Tips for Choosing the Best Outsource Partner
Working with an outsourcer involves flexibility, responsiveness and some volatility.
Success and satisfaction result from initial expectations and performance over time. When the two stay in sync, the relationship works and endures. To accomplish this, asset managers should anticipate change and continue to manage the relationship, according to CJ Gehlke, president and founder of REO Nationwide here.
Be sure to provide for ups and downs, allowing for ways to readjust services that meet the needs of both sides. “Research vendor choices and communicate your goals clearly upfront. Adopt a methodology that describes the various duties to be performed and lays out a clear and documented plan,” says Ms. Gehlke. “Establish clear and reasonable goals. Manage the process over time, arrange for oversight, set up avenues of communication, and request clear and accurate performance reports.” Initially check vendors out well and review their performance reports. Are they working under appropriate licensing?
There is a chance some operate on float in order to make ends meet. Others could encounter trouble with the IRS for not paying quarterlies. “Once you are working with them, track their performance on meaningful criteria that does make a difference. If you find discrepancies and still choose to work with them, that is your choice,” she said.
What is the strength of the outsourcer that has your files? Did you inherit this vendor? Do you like the representative who calls on you? Did you check their references? Do you have business that is a good fit for their services and do they perform well for you? You have choices of outsource vendors. Finding the best fit of skills and capabilities is a big responsibility with repercussions, according to Ms. Gehlke.
Some outsource companies do better with volume than others. Some offer more personalized service. There are price cutters, and companies that have been in business for decades with extensive experience and knowledge unavailable to those who are startups.
“Regardless of your own needs and the people you like the best, there are some basic standards that must be met if you are going to do business responsibly through outsourcing.”
Some of the outsource vendors currently operating in the field today are operating on the edge of the law at best. At worst, she says, you may be vulnerable to a deep-pocketed lawsuit in case of a problem.“Who among us can say that loan servicing and REO disposition are not problematic arenas?”
Another important factor to point out, Ms. Gehlke says, is that vendors are aggressively marketing their services to get you in the door initially. Business in the short run beats no business at all to some. “Don’t bid on price alone. Better pricing, servicing and servicing agreements, when it makes operational sense, can be negotiated after narrowing choices to the two or three vendors that are the best fit for your shop.”
One place to identify quality outsource vendors is in the legal update meetings at Mortgage Bankers Association conferences. “If they are staying current on the national issues that relate to your work, they consider staying informed a priority.”
Take a look at the list of vendors based solely on the basis of what is required by law to operate as a reputable outsource vendor. Some are not properly licensed, more are not adequately insured, and some do not operate from an office location. Require copies of documentation and update them annually. “Once you have verified the requirements necessary to be in business and do the job well, you can revisit the fit between your vendor and your specific requirements.”
Review their operational strengths and capacities. Get banking and credit references. Verify their track record of paying bills. Continually revisit and communicate needs to outsource vendor.
“Do your best to keep them realistic. Tell them how you are currently doing business. Include what you like about the vendors you have worked with previously. Clearly communicate specifically what you would like to see improve. Agree on a timeframe and specific things you will both do to accomplish specific goals.”
Visit their shop. Rather than getting a visit from the sales team, invite the person who is responsible to you to visit your shop, she added.
“You can tell more about an outsource vendor by visiting their shop and verifying their licensing and insurance than you can by listening to the company sales pitch or relying on the fact that things seem to be working out so far,” says Ms. Gehlke. “We are all in a business environment that is competitive and must remain responsive to deadlines and challenges.”
For all clients, service timelines will vary and performance is subjective. That’s why it’s important for lenders to pick partners that stand behind their actions. Servicers often handle REO inside or they outsource a number of properties. Many times, it’s a combination of both, said Chad Neel, president and chief operating officer of LPS’ Asset Management and Field Services divisions.
If an REO needs repairs before disposition occurs, lenders often use a property preservation services from a field service company to do some repairs to the properties. Larger lenders tend to outsource a portion of their REO portfolios. It’s common for big lenders to provide with overflow when the company has reduced its internal capacity -- for instance, when an employee is out on maternity leave and has moved to a third party provider.
The best lenders who outsource have the best tools for measuring, monitoring, and reporting. “It’s when the client doesn’t measure that you are in jeopardy,” said Mr. Neel. “Outsourcing is like hiring people. Hire a staff with a full complement of skills, but make sure you get the right candidate. An outsource relationship won’t be successful if a there is not a partnership and it’s not monitored. It is about monitoring what the lender wants as a whole that is important.”