As inventory increases, servicers are seeing themselves more and more in the role of landlord, according to panelists in a discussion, "From Lender to Landlord," at this week's Five Star default servicing conference in Dallas.

Servicers are beginning to see the benefits of keeping properties occupied with cost-savings such as lower property preservation expenses. Rentals allow the servicer to have more control over when they decide to release the property onto the market for sale because property deterioration that comes with vacancies becomes less of a concern.

Miguel Gutierrez, director, REO Rental with Fannie Mae, said the GSE hasn't suffered execution-wise in the sale of occupied properties. While it is more complicated at the front-end to get an agreement with the tenant, it can be better in the long-run as the property will sell better if it is occupied, he said.

"For the most part, our experiences with tenants have been good," Guiterrez said. "Sometimes it's great when we are able to help people who are in extreme hardship. For example, we are able to help people who are terminally ill stay in their homes."

Professional property managers provide good discipline to make sure tenants are complying with Fannie Mae rules, or vacating the property when necessary, he said.

Denia Graham, with TenantAccess, said it sometimes takes longer to handle an REO property with tenants. She said TenantAccess has found 94% of its tenants to be cooperative, but the 6% who are not can take up to 80% of the time.

TenantAccess considers a tenant to be "cooperative," if they are letting someone into the home to assess its condition and providing timely information about the lease.

Mark Paniccia, with SunTrust Mortgage, who has about 400 occupied properties that he's managing, said times have changed from the mindset in place as little as a year ago of evicting tenants as quickly as possible. Now servicers aren't looking for a one-size-fits-all scenario, he said.

Especially with multitenant properties, like condos, keeping a property occupied proves to investors that there is cash flow, Paniccia said.

"It lessens the stigma to see lights on and grass cut, and it leaves a different impression in the buyer's mind, especially in the investor's," Paniccia said.

Paniccia said about 70% of SunTrust's properties are purchased by owner-occupants.

Peter Kuclo, operations manager with Freddie Mac, said it is important to balance the concerns of keeping the property occupied with getting market value.

"What surprised all of us was the high percentage of owner-occupied purchases," Kuclo said. People may come into the Freddie Mac program as a month-to-month tenant and then ultimately buy the property, he said. Freddie Mac also allows former owners to be tenants and that can sometimes be troublesome, especially when a former borrower/owner sees what the property is being marketed for compared to what they paid for the property.

Karen Riffe, with Meridan Asset Services, said occupants add a whole new level of complexity to REOs. But brokers can earn BPOs and inspection fees and will continue to be an important part of the equation during the leasing period, all the way through to the transaction.

David Tiberio with National Residential Rental Services, a division of First American, who served as the panel moderator, said his company also keeps the real estate broker involved as the front-end connection with the tenant during the rental process.

Write to Kerry Curry.