Preservation is REO Management Priority
Mounting foreclosures mean servicers should focus intensely on property preservation in order to maximize their portfolios, according to Cheryl Lang, president of Integrated Mortgage Solutions here.
"Efficient management of the property preservation and inspection process not only keeps servicers in compliance with industry standards, but also protects their investments," said Ms. Lang.
Part of property preservation means ensuring that all hazardous materials have been removed from the property. This may include removing swing sets, tires, paint, boarding up in-ground pools or removing aboveground pools and draining ponds, she said.
After the property has gone to REO, all the trash is removed, which is known as a trash out. If the amount of personal property exceeds a certain threshold (industry standards are $500), the personal property goes through an eviction process in accordance to state and local requirements.
Ms. Lang said the process of preserving property has been greatly improved by the use of digital imaging. "Because contractors may miss something or deem a property vacant when it is occupied, most vendors today require pictures to verify contractor's work," she said.
"It is estimated that roughly 20% of contractor mistakes are caught using digital photos. Digital images of properties confirm vacancy and preservation in real-time status with no developing or film costs."
Digital images take minimal memory space on a computer and are much cheaper to operate than film cameras, she added. As such, some vendors today even provide phones with camera capabilities to contractors, so they may collect and share real-time photos in order to expedite the property preservation process. "Of course, the digital images are only as good and secure as the IT department at the vendor, so it is crucial to use a secure Web server to transfer sensitive financial material."
According to Ms. Lang, video imaging may well be the future of property preservation. "Seeing live video of a property in question would certainly give vendors and servicers a better feel for the property status," she said. "As technology continues to evolve, videos will become easier to transfer and compress. This would also improve accuracy in communicating the status of the home and provide real-time progress updates."
Some of the issues involved in preserving abandoned properties are newer trends and will, therefore, take quick adjustments from servicers and default management providers to stop.
Specifically, Ms. Lang said arson is becoming a bigger problem as borrowers are increasingly looking for a way out of a loan they can no longer afford. Squatters who break into abandoned homes are also the cause of fires. Copper pipes are being stolen, which makes it impossible to winterize the property, and stripped aluminum siding is being sold for scrap metal, she said.
"The sense of desperation homeowners feel is causing them to make rash decisions, which may include failure to contact their lender or servicer to work out loan payments, sudden abandonment, gutting the property prior to vacating and even leaving animals behind with no care or food," she said. With this disturbing trend, "property preservation is vital to maintain property value or even save an animal's life." (c) 2008 Mortgage Servicing News and SourceMedia, Inc. All Rights Reserved. http://www.mortgageservicingnews.com/ http://www.sourcemedia.com/