The vendor management process allows a servicer and property preservation firm to build a relationship with their suppliers and providers that is meant to strengthen both businesses. It is not the process of trying to negotiate the lowest price possible to complete a job, but for all parties to benefit from working together. The common goal at the end of the day during the vendor management process is to ensure that the requirements and oversight are met to benefit not only a homeowner, but the entire neighborhood.
In order for a well-rounded relationship to be developed between vendors, servicers and property preservation firms, there needs to be constant monitoring and communication to ensure that all parties are working together.
When it comes time to select the right vendor, there are several factors that servicers and field service providers need to consider. First, assessing a vendor’s overall risk of remaining in compliance with industry guidelines as well as local code enforcement issues is critical when determining their overall qualification for a job.
“It’s our money and performance, so everything is on the line for us. The more successful my vendor is, the more successful we are,” said Sherilee Massier, property preservation manager at Wells Fargo Home Mortgage, as a panelist at the 2012 National Property Preservation Conference in Chicago discussing effective vendor management strategies.
To assess the work of a vendor, scorecards are a valuable tool that is used extensively throughout the industry. But all companies rate their vendors based on different components.
For example, Jack Evans, manager of property preservation at JPMorgan Chase, said the New York-based servicer has focused more on quality versus quantity over the last few years. He added that it is necessary to have the “eyes and ears” in the field verifying that the work is actually being done properly. If this is not happening, Evans noted that clear and concise feedback is essential.
“The key to this whole idea is to do it consistently,” Evans said about monitoring how vendors accomplish their work orders. “You have to monitor vendors at least once a month and give them timely feedback so if there is an issue, you’re not going more than 30 days without addressing it. If you’re not having those conversations or are scoring them every month, the issue may not be fixed in a timely manner.”
Meanwhile, Michael Greenbaum, vice president of operations at Safeguard Properties, said timeliness is a critical rating for the Valley View, Ohio-based field service provider’s scorecard. He continued that one of the challenges with measuring quality within the REO environment today is that there are multiple results coming from the clients’ field teams as well as from the field service companies’ teams, in which this information is utilized to communicate effectively with the vendor networks to provide the necessary training to ensure quality results. “Timeliness is a firm measure and it’s easy to calculate whether you’re on time or not,” Greenbaum added. “When we look at your work, it either meets our expectations or it doesn’t.”
Furthermore, from a servicer standpoint, Evans and Massier said flexibility and how a vendor treats their client are two keys aspects when choosing who maintains their portfolio’s assets. For example, will a vendor be accessible in case an emergency occurs at the property like a boiler explosion?
As a servicer, there is always some sort of management and oversight for a vendor, whether it is monthly reporting or auditing. Over the past year or two, Massier has seen that servicers have gotten tighter controls for their vendors.
“In addition to timeliness, quality and compliance, we’re looking at and need to know if a vendor has identified their risks and what controls are in place to mitigate those risks,” Massier added. “I want to see the plans on how you change this as well as the management of processes and procedures that you have in place to control any of your risks.”
Another area that is critical to decide if a vendor is capable of handling a particular job is being familiar with their background and qualifications. Additionally, what is the vendor’s capacity to handle a certain amount of workload during the busy seasonal orders?
“Our vendor evaluation is consistent not just with our primaries, but the secondary’s we keep, too,” said Chellie Stewart, REO and claims supervisor at Central Mortgage Co. “Vendors come on site to our shop while we also go to them to see their business processes live. There’s nothing like hearing that a vendor has 2,000 employees, but when you walk in, there are only three desks there.”
Secondly, Stewart said the Little Rock, Ark.-based company speaks to other servicers to hear about the positive and weakness characteristics each vendor possesses.
Marc Hinkle, senior vice president of strategic initiatives at Mortgage Contracting Services, said the Tampa-based field service company typically starts with a formal request for proposal to see how many vendors are interested in a particular task. Once those results come back, MCS prescreens the candidates to figure out who has the capacity and price requirements to be added to the company’s network.
Also, Hinkle said MCS mandates that all of its vendors take an online educational program certifying that they understand the training requirements about working for them. This web-based program has to be completed on an annual basis. Despite these courses, Hinkle understands that there still will be conflicts with a vendor’s performance that needs to be remediated.
“When we identify deficiency trends with a particular vendor, the first reaction is to not punish them, but to have a heart-to-heart discussion with them to find out the root cause of the problem,” Hinkle continued. “We also make sure that licensing requirements needed at the local level are up to date and valid through a series of audits and site visits to validate that. It is all a multilayered approach.”