4 ways servicers can reduce financial risk of default properties

Consolidating multiple systems provides greater control and improves overall vendor management


The number of houses in foreclosure continues to drop across the country but dealing with properties in default is an ongoing challenge for servicers.  The sheer volume of properties during the crisis drove servicers into creating and using multiple systems to manage the process. Many servicers continue to use a mix of systems and often depend on loan servicing platforms to help manage the property itself.

Unfortunately, working in multiple systems makes the job of managing the property much more difficult, as creating a transparent, easy-to-follow audit trail is very difficult when data is housed in different systems.  Another issue is that some of these system are not “fit-for-purpose” and thus mandate processes that are not efficient and lack control and oversight.

With increased scrutiny from investors and regulators, servicers have to be proactive about managing their default properties in a way that also manages their risk.

Ron Briggs, senior vice president of business development at Aspen Grove Solutions, outlined four areas servicers should focus on as they look to not only gain efficiencies in vendor management, but also significantly reduce their financial risk:

1. Consolidate data and workflows

A web-based, fit-for-purpose, enterprise property management platform offering multiple workflows is crucial to solve the inefficiency of using multiple systems to house data.

Aspen iProperty is easy to use and quick to implement. The platform provides a workflow management system encompassing inspections; property preservation and maintenance; repairs; HUD conveyance and claims without conveyance of title (CWCOT); thus allowing teams to remain in one system as they manage the different aspects of properties in default.

Servicers can issue work orders through Aspen Grove’s vendor portal, which pushes out to mobile devices so that data and information flows into the management platform directly from the field. At the same time, Aspen Grove’s client portal enables servicers to push requests to investor clients for approval, all in one system.

Through APIs and integrations, data is continuously fed into the Loan Servicing platform, keeping the loan system of record seamlessly up to date.

“We house all the data — documents, pictures, vendor’s sign-ins, workflow, rules, and much more  — in one system so servicers can track where their vendor is in the process and where the investor/client is in the process,” Briggs said.

2. Gain transparency into vendor management

Servicers face a huge challenge when it comes to knowing what vendors are doing, and when they are doing it. Historically, servicers placed an order with the vendor and had little visibility into the vendor’s adherence to the servicers’ code of conduct or on the work being completed at the property in accordance with service-level agreements and timelines.

Now, through a platform like Aspen iProperty, servicers can see the progress of the vendor throughout the process. Servicers can issue a work order, track when it was accepted, see when vendors have signed in at a property, and review before and after photos of the vendors’ work.  Furthermore they can view reports across the property portfolio that aggregate data in any way they want.

Not only do servicers have control of the entire process, but also have a clear and complete audit trail for regulators.

“When auditors need to conduct a file review, they can view the documentation in one place and see pictures, invoices, vendor sign-ins, and work orders, thus saving the servicer countless hours and days gathering this information from multiple sources,” Briggs said.

3. Require quick integration to limit disruption

Servicers who want to implement a new system are rightly concerned about the disruption that could mean for their operations. To limit any effect on current work, servicers should look for an experienced team that has dedicated resources for integration and migration

Aspen Grove Solutions provides a full integration team that is solely focused on quick, thorough integration using APIs for third-party integrations, Briggs said. The team can integrate its platform with multiple systems, including clients’ current proprietary systems and legacy servicing platforms for increased efficiency.  

“Customers get the benefit of our platform but the integration doesn’t interrupt the organization,” Briggs said.

4. Make the most of the slowdown in default and foreclosures

The level of default inventory rises and falls in cycles, and the best time to invest in processes and systems is in the midst of a down cycle.

“A great time to invest in systems and infrastructure is when the volume is down, so you aren’t trying to implement or develop a new system while your hair is on fire,” Briggs said. “You can focus on the infrastructure, make the necessary changes and have processes intact so when next wave does hit, as history has proven it inevitably will, you’re in a much better position to mitigate financial risk.”

But servicers don’t have to wait years to see other benefits from implementing changes now. The foreclosure crisis put the entire industry under a regulatory microscope, which means that even with a smaller inventory of properties in default, servicers now face greater compliance risk. Improving default management processes is no longer a luxury.

“The financial risk to servicers for not adhering to investor or insurer guidelines is huge, because the seller/servicer can  incur curtailments on claims, repurchase demands from GSEs and reconveyance from HUD, if they don’t follow the guidelines,” Briggs said.

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