Editor’s note: With experts predicting foreclosures to rise in the next year, many in the industry already have new strategies in place for how they’ll manage this market change. This three-part series explores new technologies in play for lenders, investors and real estate agents who work with foreclosed properties. (See Part 1: Technology brings more competition to foreclosures and Part 2: Web sites streamline foreclosure.)
Like other lenders, Bank of America has invested time and money into mortgage default management systems that work to prevent the bank from having to foreclose on homes.
“We’re very dedicated to putting customers into homes,” said Bob Caruso, national servicing executive. “It doesn’t do us much good to put someone in one and then take them right out of it.”
Nor does it make good financial sense. Foreclosure can be a time-consuming and costly process for lenders, which is one reason why taking someone’s home is used as a last resort. And because of the cost involved, new technologies have sprung up to help lenders better manage defaults and, ultimately, foreclosures. Default management is the process lenders use to handle their delinquent loans.
Experts are predicting a surge in home-loan defaults and foreclosed properties in the coming year. If that holds true, the surge will be the first one since many of these new technologies–which include Web sites dedicated solely to listing foreclosed properties–came on the scene. So it is impossible to predict what role they might play if the housing market gets ugly.
MBA chief economist Doug Duncan doesn’t predict foreclosures as a whole will increase soon, but said having a prevalence of third-party vendors such as Web sites that market foreclosed properties, could help lenders save money on those homes during markets with little price appreciation.
Bank of America doesn’t use any of those sites, Caruso said, instead opting to list foreclosed properties on its own Web sites. The company also lists the properties with almost a network of real estate agents it has created. They’re typically experienced at selling these types of properties and adhere to certain guidelines the bank sets forth, Caruso said.
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And because the bank’s foreclosed properties are still selling fairly quickly–they’re typically on the market less than 90 days–there hasn’t been a need to look at working with sites that market the properties more broadly, he said.
Still, Caruso said, the Web and other technologies have made the entire process more efficient for the bank. Because of the Web, the bank can now communicate with its network of Realtors in a more efficient and timely manner about the properties it has listed. For example, the bank can easily find out how many prospective buyers have viewed the property, along with any comments they offered about it.
The information helps the bank determine what, if anything, it needs to do to help the property sell more quickly and for as high a price as possible. That in turn saves money and time, Caruso said.
“We’re anxious to sell the properties, but we don’t want to give them away,” Caruso said. “But we do want to sell them as quickly as possible.”
Caruso said the bank also saves money through its systems and processes that aim to prevent having to get to foreclosure. The bank utilizes the “early resolution” process, which aims to gather information, such as the financial situation, from borrowers at risk of default and to help determine the best course of action.
And when customers mail in a check, the post office scans an extra barcode the bank has placed on the envelope, which transmits the information to a Web site. The bank can then pick up the information and know which customer has actually sent in money, allowing the bank to focus on other customers who haven’t, he said. And beginning next month, the bank is planning to give customers in default the option of simply speaking and keying in their information when the bank calls them.
That simply makes the entire process more efficient, allowing the bank to move its resources where they’re most useful, he said.
New technology also has driven down lenders’ loan servicing costs and allowed them to use statistics to refine their understanding of which loans are likely to be on time or delinquent, Duncan said. That in turn helps lenders allocate their resources, such as call-center employees, more efficiently and they can focus on cases that require more intervention.
Duncan said a prevalence of third party vendors to help sell foreclosed properties isn’t likely to help lenders save money during strong housing markets. Price appreciation in such markets will help lenders recoup money on those properties.
In periods of stressed property values, however, lenders would likely benefit from having so many different ways of marketing foreclosed properties, he said.
Rick Sharga, VP of marketing for RealtyTrac Inc., said technology has enabled foreclosed or pre-foreclosure properties to sell more quickly than they did in the past. Sites like RealtyTrac benefit lenders by shortening the entire process.
“The fundamental benefit is a reduction in the cost they incur for hanging onto the properties and going through the foreclosure process,” Sharga said.
That’s because properties listed on such sites as RealtyTrac are viewed by tons of potential buyers around the country. Through the site, interested buyers also can get all their mortgage needs lined up and quickly bid on a property, rather than having the home languish on the market.
“It’s a hyper efficient process, really,” Sharga said.
RealtyTrac.com, which is subscription-based, lists both foreclosed and pre-foreclosure properties. The company’s other site, Bankhomesdirect.com, is free for consumers to use, but does not list pre-foreclosures. Lenders may list their properties on either site for free.
Still, Sharga said, a fairly small percentage of the listings come directly from lenders, with most coming from some sort of public record. Since lenders aren’t real estate firms, they may not think about different ways to market their properties, he said. They may also shy away from the idea if they have concerns about customers’ privacy.
Anecdotally, however, lenders’ response to the site has been very positive, especially among those at the “higher end of the technology curve,” Sharga said. More listings are coming directly from lenders and that’s likely to increase as the company improves its ability to track results on specific properties.
That means the company will be able to show lenders exactly how many viewings a listing on the site gets and how quickly it sells, which of course translates to saved money for the lender.
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