Cradle-to-grave coverage

Challenges become opportunities for field services providers

There are certainly challenges aplenty these days for field services providers. But over the years many field services providers have turned these challenges into opportunities to grow and prosper — and we continue to do so.

For many years, field services — such as pre- and post-foreclosure property inspections, re-keys, trashouts, repairs, rehabilitation, preservation, and maintenance — had been performed much the same way. In the pre-foreclosure realm in past decades, property preservation companies performed regular property inspections when loans entered the default process and completed repairs involving health and safety issues, as needed. 

Typically, the responsibility to manage the maintenance and preservation of properties fell on the local real estate agent who was assigned by the lender or an asset management outsource company to list the properties once they went to foreclosure sale and became REOs. These agents chose local contractors to provide maintenance and repair services as necessary. 

In the early 1990s, the rapidly growing bank-owned inventories of major lenders and servicers across the country created many challenges for these agents and providers, because of the sheer volume involved. As best practices were developed and shared by various industry trade associations and others, streamlined processes, the advent of third-party outsourcing, and evolving technology began to shorten the REO disposition process. Since time is money in REO disposition, these industry-wide process improvements and best practices set the stage for further improvements when the latest housing bubble burst.

Early in the new century, following a relative calm with respect to mortgage defaults and foreclosures, several national field services companies managed extensive networks of contractors to preserve and maintain properties in default, and REO properties until they were sold. During this period of stability, large national field services companies created “cradle-to-grave” property preservation services. 

This new strategy was an opportunity to change the entire property preservation process by letting the national field services firms take on not only pre-foreclosure inspection and preservation responsibilities, but also post-foreclosure repair and renovation duties. 

At first, the new process was not readily accepted by some lenders and servicers who believed localized control of the process was more timely and efficient. But by further streamlining activities and focusing on better quality-control programs, some of the best national field services companies began to prove that the cradle-to-grave concept could improve timeliness and quality, which ultimately decreased costs.

This change in process was positive, as far as most listing agents were concerned. The reason was cash flow. In the old process it was not atypical for some REO brokers and their listing agents to be carrying tens of thousands of dollars in repair and maintenance costs on their books, or to have it take 60 to 120 days for payments to be received after the work was completed. This often resulted in non-payment of as much as 20% or more of the receivables that were due. 

The cradle-to-grave service provided by national field services companies has all but eliminated these types of issues — not to mention the mountain of invoices that banks and servicers were previously stuck having to process.

When defaults began to rise exponentially in 2007, the default services industry was tested as never before. Field services companies became “first responders,” having previously tested the cradle-to-grave process. The advent of this new field services program lessened the negative impact in no small measure. 

The most successful field services companies have been dealing effectively with all of the challenges mentioned above. Some, like the company I work for, are also now looking for ways to help investors involved in the REO-to-rental market by providing similar services to them, while also helping struggling cities and other municipalities to better deal with their neighborhood stabilization issues. 

These companies will no doubt continue to do so, raising the standards of field services as the industry works through the current and projected inventory of distressed assets.

With so much instability in the world and a looming potential stock market crash predicted by so many economists, there remain many challenges facing field services providers among many others. 

This will again mean that there will be ample opportunities to serve the mortgage servicing industry.

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