SingleSource Offers Tenant Screening Solution
Pittsburgh-SingleSource Property Solutions, a provider of REO default, valuation, property preservation, loss mitigation and title services, has developed PropertyGuard as a means to individually evaluate tenant applicants for servicers and lenders as well as individual landlords.
"We believe PropertyGuard has a unique value proposition in that we have employed a proprietary scoring system (like FICO) that calculates the probability of renter default," said Norman Riffner, vice president, SingleSource Property Solutions.
The five-year-old company has a staff of around 160 employees to take care of putting the reports together in as little as 24 hours. In the easy-to-read one-page report, SingleSource provides a proprietary tenant scoring system, which offers a grade of A, B, C or D that calculates the probability of tenant delinquency. The company looks at many different criteria to determine the likelihood of future rental payments.
Early on, the majority of the company's revenue was valuation based on secondary market acquisition. In recent years, there has been a big shift in the industry and 80% of their business is now in real estate-owned. "The valuation side of the business took off with the secondary market. We've sort of seen the whole cycle," Mr. Riffner told MSN.
As the company continued to work more in REO, the focus narrowed in on how lenders could start producing an income stream out of the increased amount of real estate-owned assets.
"That is what people are asking for in order to help them reduce their inventory and stop the degradation of their notes. It's about keeping families in their homes and renting these properties out to them, or offering a deed-in-lieu or a lease option to buy," he said.
PropertyGuard was initially brought on to help the average baby boomer who owns residential properties and who might not have enough presence or clout to have an onsite due diligence company. "What we did, we took that part of the service and offered the tenant screening for your small to midlevel individuals who have rental properties," said Mr. Riffner.
Before now, he says no one has put together how to qualify tenants for these REO properties. "It's all in a sense the loss mitigation side. You look at income, their credit letter, W-2s and pay stubs. But no one is looking at the other side of the equation. Is this person on the Patriot list? Are they convicted of major crimes, or are they a child predator? You need to know what type of individual is going into that property. We put it all together."
With the PropertyGuard product, SingleSource Property Solutions is actually contacting previous landlords or current employers to get a verbal verification of the tenant's employment and to calculate the debt ratio.
"All of those are rental underwriting, that high level of due diligence you see on the lending side is now on the rental side."
For a lot of firms, REO is their biggest product lifecycle. Values keep going down, and they struggle to list and sell properties. "They say, 'We can't continue to bleed the way we are bleeding.' We have to try to stop the erosion of values and keep people in their homes," he added. "We have some clients with properties in the worst part of Florida. They want to rent them out and ride out the storm for the next few years."
Brian Cullen, president of the company, says servicers and lenders are getting closer to actively moving these homes from the REO inventory and choosing to rent them out.
"The idea continues to evolve as more people talk about it. We haven't seen anyone else bridge what we are doing with REO to what is going on in loss mitigation and property preservation. There are a lot of individualized companies that offer specialized services," Mr. Cullen said.
"If we are doing business with a servicer on the REO side, and we find out the property needs to be rekeyed or trashed out, instead of engaging the agent, we contact our own internal property preservation unit to get the job done. A lot of other firms might go to the agent or third party, and all that does is cause the supply chain to elongate."
Servicers are now more willing to look at repair options than five years ago, adds Mr. Cullen. "Now that FHA financing has become more a part of the process, we have to be a lot more open with repairs to try and sell the property."
Huge supplies of vacant properties continue to drive values down, he said, which is a never-ending spiral downhill. "Vacant properties encourage vandalism and crime. Keeping them occupied is the way to go."
Fannie Mae and Freddie Mac have created programs to deal with the influx of vacant homes, which were formed in response to foreclosure moratoriums and the fact that REOs were not selling.
REO inventory at Freddie Mac is being driven by various foreclosure moratoriums, which have led to a 32% vacancy rate in REO, said Ingrid Beckles, senior vice president of default asset management. About 12% of that amount is investor owned, and the rest are assumed to be owner occupants.