By Joel Davidson, AMP, SVP, ServiceLink
Although default volume is still nowhere near its pre-pandemic level, loss mitigation and foreclosure activities have been picking up steam. Black Knight reported an increase in active foreclosure inventory in February, up 15% from a year ago. While equity appreciation has certainly been a boon to many homeowners, some still struggle to resume mortgage payments in the wake of COVID-19. Should the economic challenges of 2023 continue, and particularly if a recession takes hold, mortgage servicers can expect increasing default momentum.
Navigating this growing volume begins with realigning internal resources (both human and financial), following their temporary shift to forbearance-related issues, to once again focus on properties in various stages of default. But servicers need to look beyond their own walls as well. Having a valuation partner versed in the default process and default properties can be pivotal to servicer success.
The following are three criteria to help you identify your ideal default valuations partner:
1. Servicing Valuations Experience
Servicers know all too well how challenging it can be to get accurate valuations for properties in various stages of default. In many cases, the lender hasn’t seen the property since the loan was originated, when the house was pristine. Now that the property has gone delinquent, and perhaps the borrower has lost pride in ownership, disrepair or simply neglect could come into play. You need an appraiser or broker who knows what to look for — who can focus on that disrepair and the property’s true condition to give you as accurate a valuation as possible.
With this in mind, ServiceLink created a dedicated Servicing Valuation division in the mid ’90s. In the 25+ years that have followed, we built a valuations team specializing in the needs and nuances of default so that servicers can have complete confidence in the valuations they receive.
Our appraisers, for example, are not only licensed, vetted, graded and insured, but also well-versed in inspecting delinquent properties. They often see the results of neglect or outright devastation — circumstances that will require repairs and cleanup to get the property back to its normal condition. This experience, along with specialized training, makes them more adept in estimating as-is and as-repaired values than appraisers who work primarily in the first mortgage space.
Similarly, the brokers we work with through our servicing valuations division are experienced in default property inspections and pricing, so whether they are formulating their own price opinions or working hand-in-hand with our appraisers, they are bringing additional default expertise to the process.
Our servicing valuations support team members are specially trained in default valuations as well, and they hone their expertise through their daily work with our servicer clients. These specialists spend all day, every day, working through default-related issues and requests, so they can not only understand but also anticipate servicers’ challenges and concerns.
2. A Full Suite of Valuation Products
As a loan servicer, you may need a property valuation at any stage in the default process. Early on, while a loan is still performing, an automated valuation model (AVM), desktop valuation asset review, broker price opinion (BPO) or desktop valuation with inspection (DVI) may be ideal, as they can be turned around relatively quickly. As delinquency continues, however, more depth and insight are typically required, through a full traditional appraisal. Finally, as the asset approaches REO status, an REO appraisal, including an REO addendum with both as-is and as-repaired values are likely to be required.
Your valuations partner should offer you solutions every step of the way, helping you understand where you stand in terms of loan-to-value ratio and recovery value, at any given time. ServiceLink’s servicing valuation team ensures that you get precisely what you need, precisely when you need it. You can assess how quickly you need to take action — and what action you need to take — to mitigate losses and comply with state, federal and investor-regulated timelines.
Backed by industry-leading expertise, technology, processes and analytics, as well as stringent quality control, ServiceLink servicing valuations offers:
BPOs – Provided by experienced real estate brokers familiar with the areas where subject properties are located, BPOs can serve as corroborating or stand-alone values. Rules and logic are customizable, based on your needs, and opinions can include both as-is and as-repaired values. BPOs are also, frequently done in bulk transactions for accounting refresh, or pre and post-acquisition due diligence.
Traditional and REO appraisals – ServiceLink’s dedicated servicing valuations appraiser panel conducts traditional appraisals aligned with your unique processes, rules and requirements. Appraisals can include as-is and as-repaired values set to client marketing time direction.
Property Condition Reports (PCRs) – Interior and exterior PCRs provide a detailed assessment of the subject property condition and ample subject photos, as well as the impact of neighborhood characteristics and nearby structures.
Desktop Valuations and other alternative valuations – The desktop valuation with inspection (DVI) and desktop valuation with interior inspection (DVI-I) are often used by servicers to value properties in early phases of delinquency. ServiceLink sends a local real estate broker to inspect the property, complete a property condition report (PCR) and take pictures of the property; then an employee appraiser values the property, leaning heavily on the broker’s inspection report and photos, MLS, online public records and ServiceLink’s proprietary database information. Alternatives to the DVI include the desktop valuation (DV), tie-out reconciliation and desktop review.
Additionally, every ServiceLink valuation report for default and servicing is reviewed by experienced default-specific real estate professionals after the report has been reviewed by our proprietary advanced algorithms including industry best practices and client specifications.
3. National Coverage Through a Single Valuations Partner
When you’re making decisions about how to manage default properties in your portfolio, you need valuation solutions you can rely on time after time, across your entire footprint. ServiceLink’s servicing valuation division provides consistent, high-quality coverage across all 50 states. We can save you time, money and the hassles associated with working with multiple partners, while delivering a level of customer care that is unmatched in the industry.
ServiceLink draws strength and stability from our position as one of the Fidelity National Financial family of companies. FNF’s investments into our technology and people ensure that our processes and analytics exceed industry standards at every turn, and that our vetted, dedicated appraisal panel, our in-house employee desk appraisers, our real estate broker network and our quality control and client service teams know all the ins and outs of servicing and default valuations to give you a real advantage. Get accurate, timely valuations; mitigate your risk; and comply with evolving regulations as you limit costs and holding times.
Given the current economic climate, we can expect to see continuing momentum in delinquency and foreclosure volume, through 2023 and beyond. Equipping yourself now to manage that growing volume is smart; there’s no better time to check out ServiceLink’s servicing valuation offerings. Contact your ServiceLink representative to learn more.