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» If a company does not invest in proper property management and looks to defer investments in renovations and maintenance, that's a red flag for the investor, Clothier says. Every dollar invested up front in renovations can save the investor $2 down the road. If the company does not have a program to maintain occupancy and considers frequent tenant moves as a cost of doing business, that can also be a reason for concern. For potential purchases, investors should consider the economic factors of the area—and make sure that it is growing and that its industries are healthy—as well the characteristics of the individual properties, Clothier says. Too many investors are attracted to price, which should not be one of the first criteria considered. "You have to visit the market, whether you think the prices are high or low or perfect," Clothier said. "Rent your own car; go visit the neighborhood; go back and look at it at night." The sizeable REO-to-rental volume that many in the industry expected to hit the market as early as 2009 did not materialize, says Chad Mosley, VP of business development at Mortgage Contracting Services (MCS) in Tampa, Florida. MCS, which provides property inspections, property preservation, and REO property maintenance services, ramped up its business in anticipation of that volume, Mosley says. The company plans to open a new office in Ruston, Louisiana, this month with about 90 new jobs over the next few years. With the thousands of responses to the Federal Housing Finance Agency's REO-torental pilot program and the equity funds raised to invest in pools of REO properties, it seems the market also expects many more of the properties to be put on the market soon, he says. Michael Koshet, chief executive of the REO-to-Lease startup business, says he sees potential in a Bank of America pilot program that would prevent investors from seeing a lot of the anticipated flood of REO properties. REO-to-lease would allow a homeowner with a potential foreclosure to transfer the deed to the lender in exchange for debt forgiveness and a lease through an online process. The Bank of America test program allows homeowners to exchange their debt and deed for a three-year lease, and because the house is not sold, there is no distressed sale price to negatively affect the surrounding neighborhood, Koshet says. If Bank of America were to incorporate the pilot into a larger, more permanent program and if other banks were to follow suit, Koshet contends sales of large volumes of REO properties could be delayed until they would have less of a negative impact on the market. VISIT US ONLINE @ DSNEWS.COM SUBSCRIBE TO THE LEADER IN DEFAULT SERVICING NEWS DS News is the only publication in the country solely dedicated to providing default servicing professionals with news and content focused on their industry. SUBSCRIBE NOW! Call 214.525.6700 or connect with us online at DSNews.com. 59

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