REO Manager Ramps Up Hiring
Austin, Texas-With the passage of the Protecting Tenant at Foreclosure Act, the expansion-minded TenantAccess is increasing its capacity to service all of the United States.
The company, a subsidiary of FirstService Corp., recently hired 348 property managers to be in charge of maintaining buildings, paying bills, collecting rents and communicating with tenants.
As a vendor to property owners, including government agencies, TA's forte is rehabilitating, leasing and managing homes.
"We originally started with 5,000 potential managers and have selected 7% from this group," said Paul Hayman, president of firm here.
"Although we have selected the bulk of our property managers, we anticipate a continuous process of selection as we meet the expanding needs of our clients to provide rental and property management services throughout the U.S."
As more homes go into foreclosure and move to REO, there is still confusion and questions surrounding the tenant protection law.
"One of our clients is a national evictions counselor. One key service we provide is collecting the data to confirm whether the tenant has a bona fide lease or not. This includes obtaining data to see if the lease rate is close to fair market value. It also can include follow-up work to see if the home or property is habitable or not."
TenantAccess provide an inspection of the home based on code compliance and safety. If there are serious problems, the company will help move the tenant to a hotel as quickly as possible if they have to get the repairs done and the tenant has to move out. That occurs around 2%-4% of the time.
"The financial institutions want to ensure the property is a safe place for the tenant. They care about their safety," Mr. Hayman pointed out.
"We have state rent control properties, Section 8 properties, and we have properties that are Middle America or better."
As a result of the law, lenders and servicers are becoming "de facto landlords."
"I call them unintentional landlords. Currently some of the companies are coming out with their own rental programs, such as Fannie Mae and Freddie did earlier in the year. Those were intentional actions as a landlord. They are building their core competencies," he added.
"But it certainly is a challenge if you are the financial institution or the servicer and you don't have the necessary skill sets and experiences. They are working very hard to understand the world of the landlord and the implications of the PTAFA"
There are very few property managers who have been in the REO world, he adds. "What we have done is centralized and leverage off of the capacity and skill sets of our sister company Field Asset Services. For example, using FAS we're able to provide definitive quotes on property maintenance - cutting the grass, maintaining a pool, ensuring the home is expected, etc. We're able to do this for a flat, fixed fee anywhere in the United States. FAS has 13,000 property service vendors throughout the U.S."
According to Mr. Hayman, it's been proven that if renters are happy, they are more likely to maintain the property, pay their bills on time and have greater potential to be the ultimate property buyer.
"If we can have people who are renting in the foreclosed homes it stabilizes the community. It may not provide homeownership but it is home living, which is a part of the dream. In many cases, it gives people a second chance to have the family home."
The next phase to having these occupied homes is the investor group. They are now looking at buying single-family residential homes, renting them out, and then bridging through the decline in the value of homes and selling them in three to five years.
Depending on their strategy, investors are looking at the rehab and resell service or the lease and hold piece the company offers.
"They are very interested in working with us, not only because we provide the property management and property preservation, but we also provide the network for the listing agents throughout the U.S."
Because TA has increased the amount of property managers throughout the U.S., it is now spending quite a bit of time on the training side, on the performance levels, the systems and the quality controls.
"Our philosophical view is very important. That is to ensure both sides of the equation are addressed. One side is that our client is well protected, and the second is that the tenant is well treated. In my view a happy respected tenant will result in a nicer home that will eventually be sold for a reasonable price. This will occur 98% of the time. Two percent of the population is always a different situation. You will never make them happy nor will they respect you for what you do no, matter what."
The deed-in-lieu lease service is just getting started at the company. Mr. Hayman believes it is a positive alternative that should become a part of the modification options.
"For a certain population, it's very attractive. The mortgage holder is able to maintain most of their credit status. They aren't being pushed out of their community," he said.
The lender is able to save on a lot of the preforeclosure costs, Mr. Hayman adds, and the prior mortgage holder will be thankful to the lender that they will be able to stay in the home. "And finally, this is a really big piece, if the renter misses payment, the eviction process is much faster."
The lender or service needs to know that the renter has the capacity to make some payments, and a background check should be done. One of the best ways is to go and inspect the house.
Before considering an individual as a "deed in lease" some investigation does need to be done on the present status of the house, he says.
"If the house is a mess, why will it be nice when there is a renter? In these circumstances the candidate should not be eligible. We have one of our local property managers go see it and take photographs to determine the status of the property. We want to ensure the lender makes an informed decision."
TenantAccess is seeing property rehab picking up on the lender servicer side. "The investors right now are having trouble finding bulk purchases at a price they are willing to pay," he said.
"Every week we are getting calls from hedge funds asking us to be part of their overall solution. They are raising the funds and they obviously need a property management and a property preservation combination. We're finding there's more and more investment pools calling us as price houses stabilize."
As foreclosures increase in certain states, TenantAccess will continue to evolve and increase its property manager presence. The Center for Responsible Lending says the industry is on track for 2.9 million foreclosure starts in 2009 alone.
"Those don't all go REO but they are in default. We intend to hire more skilled property managers and it will vary as the states' REO activity increases."