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72 and other events, where lawyers would vent their frustrations to the GSE representatives, often in colorful language and with considerable emotion. e attorneys' concerns about the GSEs intruding into their client relationships was certainly understandable, but as a "business guy in a lawyer's suit," I also understood the GSEs' motivations. e selection of vendors (a justifiably despised term among lawyers) was hardly a transparent, objective process in many servicing operations. Given their interest in obtaining efficient and effective foreclosure services on their loans, the GSEs focused on key business concepts in evaluating firms for inclusion in their programs, including: PERFORMANCE METRICS: e introduction of performance metrics, notably foreclosure timelines, shined a light on firms' efficiency in producing outcomes. While highly controversial, these metrics engendered a production mindset that spurred law firms to make investments in talent and technologies, which proved critical when the default crisis of the late 2000s came about. While many believe that servicing metrics have propagated to the point of obfuscating the fundamentals of the issues that matter (I'm of this camp), the influence of the GSEs in bringing about a performance mindset to the default world is undeniable. SCALABILITY: It can be fairly stated that much of servicing is an exercise in supply chain management, and this theme reaches its zenith once a loan goes into default. e multitude of activities necessary to produce a resolution, whether curative or liquidation, are generally performed by third-party service providers. As a result, in building their vendor networks, the GSEs focused on ensuring the selected providers were appropriately provisioned with sufficient people, processes, and technology to handle fluctuations in volume. As the foreclosure crisis unfolded, it turned out that the GSEs undermined their own programs by relying upon the firms to advance reimbursable foreclosure-related expenses, a daft arrangement that caused many firms to collapse. In retrospect, the systemic design flaw seems as avoidable as it was tragic, yet it also serves to emphasize the criticality of ensuring service provider scalability in the default servicing marketplace. COMPLIANCE: In constructing their attorney networks, the GSEs' primary focus was on ensuring that foreclosure firms were aware of and had controls in place to ensure compliance with relevant legal standards. Since the crisis, forests of trees have yielded to articles about compliance, with countless substantive and procedural recommendations for servicers and their providers. It is neither necessary nor relevant here to add to the pile, but it is important to note that, given the wide range of activities performed by third parties, and the imputation of risk upstream, this area remains an important and ever-expanding area of inquiry when evaluating vendors. Unfortunately, the industry at large was not prepared for the magnitude of the foreclosure crisis and the GSEs' attorney network programs could have been better designed and administrated. Hindsight, of course, is always 20/20. Furthermore, the long, painful cleansing of toxic loans from the books would have been infinitely more difficult had the GSEs not been proactive in learning about and programmatically addressing the unique performance, scale, and compliance risks of the business models of the firms performing their foreclosure work. e need for good supply chain management is a lesson learned from the crisis; another is that the GSEs are uniquely situated by their perspective and qualified by their experience to perform that role across the spectrum of default servicing activities performed by third-party providers. In a number of 2018 Five Star Institute conferences, the GSEs discussed initiatives that are essentially more recent supply chain management efforts, notably in the areas of disaster recovery and property inspections and e need for good supply chain management is a lesson learned from the crisis; another is that the GSEs are uniquely situated by their perspective and qualified by their experience to perform that role across the spectrum of default servicing activities performed by third- party providers.

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