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35 ยป VISIT US ONLINE @ DSNEWS.COM Lorenz Schwarz has been active in the commercial and residential mortgage servicing industry for more than 25 years, most recently holding the position of President at Phoenix Asset Management. Mr. Schwarz has also held various management positions within some of the industry's top mortgage servicers. In addition to REO management, he has also been heavily involved in other aspects of mortgage servicing including collections, loss mitigation, foreclosure, valuation, and claims management. As an REO asset manager, what are some of the biggest challenges you face today? Today, we're faced with increased regulatory scrutiny surrounding the mortgage industry. Many of the requirements placed upon our servicing clients by the OCC, CFPB, and other agencies are passed-down to us, which has significantly increased vendor reporting requirements and the frequency of third-party oversight and risk assessments. In order to remain compliant and serve our client's best interests, we have added staff across many areas of the company, enhanced our policies and procedures, and modified the controls in our SOC-1 audit to better identify and manage specific areas of risk. Other challenges that seem to be ever changing are at the local market levels, and include staying ahead of changes in ordinances and laws, market conditions, and the increasing aggressiveness of homeowners associations to recover from the losses they suffered over the past several years. With REO inventory down, what differences do you see in your current REO engagements? Our clients continue to become more sophisticated in the manner in which they absorb and process data and information, and how they utilize key performance indicators (KPIs) and other performance metrics to manage and compare the effectiveness of their vendors. is is not necessarily driven by declining REO portfolios, but it certainly heightens competition between vendors to be the "last standing" as clients are forced to reduce the size of their vendor networks. Technology has greatly increased the quantity and quality of data being exchanged, as well as visibility into the daily management of the individual assets. Effective use of KPIs is a necessary component of asset management, as the difference between first and last place on a client scorecard may simply be one or two closings, or a single quality control metric. All of these factors drive performance, which of course is good for the industry as a whole. To ensure Green River Capital (GRC) maintains a competitive advantage, we place a great deal of emphasis on our data analytics and business intelligence capabilities, and openly share the results of our analysis with our clients. It's been reported that one of the biggest factors contributing to the strong prices being paid for REO and distressed properties has been single-family rental (SFR) investors. Is this true? If so, do you see it continuing? e institutional SFR investors definitely influenced home prices in key markets in 2011 through 2013. However, their overall acquisition activity in these markets has waned throughout 2014 as they focus more on capital markets and building long-term business models around their portfolios. Many of the institutional SFR investors now place a greater focus on secondary and tertiary markets, seeking more attractive pricing as home price appreciation in the primary target markets significantly compressed rental yields. Notwithstanding, we don't see investor activity in these markets having the same impact we saw in 2011 and 2012. We believe the supply and demand dynamics that will most greatly affect home prices in 2015 will be influenced by continued tight credit, the prospect of rising interest rates, and the continued absence of first-time home buyers. Green River Capital is wholly owned by Clayton Holdings, which was recently acquired by Radian Group. What has this deal done for your business? e Radian acquisition closed June 30, and within one week the leadership teams from all three organizations met in Radian's home city of Philadelphia to start discussing synergies within the various operating units of the companies, and how we can best leverage the resources of each firm to take advantage of short- and longer-term opportunities across a more broad marketplace. We firmly believe this illustrates Radian's desire and commitment to invest in and build upon the Clayton and GRC brands, and we also feel being a part of the Radian family is yet another way in which GRC can further differentiate ourselves from our peers. e intellectual capital and knowledge base residing within Radian and Clayton provides GRC tremendous insight into the inter- workings of the industry, as well as exposure to key individuals who will play an important role in shaping the industry over the next several years. Are you looking at any new opportunities or markets? e simple answer is yes, whether it is organic growth within our existing market sectors, or more importantly seeking entry points into new and diverse markets by expanding our product and service offerings. We have experienced significant organic growth around our component service offerings, which allow clients to utilize individual "components" of our service suite, which include evictions, rental management, title and closing services, and construction management. ese individual offerings provide our clients significant flexibility, and more importantly, an alternative to a servicer or vendor that may not excel in all areas. We have a team currently working on a small number of important mid- to long-term strategic initiatives that we plan to implement over the next several months, which will allow us to better hedge against the cyclical nature of the mortgage markets by offering more traditional real estate and mortgage-related services across a national footprint. ese initiatives are important components of GRC realizing the objective of becoming a full- service real estate company. Additionally, and just as important, we plan to increase our involvement in the SFR securitization markets, leveraging the experience and relationships we have developed as a service provider within this niche. We have been very bullish on this asset class since its inception, and we feel the next iteration of multi-borrower securitization issuance has tremendous potential for many years to come.