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MortgagePoint ยป Your Trusted Source for Mortgage Banking and Servicing News 28 November 2023 C O V E R S T O R Y T he past few years have been something of a roller coaster ride for both the housing market and the overall economy. With the onset of COVID, the American govern- ment and mortgage servicers implement- ed numerous changes designed to allow a nation reeling beneath an unprecedented health crisis to ride out the storm and keep people in their homes. As we emerged from the pandemic and the associated spike in forbearance, the industry has since been navigating less dire challenges, such as soaring housing prices, insufficient inventory, and both inflation and the impacts of the Fed's attempts to slow it. As we approach the fourth anniversa- ry of the first time most of us ever heard the word "coronavirus," COVID's legacy can still be felt in the nation's housing migration patterns, in the ripples of pan- demic-driven career swapping, and in the ongoing push-and-pull between remote work and traditional in-office models. At the nexus of all of the above trends, we find the modern property preservation and field services sector. Like every indus- try, it was forced to evolve rapidly to deal with these tides of history, and even now, it continues to navigate the breakers, striving to remain on its feet while being buffeted by forces beyond its control. Over these past few tumultuous years, many compa- nies within this field have gone under or moved to the relative safety of alternative business lines. Those who remain are battle-tested and committed to the critical work that property preservation provides, helping maintain and restore properties so they can be cycled back into the housing inventory, and provide someone with their slice of the American Dream. However, the waves remain, and it can often be difficult to stay on your feet. One critical aspect of modern property preservation work is allowable fees: the amounts set by the government agencies/ investors, per service or property, that give vendors the authority to proceed on a given task or project without bidding if the cost does not exceed the prescribed fee. "For example, Freddie Mac has a fence repair allowable set at $500 to repair/re- place damaged sections of fence," recounts Tony Maher, EVP of Business Develop- ment, Cyprexx Services (founded in 1989). "If we can complete the work for $500 or less, we are free to proceed with the service without needing to stop and bid to the investor. This allows us to expedite and complete services faster with fewer trips to the property. Investors set and reset the allowable fees using available industry data and cost estimators that consider both labor and material costs for each service." However, the consensus from the vendors we spoke to is that those fees have not always kept pace with the realities and economics facing the business of property preservation. "The bird's eye issue is that a lot has changed in the industry, given that we are at a 40-year low in terms of defaults," said Nickalene Badalamenti-Kalas, President of Five Brothers Asset Management Solutions, a field services vendor with nearly 50 years' worth of experience. "All these things are contributing to the fact that gas is expensive, materials are expen- sive, people are driving farther, they're driving in more rural areas, and all of this cuts into the expectation of what we're able to do, for how much we're able to do it, and how much time is required to do it." For this issue of MortgagePoint, we spoke with experts from across the prop- erty preservation industry, ranging from representatives of the Federal Housing Administration (FHA) and Fannie Mae to THE COST OF DOING BUSINESS With factors ranging from low volumes to inflation and manpower shortages putting the squeeze on the property preservation and field services sectors, MortgagePoint speaks to the vendors, government agencies, and the GSEs trying to guide this important industry through the challenges it faces. B y DAV I D W H A R T O N D A V I D W H A R T O N , Editor-in-Chief at the Five Star Institute, is a graduate of the University of Texas at Arlington, where he received his B.A. in English and minored in journalism. Wharton has 20 years' experience in journalism and previously worked at Thomson Reuters, a multinational mass media and information firm, focusing on producing media content related to tax and accounting principles and government rules and regulations for accounting professionals. Wharton has been with Five Star since 2017 and has an extensive and diversified portfolio of freelance material, with published contributions in both online and print media publications. He can be reached at David.Wharton@thefivestar.com.