LAMCO Marks 20th Anniversary, CEO Says Compliance Biggest Issue Now

Lenders Asset Management Corp. here is marking 20 years of serving the mortgage industry. Since 1989, LAMCO has delivered REO solutions that enable lending institutions, servicers, investment firms and insurance entities the ability to cost-effectively scale operations and liquidate REO assets with mitigated risk. Up to present date, LAMCO has liquidated more than $5 billion in residential assets for some of the largest financial institutions in the nation.

“Some clients engage us at the very beginning stages of default. Others engage us with just the REO side. Obviously, the spotlight is on our industry, so you see a lot of people jumping into the arena,” says Brandon Hawkes, CEO of LAMCO. “But this is what the core competency of our company has been from day one. It didn’t start out as a mortgage company that turned into an asset management company. This has always been the heart and the key to what LAMCO does.” In the last two decades, LAMCO has created a steady track record of successful disposition management operations, averaging a 45-day turn-time on REO properties it liquidates, compared to the industry standard, which is significantly greater. Also, LAMCO has consistently averaged 90% of BPO value per property sale.

Within the first three years of operation, LAMCO signed one of the top five lenders in the U.S., and for 17 years this active national client has continued to utilize LAMCO as an outsourced business partner for their REO disposition.

“It has not been a situation where a few years ago we did a little bit of business here, a little bit of business there. We’re classified as their critical vendor, which we’re very proud of. We can really adapt our business to what the different servicers’ needs are,” said Mr. Hawkes.

The biggest challenge their clients face these days is compliance. “Compliance issues are on everyone’s hot topics. That’s the buzzword that is going around right now.”

LAMCO has witnessed local, state and federal entities begin to implement all sorts of regulations dealing with vacant property registration to inspections. Various municipalities are now requiring a fee to register these properties.

“They are finding this is a wonderful revenue source for their local government,” said Mr. Hawkes. “If these lending institutions are not registering these vacant properties within a certain timeframe, which by the way varies around the U.S. and county, they will start implementing fees per property per day. We’ve seen fees come out that will be $1,500 per day per unregistered property.”

There is no national directory where everyone comes together and provides updates on these laws. “We are seeing the cities really crack down on the lenders we represent. We all know foreclosure properties have a target on them. Sometimes people will use them as dumping grounds. They will see a vacant property and drop their trash off there. The first thing the city will want to do is fine these lenders. It’s very important that we have the right processes in place to correct these situations immediately.”

Lending institutions have two choices, to handle compliance in-house or outsource it. Some cities will require that properties be boarded up. Others require that the boards are painted a certain color or made to look like windows so it is not an eyesore for the community. Cities are getting very specific on how to secure these properties.

“When youth gets into some of these vacant properties or distressed neighborhoods or vacant properties per block, the cities are starting to dictate through their compliance laws and regulations how we secure these properties, everything from aluminum doors, to metal bars, to reinforced hinges. “We’ve even seen issues get as deep as what size of padlocks or what size the thickness of the boards,” he added.

“Obviously, the see a revenue source, but they also have the humanitarian side that they want to keep these neighborhoods safe.”

The whole key for compliance for LAMCO is to stay ahead of the game and be proactive instead of being reactive to the situation.

“When you are reactive you are trying to chase down fines. You are trying to negotiate a lower dollar amount. What we do is try to put an educational together for these vendors. We tell them these are the things that have to be done in accordance to local compliance areas.”

In the past, asset management companies would have compliance as part of their day-to-day process. Now the industry is seeing actual compliance departments open at LAMCO and other companies that are dedicated just to staying up to speed on the hot areas dealing with registration and inspection of vacant properties. This new division minimizes the lender’s pain and liability.

“It has definitely changed how lending institutions and outsourcers have done business in the past,” Mr. Hawkes said. “It’s not isolated to one city or state. This is on a national scale. The trends are a lot of cities are starting to catch on to the compliance revenue that another city has been generating by making these lenders register and pay a fee per property. Once one city does it, then the next, it’s a domino effect.”

For many years LAMCO has offered a relocation assistance program, which is also known as cash for keys in the industry. It still continues to be successful. However, with the new topic coming out of actual lease management, the majority of the portfolios that come through that have occupied properties are not actual owner occupants. These are individuals that have an actual lease agreement on the property. They are renters.

“We all know renters have renter rights. To go through with cash for keys or to move forward with an actual eviction in some cases has violated those renter rights. What LAMCO has put in place is a lease management system. It address two things — one, our lenders exposure, it minimizes that exposure to violating renter rights. The second part is we manage that lease process.”

LAMCO still puts that property on the market. Now, they are selling an income-producing investment to investors, said Mr. Hawkes.

“Part of the sales process is they will honor that lease. A lot of investors are giving us wonderful feedback on this. They can purchase a property, and they don’t have to unload it immediately on a bad market. They have a renter in the property. Once the market starts to rebound or the lease is up, they can proceed with a fix and flip or they can proceed with a rehab of the house. It’s a win-win situation for the asset manager, for the lender, for the renter as well as the investor.”