Servicers and investors with clear insight into risks and potential costs can make well-informed asset management and disposition decisions in this volatile market.
With delinquencies increasing to 3.94 percent nationally comes the chance that these could translate into foreclosures. Given these conditions, it’s important to be prepared. Asset management and disposition decisions need to be made quickly and confidently, making the ability to accurately predict property preservation costs essential. Additionally, with residential construction costs increasing 1.28 percent, lumber decreasing 1.87 percent and ready-to-mix concrete prices continuing to rise at 1.37 percent, it’s easy to see why clarity on property preservation costs is more important than ever before.
How to get the best results when forecasting costs
Historically, investors have been limited to relying on their own records to calculate high-level averages that might help them forecast these costs, making it easy to miss something and leaving a lot of room for error. Today, you can avoid manual mistakes and uncertainty by using an asset decisioning tool, like EXOS One Marketplace®. Developed by ServiceLink, this technology provides machine-learning-based probability and cost modeling to provide investors and servicers with better information, faster. EXOS One Marketplace offers features like drilling down to the ZIP code level to forecast the likelihood that a particular property might incur expenses for certain damages and issues, giving you a more accurate idea to determine the best disposition path.
EXOS One Marketplace: Insight throughout the default ecosystem
The tricky thing about real estate assets is that they can present many challenges when forecasting and managing property preservation costs depending on where they are in the default cycle since distressed properties that are occupied don’t allow access for conducting proper inspections. Once a property becomes vacant, your field services team needs to know what to prepare for. And of course, when you are considering investing in a new pool of loans, understanding any and all risk is paramount to prudent decision-making. The probability and cost modeling of EXOS One Marketplace cuts through these challenges by providing insight at every stage, together under one platform, on one desktop:
When the property is occupied
For properties that are occupied, there are many things that factor into predicting costs. EXOS One Marketplace can identify potential outlier issues with a high level of accuracy including mold, water damage, roof issues, hazard claim damages, etc., and then estimate the cost of remediation or repair. This eliminates surprises and offers insight into what you may be walking into once the property is vacated. Let’s say, for example, that EXOS One Marketplace predicts that a certain occupied property with several outbuildings and a large lot has a high probability of roof damage and subsequent mold damage, in addition to a large amount of debris that will need to be cleared. Repairs and remediation could very well extend the conveyance time frame and increase the likelihood of penalties. In addition, a potentially large portion of the expense may not be reimbursable by HUD. So if you entertain a qualified offer that’s close to reserve, you might give serious thought to contributing more towards the loan closing rather than having to deal with damage and expose yourself to potentially nonrecoverable expenditures on that asset. Making the decision to choose one path over another is a critical component in this process that can end up being costly if you choose the less optimal path. “EXOS One Marketplace creates a clear picture of the outcome you might expect by applying machine learning and data analytics to loss modeling and property preservation cost projections,” says Anthony Scotese, vice president, product operations, at ServiceLink, of this particular scenario.
When property is (or becomes) vacant
Whether pre- or post-foreclosure, once a property has been vacated and you have a field services team making repairs and maintaining a property, optimize your process using proven technology. “EXOS One Marketplace enables you to flag and keep a close watch on properties with a high probability of certain kinds of damage by providing modeling for anomaly detection,” says Scotese. In this example, a property has no current evidence of water damage, but you know, based on information generated by EXOS One Marketplace, that there’s a high probability of water intrusion. This knowledge enables you to more proactively monitor that risk through property preservation efforts. “If ServiceLink’s field services team were maintaining this property, we would make sure that every time we sent out a work order, we include a note for the contractor to double-check the basement to ensure no such damage exists, and to take corroborating photos. We would proactively manage the risk associated with that asset so that if and when water intrusion occurred, we would be prepared to remediate it, early and quickly — again, in the interest of preventing a larger expense later,” says Scotese.
When due diligence is required
Another perk to EXOS One Marketplace is that it assists you to uncover any high-risk assets and predict their related costs before you acquire the portfolio. This process can be tricky, especially when it comes to making decisions. Scotese adds, “Trying to determine yourself which assets could end up being high-risk for increased property preservation expenses could be where you end up subjecting yourself to losses. Let the product do the work for you.” EXOS One Marketplace could lead you to try to adjust the purchase price, flag the loans once they’re ingested to put the new servicer on notice or reject the pool outright as too high-risk. It can be easy to miss something small with property preservation that can end up costing you more down the road, especially when delays during service transfer cause missed timelines. Damaged properties don’t magically improve on their own, their damage progresses. It’s generally wise to take the loss as early as possible, before it spins out of control. EXOS One Marketplace provides the transparency and insight investors and servicers need to make these decisions earlier in the process than has ever been possible before, saving money, time and effort.
Discover more about EXOS One Marketplace
In addition to probability and cost modeling, EXOS One Marketplace can project the amount of debris that may be at a property post sale, as well as how long it may take to place a property in conveyance condition and get it back to HUD — both of which can translate into significant costs. It provides investors and servicers with functionality and performance beyond property preservation management as well. Eliminate all the extra worrying by utilizing the transparency and insight this technology offers and how it links together ServiceLink’s full suite of default services.
