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» VISIT US ONLINE @ DSNEWS.COM 75 foreclosure timelines are extended, there is a need for ongoing property valuations. Costs of property valuations will vary depending on the type of valuation ordered, with broker price opinion's (BPOs), automated valuation models (AVMs), and drive-by inspections being less expensive than full and complete appraisals. Either way, the costs can add-up when foreclosure delays occur over extended periods. Property-valuation declines have a direct impact on loss severity, as properties sold at foreclosure sales generally yield lower proceeds when the overall condition of the property is impaired. Homeowner's Association Administration (HOA) Fees: is fee, if applicable, continues to accrue and must be paid while the property remains in foreclosure. According to a November 2017 Bankrate report, HOA fees normally range from $200 to $400 per month for a typical single-family home. For condominium or cooperative units, HOA fees tend to be higher as they cover costs associated with maintenance relating to the building's common areas such as lobbies, patios, pools, grounds, elevators, etc. As with property taxes, failure to pay HOA fees can result in liens being placed on the property by the HOA. e fees will vary depending on the size of the unit, its amenities, and the property's physical and geographic location. Additionally, communities hit with unexpected or extreme maintenance expenses that are inadequately reserved can result in special assessments that may make HOA fees even higher at defined points in time. It is, therefore, in the best interest of servicers to foreclose as expeditiously as possible in order to minimize the amount of HOA fees paid and avoid the uncertainties associated with special assessments. Nonrecoverable Advances: ese are expenses paid by the servicer that it deems in its good faith judgment to be nonrecoverable. Certain expenditures will continue to be advanced to avoid liens from being placed on the collateral (i.e., taxes, HOA fees, etc.), or to ensure adequate protection of the underlying asset (i.e., hazard insurance, property maintenance, and repairs). To the extent these expenditures are nonrecoverable, they will add to loan-loss severity. Blight-Related Costs: Blight caused by property neglect, damage, abandonment, or vandalism tends to increase the longer a property remains in foreclosure. When a property is abandoned, some states do not require banks to fully maintain blighted properties until the foreclosure process has been completed and they have assumed ownership. However, many municipalities across the nation are enacting ordinances setting a legal framework and establishing clear standards relating to the maintenance and repair of blighted properties. Many municipalities are imposing significant fines and penalties relating to these properties. Servicers may be liable for paying these fines and penalties while the loan remains in the foreclosure process. Additionally, there is the potential for bad press associated with such conditions. From a practical perspective, blighted properties have an impact on depressing home values in a specific region and might also have a direct impact on the reputation of a bank or servicer. It is key to remember that blight usually occurs and worsens when abandoned properties remain in foreclosure for an extended period. Consequently, the shorter the foreclosure timeline, the greater the likelihood that related blight can be prevented or contained. Value Declines: Vacated or abandoned houses, including foreclosed properties, contribute to neighborhood blight. e result? An overall decline in property values. Delays in the foreclosure process may lead to decreases in property values, mainly due to neglect. Studies have shown that the longer a property is in foreclosure, the larger the impact will be on value declines for the property, as well as for neighboring homes. Such value declines have a direct adverse impact on proceeds received from foreclosure and real estate owned (REO) sales, impacting loss severity. Compensatory Fees: ese apply to agency loans and represent compensation for damages that may be incurred as a result of a servicer's failure to comply with specific GSE requirements or procedures relating to a defined aspect of the servicer's performance. Specific to the foreclosure process, compensatory fees are assessed to cover costs associated with the nonpayment of interest associated with delays in foreclosure. ese delays in excess of GSE standard guidelines result in costs to both servicers and investors. Compensatory fees are assessed against the servicer for the difference in the period commencing with the Last Paid Installment date through the foreclosure sale date minus the GSE allowable foreclosure timeline for that specific state. Undoubtedly, delays in the foreclosure process result in additional costs. It is, therefore, in the best interest of banks and servicers to move the foreclosure process along most expeditiously and in accordance with GSE timeline guidelines. is will likely result in fewer expenditures and reductions in loan loss severity. From a practical perspective, blighted properties have an impact on depressing home values in a specific region and might also have a direct impact on the reputation of a bank or servicer. It is key to remember that blight usually occurs and worsens when abandoned properties remain in foreclosure for an extended period.

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