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» VISIT US ONLINE @ DSNEWS.COM 69 budget will allow, you'll break your budget later with costs to remediate after the fact." Foreclosure challenges will vary by case and definitely by state with their different compliance rules, legal structures, and schedules. In-house standards of efficiency are an important way to navigate different market currents and regulations. "It can come down to how efficient the default attorneys and bank/servicer are at their internal foreclosure procedures," said Scott Stoddard, CEO of Quandis, Inc., a default management technology firm based in Orange County, Cali- fornia. "Our experience is that clients that lever- age technology to automate foreclosure work- flows, tasks, time frames, and compliance are able to much more efficiently manage the entire process. One of the benefits realized is quicker and less costly foreclosure proceedings." PURCHASING OCCUPIED ASSETS A house in foreclosure limbo means a loss for multiple parties as the resident is not likely to perform maintenance if eviction looks imminent. e bank and servicer are not in the property management business, and an investor is there to make money, not to sink funds into a degrading asset. Finally and most noticeably, the communi- ties are negatively affected by lower property val- ues and when homes are abandoned, the higher probability of crime. "e sooner the foreclosure process is com- plete, the better it is for everyone involved," says Javid Jaberi, EVP of Single Family Residential Operations at Auction.com. "Until the real estate in question is sold, it continues to burden an investor's balance sheet and hinders the stabil- ity of the neighborhood." Jaberi cited the study commissioned by Community Blight Solutions and performed by Aaron Klein, former Trea- sury Deputy Assistant Secretary for Economic Policy, that found a property triggers losses of approximately $150,000 in the first year of vacancy: $133,000 from reduced property value for neighbors, $14,000 in increased crime, and $1,500 in police and fire department expenses. Jaberi maintained that the best way to reverse course out of this value black hole is the purchase of occupied assets. Just like a leased commercial building is worth more than an empty one, inves- tors are attracted to cash flow, which leads to a more attractive situation for all. "By purchasing an occupied asset, investors can help sellers rid the real estate from their bal- ance sheets sooner, provide the foreclosed family stability in their home, generate a new source of income, and prevent the property from enter- ing the REO process," Jaberi said. "To rebuild communities that have been negatively impacted by foreclosure and to benefit investors is to ensure that every home is quickly purchased by an inves- tor or homeowner who values the real estate and the neighborhood in which it is situated." Affected communities will certainly trade the drifters, grifters, and bystanders for committed investors, both financial and emotional. e buy- and-rent strategy offers a stable of stability: the owners-turned-tenants avoid the uncertainty of having to find new housing and schools, the real estate remains a contributor to the local tax base, and the neighborhood bypasses the debilitating effects of blight and crime. To accomplish this, sellers should first establish a reserve price instead of a list price. Ac- cording to Jaberi, who has servicing experience at Fannie Mae, the reserve price reflects the seller's estimated net proceeds from a standard REO outcome. "If a reserve price is correctly calculated, 80 percent of the time a buyer can be found at a foreclosure sale or in an online auction the day after the foreclosure sale," he added. "Once sold, a buyer that allows the foreclosed family to remain in the home gains an opportunity to earn ad- ditional income from rent the family is now able to afford. When buyers purchase occupied assets and allow the foreclosed borrower to remain in the property, the buyer, the seller, the foreclosed borrower, and the neighborhood win." GET IN THE GAME e foreclosure crisis had a profound and protracted impact across the country. Michael Harris, President and CEO of Glencoe, Illinois- based Exceleras, noted that Detroit, Baltimore, Chicago, Las Vegas, Memphis, Milwaukee, Tampa, Toledo, and Virginia Beach are still struggling with blighted areas filled with aban- doned or REO homes. "Part of making the foreclosure process better is making its impact on communities less cata- strophic," he said. A complex problem such as the foreclosure crisis can lead to complicated solutions, which create more confusion and delays. e joint venture of Exceleras and M2 Asset Services, LLC, has chosen instead to empower communi- ties through their nonprofit partners. Built on Exceleras' DispoSolutions platform and leverag- ing M2's experience, the result brings together the process knowledge and partners, including those in construction and home finance, for the community organizations. "In the past, these organizations have been forced to stand on the sidelines, coaching resi- dents and sometimes administering funds, but never being real parties to the transactions," said Harris. "For the first time, community-based organizations will have the power and the con- nections required to heal neighborhoods. is puts them in the game, giving them even more incentive to ensure wins for everyone." Foreclosure ills go beyond markets or metros to, as NeighborWorks America's Nicole Harmon said, "micropockets" that can be hard to properly target and assess. Struggling homeowners are too consumed by their own mortgage miseries, and major financial institutions aren't inclined or designed to put boots on the ground. Nonprofit community organizations are the ones to effect positive change, which is why Exceleras and M2 Asset Services have provided them a complete default and asset management tech solution to acquire, rehabilitate, manage, and sell real estate. "is is a great opportunity for individual real estate investors to participate in the rebuilding of our communities, and earn a good return while doing it," said M2 Managing Partner Donald Maxwell, who once served as Fannie Mae's Di- rector of National Property Disposition Center. "It allows nonprofits to make more money with their services by having scale and access to the funding required to acquire these properties from sellers, like so many cities that currently own them. Secondly, it puts more people who deserve to be homeowners into homes of their own." ARE WE THERE YET? e National Institutes of Health found that foreclosures adversely affect health and mental health on both the individual and community levels. Although its conclusion certainly is not surprising— stating "programs designed to encourage early return of foreclosed properties back into productive use may have similar health and mental health benefits," – the study does underscore how pervasive the housing problem was and is. All types of solutions are required, from the legislative to the innovative, as are hearts and minds. Jonathan Dever, the Ohio state representa- tive who captained the fast-track legislation in the state, told a story of a city in his district plagued by foreclosures. A councilmember recently called to say that since the new law was put into effect, all the zombie title homes targeted by the city had been fast-tracked and sold. COVER STORY INDUSTRY INSIGHT INDUSTRY INSIGHT INDUSTRY INSIGHT

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