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Servicing

Are we facing yet another foreclosure crisis?

Property preservation remains vital component to default servicing

August 19, 2014
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Despite numerous reports indicating that there has been a deep decline in foreclosure inventory over the past several months in many markets, the reality, as chronicled in several articles recently penned by this author and others, is that foreclosure rates are very likely to rise again in the not-too-distant future.

With that prospect just over the horizon, it is important to note that property preservation and repair services for bank-owned properties remain a vital component of mortgage default servicing.

As has been well documented, I am not alone in my beliefs about the prospects for increased foreclosure rates, at least not any more.

For example, author Keith Jurow has also been making the case that the so-called housing “recovery” is nothing more than an illusion. In a piece he wrote that appeared on Doug Short’s Advisory Perspective web site titled, “Why the Move-up Housing Market is Gone,” Mr. Jurow noted in particular that the mortgage delinquency problem just won’t go away.

In part, Jurow wrote, “I have also been writing about the serious delinquency problem for four years. Wall Street continues to disregard the issue.

“First, the delinquency figures put out by the Mortgage Bankers Association and others are misleading and quite useless. Why? More than 22 million homeowners have had their mortgages modified since 2008. Most of them had been delinquent in their payments. Once the modifications become permanent, the loan is considered current. So of course this pushes the delinquency rate ay down.”

To Jurow’s point, the recidivism rate on loans that have been modified following the housing crash has risen to be as high as 70%. The highly touted loan modification “workout” programs like HAMP, HAFA and other foreclosure alternative programs has only forestalled foreclosure, not eliminated them.

Many housing industry experts now expect the foreclosure numbers in 2015 to be higher than this year’s totals. This is partially due, of course, to the lenders’ and servicers’ efforts, often at the urging of the CFPB and other regulators during the past two years to ensure that foreclosure-related paperwork was proper, and more importantly, legal, which created a backlog in the process—part of the “shadow inventory”. But many of these loans and their associated properties will emerge from the shadows late this year and early in the next.

And, with protracted foreclosure processes in states with judicial foreclosures finally moving through the system, an increase in bank-owned properties hitting the market will also

As mentioned earlier, this will increase the need for various property inspections, repairs and renovation from regional and national field service providers.

Natural disasters that occur around the country, such as tornadoes, fires, drought, floods and others cause severe damage on all types of properties, keeping contractors overloaded with work orders. While we all hope there are fewer and fewer of these events each year impacting people across America, we also know we can’t expect them to disappear.

Defaulted loans with deferred maintenance, health and safety issues, and the need for any number of repairs continue to generate the largest number of work orders for field services providers.

Depending on whose predictions you choose to believe, the outlook for the remainder of this year and into 2015 would seem to portend the potential for continued slow growth and another rise in foreclosure activity across the country—this is particularly true since, as noted before, we have still not recovered from the recent prolonged recession.

Continued high unemployment rates, declining consumer confidence, higher taxes for many Americans, the aforementioned slow economic recovery, inevitable disasters and so forth could all conspire to keep property preservation/field service providers quite busy in the foreseeable future.

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