Managing REO Assets Through Difficult Times

With the mortgage industry almost finishing its fourth consecutive year of being in a housing crisis with no end in near sight, asset management companies have to be more creative in finding ways to help their clients maximize returns for their distressed assets.

Brent Taggart, senior vice president of business development and client relations for Green River Capital, West Valley, Utah, believes that the real estate owned industry is in a “contraption” right now because of negative trends that are occurring during the processing of foreclosures.

“Foreclosure filings and timelines are taking a longer pace than we expected them to be at this time,” Taggart told this publication. “There are several legislative procedures that have an effect on the housing industry that we can’t do anything about. Until something happens politically, this entire process is going to be slow.”

Because of the recent slowdown in processing foreclosure documents, Taggart said short sales have increased over the last three months at GRC. He said the company has hired three new clients to “clear the balance sheets in order to get rid of their assets.”

GRC has also enhanced its technology tools this summer in order to help their real estate agents complete an occupancy inspection and receive notifications regarding task assignments. GRC’s agents can now determine whether an REO property is vacant and ready to be marketed or if it is not vacant and needs additional tasks before selling the asset through the company’s mobile device application REOConnex. In REOConnex, agents can submit their occupancy inspection reports along with the necessary photos without using a computer or being forced to go back to their office.   

“We needed to think outside the box for our financial purposes and this was a major improvement for our agents,” Taggart said.

Another way to help the nearly 1.5 million homeowners that are in some stage of foreclosure is to perform some type of loan modification. Taggart said the Home Affordable Modification Program and the Home Affordable Foreclosure Alternatives program was helping out the industry last year by allowing more homeowners avoid the default foreclosure process. He said these programs allowed more borrowers to qualify for a modification until the robo-signing scandal occurred in October 2010 that slowed everything down.

“Right now, there is no way to predict how many more assets are going to come through,” Taggart said. “My crystal ball shattered years ago and we can only project the future of the industry based on what is happening today, which is not an ominous sign for a recovery anytime soon.”

In order to reduce the number of people who are forced out of their homes due to foreclosure, Taggart said GRC’s door knocking strategy has been a successful loss mitigation tool in speaking with distressed borrowers about 55% to 60% of the time.   

“No day without any communication with a borrower is not good,” Taggart told National Mortgage News. “We want to send individuals to a property to let them (homeowners) know what our intentions are going forward. During these unfortunate times, every homeowner deserves an opportunity to preserve their property.”

At the upcoming Mortgage Bankers Association annual conference, Taggart said he is interested in learning more about the Obama Administration’s interest in decreasing the REO inventory levels for the government-sponsored enterprises Fannie Mae, Freddie Mac and the Federal Housing Administration, which currently own approximately 250,000 REO properties nationwide. Taggart added that he wants to know more about the rental program that has been proposed and whether this is a viable option to reduce the GSEs inventories and who the exact participants of this program will be.

“The MBA annual conference has been more upbeat the last few years as the economy was recovering and I expect more of the same this year,” Taggart said. “The market has opened up and there are bulk sales taking place. I want to speak with purchasers, whether they are private investors or private equity firms, to see what their interests are for REO properties that are on the market.”