Safeguard in the News
July 30, 2021
Source: Five Star Institute
Even in tough times, mortgage field services providers adjust to deliver quality
Protecting and preserving properties is imperative to ensuring communities do not become overrun with blight and properties remain secure. In the early stages of the COVID-19 pandemic, mortgage field services providers were challenged with maintaining these consistent, high servicing standards. As states began issuing stay-at-home or shelter-in-place orders, they had to address issues in the field as they arose and complete work in areas where it was not prohibited completely.
Now that we are halfway through 2021 and health orders are being lifted in states across the country, mortgage field services providers need to shift their focus on three key areas of their businesses to ensure mortgage servicer portfolios remain secure and protected. The FHA conveyance process, in addition to mitigating book loss while ensuring quality results, and scaling for volume are some areas that would benefit from streamlined processes as properties emerge from forbearance.
FHA: How to Successfully Convey a Property Within 30 Days
The FHA Single-Family Housing Policy Handbook requires a handful of very specific conditions in which the property must be before conveying the loan back to HUD:
• The property is undamaged by Big 6 damages
• The property is secured and, if applicable, winterized
• All insured damages including theft and vandalism are repaired per the scope of work
• Interior and exterior debris are removed, and the property is in broom-swept condition
• The property’s lawn and all vehicles and any other personal property are maintained
• The property has a good and marketable title
Before the foreclosure sale, if your disposition strategy takes the property down the path of conveyance back to HUD, then the goal should become getting the property into conveyance condition apart from debris removal, before the foreclosure sale.
Once the foreclosure sale is held, debris is removed, and the property is ready to convey to HUD. Servicer generated allowable(s) to cure extenuating conditions such as mold, roof, and water reduce the risk of further damage and elongated timelines.
Repairing Big 6 damages concurrent to the conclusion of a hazard insurance claim once the adjustor has been dispatched to the property coupled with an allowable for supplement claims greatly reduces the timeline post-sale.
A Simple 5-Step Approach
Step 1: Initial Secure—Address all conditions pre-sale apart from debris to increase on-time conveyance by a large margin
Step 2: Damages—Identify and document all damages.
Step 3: Claims—Repair concurrent to the claim conclusion proceeding the adjustor’s visit
Step 4: Allowables—Provided for issues such as mold, roof, and water rather than walking away from the property and risking further damage
Step 5: Disposition—Capitalize on an opportunity where gains are possible. (i.e., good property, buy and rehab; offset losses on other properties)
Mitigating Book Loss
Paying for property preservation services but not being able to claim the expense to the insurer or investor is a top concern for mortgage servicers. There are several specific processes that lead to book loss that can be improved.
• Over-allowable requests sent to HUD (MCM) getting denied for non-timely foreclosure: The best practice we have seen is designating a specific point of contact to receive these denials, ensuring clients have a workload system so they can track the open requests to their attorney network. Once the chronology is returned, have someone carefully review, add in servicing details (bankruptcy, loss mitigation activity, etc.) and make sure all time periods are covered. Ensure it is complete before appealing the denial.
• Incomplete assessment at first entry: All liability shifts to the mortgagee upon first entry into the property. You either document it or you pay for it. Safeguard has stood up a practice where we complete a second, independent review of initial secure work orders 45 days after the first review. We are confirming that the secondary processes of bids, appeals, and damages were completed fully and accurately, and revalidating the complete assessment.
• Bid after the fact (BATF): Given all the rules at play and the possibility of having multiple orders open at the same time, it is possible to run over allowable limits unintentionally. We have stood up practices to systemically check investor set limits versus expenditures and proactively launch over-allowable requests to cover the expense.
Scaling for Volume
Over the past few years, there has been a significant downturn in volume, allowing time to adjust business practices and prepare for fluctuations in the market. It also has been an opportunity to adjust processes for the latest crisis, the COVID-19 pandemic. Mortgage field services companies have scaled their vendor networks in anticipation of the pending volume. To do so, they have implemented the following processes.
• Streamline Vendor Onboarding Process
– Introduce an expedited vendor program that allows vendors to immediately sign up and access orders same day
– Roll out a quick start insurance program, which allows potential vendors to test working within the property preservation industry before meeting required insurance thresholds/requirements
– Reorganize the credentialing process to get vendors into an active network quicker, while also ensuring that they have the necessary tools and information to succeed in the field
– Partner with a third party to provide background checks for vendors, eliminating the need for them to obtain on their own
• Enhance Technology for Vendors
– Make enhancements to optimize the vendor-facing website
* These changes help the vendors navigate themselves through the onboarding process
– Create an online learning portal to allow vendors to self-learn processes and mobile applications on their own time instead of via scheduled facilitated conference calls
• Increase Vendor Recruiting Efforts
– Partner with new third-party recruiting companies to assist with the onboarding of vendors in areas that have been challenging in the past
– Tap into multiple, innovative new channels to recruit talent across the U.S. and Puerto Rico
