Visibility Is Key to Making and Justifying Asset Management Decisions
In today’s volatile real estate market, the Consumer Financial Protection Bureau (CFPB), Federal Housing Finance Agency (FHFA) and other regulatory bodies are often asking servicers and investors to show their work on default asset management decisions. Audits take a deep dive into the data and processes, as well as the rationale, behind making one decision versus another to ensure that homeowners are being treated equitably.
Servicers and investors who can offer transparency into their decisions go into these audits with confidence. “The easiest way to demonstrate you have been thoughtful and reasonable in your judgments is to have all of the related information in one central location,” says Yvette Gilmore, senior vice president of Servicing Product Strategy, Default Services, at ServiceLink. “Unfortunately, that’s not always the case. We often hear from those managing the default process that they have very good data and are using it effectively, but because it is housed within several different systems, pulling it all together to justify their decisions can be a complex and time-consuming task.”
Gilmore says that ServiceLink’s EXOS One Marketplace® provides a solution. “EXOS One Marketplace consolidates all of the data in one system. During an audit, you don’t have to pull information from six or seven different systems to provide transparency into your decision-making process,” she explains.
Mandy Zied-Ryan, vice president of Servicing Business Implementation for EXOS One Marketplace, adds that this data consolidation benefits servicers and investors not only when they are being audited but also as they are actively making asset management decisions. “Clients tell us that it doesn’t take just hours, but often days or even weeks, to access and analyze all of the data they need to make a decision. Once they start using EXOS One Marketplace, they have all of that data right at their fingertips, through a comprehensive dashboard view. EXOS One Marketplace also automatically calculates timelines and deadlines important to the decision-making process, eliminating the need for manual calculations.”
A Real-World Example: How EXOS One Marketplace Supports Decision-Making
This example illustrates how EXOS One Marketplace can be used during an audit to justify a default decision:
Two similar properties go to foreclosure and don’t sell. The servicer has the option of repairing the properties and conveying them back to the investor or selling them post sale at a discount. The decision made on one of the properties is to repair; the decision on the other is to reduce the price, take a loss and sell it at auction as a 2nd Chance property.
The auditor questions why the properties were handled differently. Through EXOS One Marketplace, the servicer can pull up a side-by-side comparison of the factors that were considered when each of the two decisions were made. What the auditor sees reflects what the decision-maker saw at the time they were evaluating the choices related to the two properties.
“EXOS One Marketplace helps ensure that all relevant factors are taken into account at the time of decisioning,” Zied-Ryan shares. “The decision-maker can see how much money they have already put into the property, what timelines they may have missed, what they can expect in terms of future expenditures, etc. — everything they need to determine which decision will minimize losses on the property.”
Predictive Modeling Provides Essential Insight
An important part of the decision-making process is understanding potential costs of taking one path versus another. Through its proprietary technology platform, EXOS One Marketplace applies AI, machine learning and data analytics to loss modeling and property preservation projections to provide servicers and investors with a clear picture of the outcomes they can expect in response to their actions or inaction.
“EXOS One Marketplace drills down to the ZIP code level to take property values and repair costs into account,” explains Gilmore. “The decision-maker can see what it would cost to sell an asset today, compared with doing some repairs and selling two months from now. The projections would factor in all of the rehab costs, as well as the lost interest for those two months, to see whether the latter approach would result in a smaller loss than the former.”
Adds Zied-Ryan, “In terms of property preservation projections, EXOS One Marketplace technology considers many factors — property DNA, including beds, baths, square footage and year built, as well as neighborhood data — to calculate the probability of certain damages, such as mold, water or roof damage. It can do this while the property is occupied, which is helpful, because the servicer can anticipate what repair costs may be involved once the property is vacant. They can determine which properties require regular damage inspections to ensure they are adequately protected. And they can set thresholds. For example, if the data model reveals certain properties have an 80% or higher probability of mold, those properties can be flagged. The ability to accurately forecast and quantify repair costs is crucial to making sound asset decisions.”
On the disposition side, EXOS One Marketplace factors in specific information to predict when the disposition will take place and based on that timeline, what losses will be incurred. Information may include the time it takes to foreclose in the state; bankruptcy, loss mitigation or other holds; deadlines for certain actions to take place; redemption (it can take six months in some redemption states for the property to be redeemed, which delays certain actions); and the length of time for an eviction to take place in the state or area. Since some of these timelines can vary, the user can ask for best- and worst-case scenarios: What happens if the homeowner moves out in 30 days? What if it’s 60 days?
“Because all of this data is automatically generated by EXOS One Marketplace, the investor or servicer can manage timelines, project costs, run simulations and determine the ideal disposition path quickly and confidently,” says Zied-Ryan.
Keeping Pace with HUD Guidelines
HUD guidelines can add complexity to the decisioning process, especially because they are constantly evolving. ServiceLink has built the HUD Handbook into its EXOS One Marketplace platform so that up-to-date guidelines, timelines and due dates are right at users’ fingertips. They can also see how much they would need to contribute to get their properties up to HUD standards for conveyance and what costs are claimable under HUD guidelines.
Gilmore points out that this feature can be tremendously helpful in an audit situation. “One of the challenges for servicers is to have to go back to the date of the decision and figure out what HUD guidelines were in effect at that particular moment in time,” she says. “Even if the guidelines have changed several times since then, EXOS One Marketplace will bring up the rules that were in place on that date. That makes it easy to verify that the decision made was HUD-compliant.”
Centralized Platform Supports Decisioning and Audit
All of the features that support EXOS One Marketplace users in asset management decisioning can also help them justify those decisions when they fall under the scrutiny of oversight agencies. “Information related to valuations, title, carrying costs, property preservation expenses, HUD guidelines and more comes together in this industry-leading centralized platform,” says Gilmore. “Our goal is to help forward-thinking servicers and investors mitigate risks, reduce losses and have the ability to share their data and rationale should they be asked to produce it.”