MReport June 2022

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Page 38 of 67

M R EP O RT | 37 Are You Ready for the REO Reset? A s veterans in the default services and technology space, we have experience with the cyclical nature of the real estate industry. We've experienced three significant default cycles. If you're looking at a timeline, the trends would have told us that a new one would have already started. According to ATTOM data, lenders default starts have increased since the moratorium lift and repossessions are up 82% from this time a year ago. While the overall size of the next REO wave is yet to be determined, the signals are clear, there will be specific areas of the country with concentration effected in this next turn where experience matters. California, Colorado, Illinois, Indiana, Massachussetts, Minnesota, Ohio, Nevada, New Jersey, and Washington are all on the short list. Given our 30 years' experience in this space, we want to share the knowledge we have gained along the way to use as a guide on how to help you build an unstoppable REO organization. Operational Structure I t is important to first deter- mine the structure of your REO operation. There are two primary choices: a vertical structure (role-based), where one senior-level asset manager man- ages process from end-to-end; or a horizontal structure (task- or function-based), where multiple subject-matter experts manage particular functions as the prop- erty transitions from department to department. Vertical struc- tures are useful with smaller portfolios, but scalability can be challenging with higher volumes, and horizontal structures work best for managing larger or challenging portfolios because it provides streamlining of tasks that are specified to individual roles. Both structures rely heav- ily on efficient communication and comprehensive workflow management tools. Having a software platform that provides easy-to-deploy and agile work- flow is critical to an operation's success. Broker-Direct vs. Outsourcing A dded components to consid- er include whether to have a broker-direct model, where the disposition process is sourced "in-house" or "outsourced" to a third-party asset management provider. In the case of in-house management, best practices are to retain at least one asset management company for the overflow and scalability. If outsourcing 100% of the portfolio, a minimum of two providers should be retained. Creating an opportunity to develop and retain your own best practices over time between the providers also provides its own advantages. Optimizing the Process A s a leading asset manage- ment provider, over the last three decades, we have managed over 175 clients ranging from government sponsored enities (GSEs) to private lenders. This diverse pool of clientele pre- sented its own unique experi- ences and set of challenges. The exposure of the varying require- ments and liquidation strategies is the key to optimizing the REO process. It starts with a sound fundamental process for every stage of the liquidation. With a firm foundation in place, from setting the pre-marketing strategy to negotiating multiple competing offers, objectives are easy to identify and goals are successfully met. Building the Right Vendor Network Y ou are only as strong as the weakest link. A sound supplier network is critical. Accuracy of Broker Price Opinions and appraisals set the recovery of the asset in motion, followed by experienced real estate agents, property pres- ervation companies, eviction attorneys, and title and clos- ing providers. Each play a vital role in the transaction, and it is important to ensure proper diligence is conducted when procuring these providers and assessing their performance by having reliable score-carding in place to measure key perfor- mance indicators. In some cases, relying on solutions that already have built-in networks may be an option for some operations if a robust vendor management division is not feasible. The Power of Workflow Management L everage the experience of the companies before you. Given there have been several cycles in our industry's history, there is tremendous value in estab- lished default technology tools, such as RES.NET, with a robust workflow that has evolved with the needs of the industry and the direct input of the users and clients. Having a comprehensive system where the supply-chain ecosystem is contained within one secure environment that is scalable to your operation and to your clients provides efficiency and agility in servicing. Scalability and Profitability A s inventory slowly increases through the remainder of the year and into next year, you want to make sure your busi- ness can pivot with the market fluctuations while remaining profitable. Controlling profit margins is a careful balance of managing headcount, file count, and overhead costs. The key to success is knowing when to shift operational structures, employing the right business processes, de- ploying the use of best practices, engaging a qualified network of suppliers, and implementing the right technology platform. Founded in 1992 as a real estate service company, USRES provides financial support services for valuation and disposition of REO real estate assets. USRES' products and services have provided the mortgage banking industry relief in origination and default valua- tion products, together with REO asset disposition services. With focus on trans- parency in workflow and the real estate transaction, USRES uses RES.NET, an enterprise software as a service (SaaS) platform, for the management and processing of valuations and real estate asset disposition services. RES.NET is a wholly owned subsidiary of USRES. How to Build an Unstoppable REO Organization SPONSORED CONTENT

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