, the calls should be made to cultivate an ongoing relationship in which the vendor has an opportunity to communicate any problems and develop a clear understanding of the servicer's customers. From the vendor's perspective, this is seen as a breath of fresh air rather than an interruption.
Regular communication can also lead to detecting an issue early and making sure that a minor problem does not escalate to a catastrophe due to bad communication.
The vendor relations team needs to constantly look for ways to positively affect each vendor's daily operations and help them understand the internal preparation that needs to take place to be ready for new business, he adds. "Once the relationship is built, a vendor would feel comfortable telling the servicer to stop sending them work if they're falling behind or if they have trouble finding the properties. In essence, the vendor relations team serves as a human resources department for the vendors."
The bottom line, Mr. Martin believes, is that the key to excellent vendor relationships is communication.
"Vendors are quality people who want to do a good job and take advantage of the opportunities that are currently available in the industry, but regular contact is needed to cultivate a strong relationship and to improve their business. As the vendors become more efficient, this in turn helps the servicers and the industry as a whole."
When it comes to picking a contractor, it is important to verify that the individual is an authorized agent of the company the asset manager is hiring, according to the folks at REO Nationwide in Newport Beach, Calif.
Ask the company to provide a copy of their license. It is important to verify the license is still in good standing and has not expired. Asset managers can find a list of state's licensing requirements on the Web.
Ask for proof of insurance. Ask the company to provide a copy of their insurance certificate. Finalize the contract before starting on a project.
A good contract should be written on company letterhead, contain the company's name, address, phone numbers and license number. It should contain the consumer's name, address (where work is to be performed) and phone numbers. Make sure it is dated when it is written, includes a detailed description of the work that is going to be performed, and provides dollar amounts associated with each task included in the project. It should include an anticipated start and finish date, a payment schedule, and a termination clause, which protects the homeowner from any potential mechanics liens once the contractor is paid in full and clearly states whether permits will be pulled, and who will be responsible for pulling them.
Make payments to the company that was hired. Do not pay an individual person. Avoid paying with cash. Check and credit cards are preferable, and be sure to get a receipt for all payments, according to REO Nationwide.
The company advises asset managers to withhold final payment until satisfied with the project. Don't pay in full until the project is completely finished and the asset manager has completed the final inspection. If subcontractors were used, be sure to get signed releases from all subcontractors clearly indicating that they have been paid in full by the general contractor.
For larger projects, don't make the final payment until the asset manager has passed the final building inspection. (c) 2008 Mortgage Servicing News and SourceMedia, Inc. All Rights Reserved. http://www.mortgageservicingnews.com/ http://www.sourcemedia.com/