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74 those loans in foreclosure or REO). Many of these assets, particularly in judicial states, don't make it through the foreclosure pipeline. Instead, they linger in the netherland between default and foreclosure, in some cases, for years. For example, in New York it takes more than three years for a delinquent mortgage to go through the foreclosure pipeline. Earlier in the year, the Federal Housing Finance Agency (FHFA) outlined new requirements for sales of NPLs by Fannie Mae and Freddie Mac. As a result, the GSEs, as well as some large banks, have become more active, selling large pools of NPLs to hedge fund buyers that have raised capital to acquire NPLs. e investment strategy depends on the fund. Some investors are acquiring NPLs to modify them, turn them into re-performing loans (RPLs) and then sell or securitize them. Others may want to take the loans through the foreclosure or short sale process and take advantage of improving real estate prices. Others may want to use NPLs to drive their single-family rental (SFR) strategies. In the past two years, 23 SFR securitizations, valued at $13.5 billion, have come to the market. ese deals represent the first of many to come in this burgeoning asset class. e growing demand for single-family rental properties has drained the pool of REOs and now investors are looking to move further up the supply chain by acquiring NPLs. Co-bidding on potential loan pools is another recent trend to hit the market. It allows partners with different levels of capital risk appetities and investment strategies to participate in larger transactions. THE SAME OLD WORKFLOW What hasn't changed, however, is the workflow in the NPL market. Too often, investors still use the same old tools: Excel spreadsheets and shared drives. Investors also continue to rely on due diligence vendors to review the loan data and input their findings into spreadsheets. ese third-party reviews usually occur on separate systems, creating substantial inefficiency and introducing the risk of errors into the models. In addition, defects in title and issues regarding taxes and HOA fees sometimes fall between the cracks, only to come back post-closing to undermine an asset's ultimate value. With a process so disjointed and inefficient, how can investors properly monitor all the borrowers and properties in a pool? For example, how can they know if a borrower is even living in the property? Our company tracks delinquent assets for clients and we have discovered that, in a fair number of cases, seriously delinquent properties are being rented by borrowers to unsuspecting tenants. So borrowers, who for three years haven't made mortgage payments, are collecting rent and turning a profit on these properties. Obviously, not all borrowers are trying to profit from NPLs. Some are trying to do the right thing by seeking to sell their properties. But even in those instances, the owners of the loans are often unaware. Otherwise, they could work with the borrowers to affect a short sale, or a deed-in-lieu, or some other event to regain control of the property. e end result of the same old workflow: Investors may not know what they're actually getting—spending more time and more money on trades. CREATING A BETTER WORKFLOW Attempting to respond to the developing need, over the past several years, our company has developed a system, which consists of a suite of tools to help investors, diligence providers and servicers value, bid on and manage NPLs and REO properties. e system is a web-based portal that uses task-driven logic to manage pool bidding, asset monitoring, short sales, loss mitigation and REO management and portfolio rental strategies and execution. In the bidding process, the system creates continuity and structure in NPL and RPL trades, regulating the process and ensuring consistency from one property to another and one trade to another. It ensures that all due diligence activities are completed as prescribed, including the ability to elevate problems that arise to the appropriate management personnel. e platform also captures and organizes documents and confirms that all trailing documents are received. In addition, everything is consolidated into a website that allows any outside vendor to access all of the data and all of the documents. us, the full trade is documented and the workflow is documented as prescribed for each trade. We also provide valuation tools that investors can use to calculate—or benchmark their own model—for property value, rental rates and return on investment. After properties have been acquired, the system provides an end-to-end solution for property monitoring, short sale, loss mitigation and REO management and rental portfolio management. As the NPL market returns, investors need alternative paths for acquiring and managing pools of loans and properties. Proven and more efficient technology should help shorten acquisition timelines, support different investment strategies and drive prudent property-level decisions. It should allow users to be able to customize workflows, reports, key performance indicators and other items quickly and adjust for specific trades. is will help ensure investors are getting the best possible returns. "Many of these assets, particularly in judicial states, don't make it through the foreclosure pipeline. Instead, they linger in the netherland between default and foreclosure, in some cases, for years."

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