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» VISIT US ONLINE @ DSNEWS.COM 91 accountable for oversight of these assets, not the vendors. What can be done? As a servicer, there is more you can and should do to effectively manage your portfolio and mitigate risk. Default Risk Management—Complete a deep-dive of your portfolio to determine the age and location of your 90+ days delinquent loans and ensure there is a focus on liquidating properties if all efforts have been exhausted to cure these loans. ere are still challenges in some states where foreclosures are handled through a judicial process, causing significant delays in foreclosure. If these properties are vacant, there is a greater chance they will be vandalized and damaged and more costly to service. Whether these loans are serviced for other investors or held as owned assets, this cost and risk will increase as these delinquencies age. Property Management—If you are relying on vendors to manage this process for you, inspect their work, especially in higher risk areas where vacancies tend to be high. You should visit these properties on a regular basis. As I've suggested this to servicers over the last several years, those that actually did this thanked me for this suggestion. ey were shocked to find that many properties were not secured or properly maintained, which explained why they were seeing an increase in local government penalties and fines. It's also critical to identify when a property first becomes vacant. It is at this point that servicers will be held even more accountable for securing and managing properties. Vendor Management—Partner closely with the vendors you choose, and make sure they know your expectations. Require that they perform background checks on any employee or subcontractor that they send to your property. Mobile technology is also available and should be used to identify who is on the property and when it is being inspected. ose reports with photos should then be transmitted and stored for current and future review and easy access, and action should be taken where appropriate. Invoice and Claims Management—You may have some basic rules in place so that invoices are properly and timely paid, but you are likely paying for work that has actually not been done. Controls should be in place to ensure the work has been completed and that the fees charged are within allowed limits or approved before work is completed. It's then important that you have detailed documentation easily available to promptly file claims with insurers and investors to quickly recover your expenses. Conveyance or Liquidation—Depending on the investor, properties may be conveyed to an investor to manage and sell the property immediately after foreclosure. In other cases, the servicer may manage and sell the property through their REO process. However, servicers may also be required to manage the property until it is in a conveyable state, as with FHA- insured loans. If you have not effectively serviced these loans or managed the properties, there will likely be a delay in conveyance and possibly a rejection to convey. is is an area where many servicers are still struggling and finding costs to be high. Reputation Management—Build relationships with local communities and work closely with them to identify areas of risk and focus. Make sure they know that you care about their cities and their residents, and then partner with them to address areas of concern. You will find that many of them simply do not understand the complexity of the mortgage business, and they will appreciate your partnership. is also positions you well to drive change in those communities that will benefit all parties. Technology Solutions—Take the time to assess the technology you are using to determine if it is effective in helping you service and manage your portfolio, especially higher risk loans. I have typically found that servicer processes are fragmented, utilizing multiple systems to manage their portfolios. It's important to tie these processes together and cross-manage these loans where multiple groups may be touching them. Effective workflow tools should be leveraged to prioritize and assign work and to maximize efficiency. In summary, your overall delinquency may be down, but an assessment of your portfolio and business processes will help you realize that you do still have areas of hidden and high risk that need to be addressed and effectively managed. As we have historically experienced, this is a cyclical business. We will see more economic downturns, and there will be more natural disasters. Are you prepared for these? Now is the time to make sure you are. JK Huey brings over 35 years experience in the mortgage industry, and offers her expertise to various organizations. She serves on the National Board of Directors of Operation Homefront, specifically helping military families obtain homeownership, but also advises the organization on its other endeavors to help veterans and their families. She also serves on the Advisory Board of Aspen Grove Solutions, a provider of technology solutions to the mortgage industry. Do you know if the properties in your portfolio are occupied or vacant and maintained to protect the value of the asset you financed? Or are they abandoned and eyesores to a neighborhood and in violation of local laws?

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