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74 result in servicers taking a short-sighted view of the problem and making cuts solely in the name of cost containment, thereby making it more difficult to optimize the foreclosure process (i.e., process optimization that may result from investments made in technology and staffing). is may result in an undue lengthening of foreclosure processing timelines, leading to an increase in costs and loss severities. Additionally, controls may be compromised, potentially adding to further oversight of the servicer by rating agencies, regulators, and others in order to monitor and maintain audit and regulatory compliance. In some instances, servicers may be fined or penalized, further exacerbating costs relating to foreclosure processing. Downgrades from rating agencies and/or sanctions from regulators may result, adversely impacting the servicer's ability to acquire new business. is short-term view on costs may result in a temporary deferment of foreclosure processing expenditures and impact the servicer's ability to move the process along expeditiously and in line with GSE foreclosure processing timeline guidelines. THE REAL COST In addition to the economic cost of carrying a non-earning asset on the balance sheet, delays in the foreclosure process can result in extra costs to servicers and, ultimately, to investors. Taxes & Insurance: Foreclosure processing delays typically translate into certain variable costs such as property taxes and hazard insurance premiums that will continue to accrue and must be paid by the servicer to applicable local and state municipalities or third-party insurance providers. Protecting the collateral is essential in order to ensure the underlying property is insulated from potential liens that may be placed for failure to pay property taxes. Similarly, maintenance of hazard insurance is critical in order to shield the underlying asset from costs resulting from the damage caused by fire, floods, and other events. Legal/Court Filing Fees: Costs relating to documentation retrieval and recovery, along with those costs necessary to properly maintain and file required documents, tend to increase the overall loss severity due to delayed foreclosure. ese costs may often be avoided or greatly minimized if servicers were to instill proper care and due diligence protocols upfront versus taking a "fire-drill" approach (i.e., dealing with and reacting to specific transactions on a case- by-case basis). Other incidental fees may also accumulate as the foreclosure process continues and may include items such as certified mailings, court refiling fees, and additional attorney's fees. Maintenance and Repair Expenses for Abandoned Homes: Costs associated with preserving property value and complying with city and county ordinances (i.e., winterizing the home, securing the property, cutting the grass/ landscaping, snow removal, changing locks, etc.) can be sizeable depending on the length of time the property remains in foreclosure. Abandoned homes that remain on the market for extended periods of time are subject to damage, vandalism, and theft. ese properties quickly become cost magnets. Add to this, expenditures associated with things like graffiti removal, repairing or replacing sheetrock, repainting, re- carpeting, cleaning, refuse removal, displacing and evicting squatters, and other property maintenance and repairs, total costs associated with delaying the foreclosure process can be significant. Once a foreclosure sale has occurred, property maintenance and repairs may continue throughout the redemption period, which, in some states, can be up to one year after the sale. Property Inspection Costs: roughout the foreclosure process, servicers are required to perform inspections on a monthly basis to determine both the physical condition and occupancy status of the mortgaged property. Even prior to foreclosure, property inspections should be ordered on a regular basis once the loan goes into default. While the cost of a single property inspection by itself may not be significant, such costs can multiply when foreclosure delays occur over extended periods of time across multiple properties. A servicer's diligence in adhering to prudent inspection guidelines is critical in keeping up with property maintenance and repairs in order to contain costs and eliminate or mitigate fines or penalties that may be assessed by local municipalities. It is therefore prudent that servicers minimize foreclosure timelines to decrease the susceptibility of properties from becoming damaged or vandalized, thereby resulting in increased maintenance and repair costs leading to a decline in property value. Property Valuation Costs: Interim property valuations should be performed throughout the foreclosure period, in addition to property valuations ordered by servicers before starting the foreclosure process and valuations ordered directly preceding foreclosure sale. During this timeframe, it is critical that servicers keep a watchful eye on the underlying collateral to ensure there has not been any significant change to the asset's condition adversely impacting its value. As Along with the "high-touch" servicing necessary to sustain ongoing dialogue and active interaction with the borrower to maintain homeownership, costs may force the servicer to curtail investment and hold expenditures to a minimum.

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