Q&A with James Harp of Altisource Portfolio Solutions
James Harp is Director of Real Estate Auction Services with Altisource Portfolio Solutions, based in Palm Beach, Fla.
MBA INSIGHTS: The number of bank-owned properties has been on the decline for some time, but there is still a large volume. What can banks and servicers do to make sure these homes are well-maintained and managed so they can be resold?
JAMES HARP, ALTISOURCE PORTFOLIO SOLUTIONS: Ensuring that bank-owned homes are well-maintained and well-managed starts with the selection of the right property preservation vendor. Property preservation vendors are key partners who not only provide maintenance and repair services but can be utilized to proactively escalate emerging issues and local requirements to decrease reputational risks and costs for banks and servicers.
Based on our experience, it's crucial for servicers to screen vendor companies and then continue to keep a scorecard on an ongoing basis to ensure the preservation process is operating correctly and in a timely manner. Servicers should pay attention to their vendor's training and quality control processes. This will provide a leading indicator of the level of service that can be expected from those being dispatched into the field. All this comes down to smart vendor management.
There are also some key elements to consider once the right property preservation vendor has been selected. Sellers should have a rehabilitation strategy in place as part of the disposition strategies. Today, more banks and servicers are utilizing repair and renovation strategies on properties prior to selling them for three reasons: 1) to increase the property value, 2) to increase the buyer pool by making the property eligible for conventional financing and 3) to restore the property to its optimal condition, decreasing neighborhood blight.
The key is being on top of properties prior to foreclosure, working closely with property preservation companies and managing expectations in a timely manner. A streamlined, efficient process should involve the appropriate use of technology, the right vendor selection and the prompt delivery of data to the servicer to make sure everything is running according to plan.
INSIGHTS: With rising real estate prices, banks are looking more closely at real estate valuation. How is this process changing in the current environment?
HARP: Valuation models are better than ever, and here's why: availability of data. There is simply more data--and higher quality data--available to servicers than ever before. As a result, banks and servicers can be much more accurate with their valuation process.
It used to be the case that an organization's approach consisted of sending an appraiser or real estate agent to visit a property every 90 to 120 days. This method left little margin for error and resulted in long holding times if the initial valuation missed the mark.
But now the availability of real-time data is allowing for dynamic valuation models that can be run more frequently. The consistency and accuracy of these models has become much better and is providing servicers the opportunity to maximize sale prices and reduce loss severity. By augmenting a traditional valuation with advanced data analytics, including internal and historical data, servicers can anticipate home price appreciation and depreciation with far better accuracy.
INSIGHTS: Do enough Americans realize that they can buy REO homes through online auction platforms? Can online auctions change the way that Americans think about buying a home affordably? What are the largest barriers to entry for consumers?
HARP: Beside frequent property investors and institutions, there are still many home shoppers who don't realize that they can buy all types of homes through online platforms like Hubzu--or at least, they don't understand that this can be an easy route toward acquiring a more affordable home. Much of this buyer pool is made up of potential buyers who don't invest in properties for a living. While these non-investors are becoming increasingly aware of the auction process, there can be a learning curve.
The largest barrier to entry for consumers relative to the auction process is the fact that many still do not fully understand the process. The non-investor, or one-off buyer, needs to be better educated on the steps in the process and how auctions can benefit them--so they can clearly realize the value and ease of access to homes that auction platforms can provide.
These non-investors often default to the traditional approach of finding a real estate agent and then working with that agent to schedule home tours. What they don't realize is that between hiring an agent and buying a home, they are already doing quite a bit of work on their own by searching for properties online that interest them. Auction platforms, like Hubzu, now make it just as easy to find the right property by providing extensive property information and easy search tools while browsing from the comfort of their home. Further, many of the available auctions on Hubzu will provide full buyer agent commission just like a traditional sale, so buyers with agent representation are not discouraged from participating.
These sales processes, which combine traditional broker representation with online auction technology, are easiest for new auction participants to get ahead of the curve. The good news is that more prospective buyers are becoming aware of this route, thanks to real estate agents who are becoming more accepting of, educated on and involved in the auction process.
In terms of disposing of REO, successful auction platforms have the potential to provide the best market exposure for a property. Hubzu marketing typically combines traditional MLS listings with an online marketing engine to maximize syndication, digital marketing and social media marketing, so banks and servicers are able to reach more buyers than with traditional MLS-only listings alone. Successful companies can target local one-time buyers while also appealing to frequent investors. When this occurs, increased competition drives sale prices higher, resulting in maximum value for the property owner.
INSIGHTS: do you think 2017 holds in store for the mortgage servicing marketplace? Any shifts or major trends on the horizon?
HARP: Many upcoming trends for this year are extensions of what's already happening today. There will be a continued focus on becoming more efficient, reducing timelines and streamlining processes. While implementation of new regulations have been delayed barring direction from the new administration, mortgage servicers must remain compliant with existing regulations and be prepared to adapt to changes that may continue to present challenges across the mortgage servicing marketplace. We saw this over the past year with TRID. In order to clear these hurdles, organizations must ensure that they have the proper infrastructure, technology and training processes in place to absorb and adjust to regulatory changes.
Organizations should also work to educate consumers and borrowers on current, new and upcoming regulations to ultimately make the borrower experience better. This will require increased communication with borrowers as well as the integration of technology and data analytics to streamline processes internally. It also requires providing customers with current and efficient technology and information to use and reference.
Finally, we'll see the continued emergence of what I like to call the marketplace or the deeper and deeper integration of vendors and third parties with banks and servicers. Right now, servicers deal with multiple vendors, which is difficult because they have entry points in many areas.
By creating a more integrated marketplace, every participant will be able to move toward better and more efficient transfer and sharing of documents, and information and data will be collected and analyzed more smoothly. It comes down to finding ways in an increasingly complex space to make the experience better for the borrower through more efficient and integrated processes. By executing more effectively behind the scenes, lenders and servicers will deliver better outcomes for everyone: an improved borrower experience, stronger returns for investors and improved compliance for the regulatory community.