A lot of my Research for Articles comes from good old fashion hard copy. I suppose I am one of the old school folks; I like to touch things, to feel their texture. I read to my 3 year old from the publications sometimes. I like to think that within one of the plethora of neurosynaptic pulses raging within his body some remnant of economics will overpower that of Patrick and SpongeBob and take hold like a lone climber with a grappling hook. Maybe not; perhaps the days of folks like myself drinking coffee and Earl Grey Tea are long gone, maybe the iconoclastic accouterments which seem to litter my spartan desk and constantly invoke the ire of my girlfriend will become the papier-mâché of tomorrow’s Club Kommando.
Regardless, Mortgage Servicing News has been beating a drumbeat lately and driving home a point through their past two months of publications: Servicing is going to return home to the banks. May’s Edition, on page 19 I believe, had an article by Ron Jasgur speaking to the Asset Management (AM) portion. By in large his belief, along with others, is that financial institutions are going to re embrace the sales of their own disasters (my license of the concept) as paying the middlemen has become to costly.
When the foreclosure crisis began, many banks turned to outsourcing asset management functions because they just couldn’t handle the volume and they weren’t equipped with the proper technologies or skill sets. Fewer delinquent loans and more successful loss mitigation efforts ……upstream have slowed the flow of REO, so we’re seeing more and more servicers looking to bring management functions in-house in order to better control costs.
Why bring REO functions in-house? To save money, save jobs and streamline efforts to liquidate REO efficiently and effectively, plain and simple. There’s less administrative oversight and more control over what’s really going on. That means more money in the end for all involved.
The contraction of the Industry is being felt from Top to Bottom. Shanthi Bharatwaj, a Reporter for The Street.com, recently wrote: “Banks are laying off employees to lower costs and boost returns in a difficult operating environment. Bank of America (BANA) is in the middle of laying off as many as 30,000 workers. Citigroup (CITI) said late last year that it would layoff as many as 11,000 workers. Earlier this year, JPMorgan Chase (JPMC) said it will slash 19,000 jobs, mostly from its mortgage banking business.”
We recently reported on Berghorst Enterprises laying off folks. We additionally reported on A&M Recovery pulling out of Tennessee. The end result of the former Company’s actions were the loss of employment for W-2 Employees and the latter Company’s actions resulted in the loss of work for 1099 Subcontractors.
What is different between the financial institutions laying off people; the Clients if you will, and the Property Preservation Industry’s laying off of people is that the financial institutions are transparent in what they do. True irony if you ask me! Even more so problematic neither Berghorst nor A&M wish to discuss anything with respect to their actions. A person purporting to be the Chief Executive Officer (CEO), Andrew Strickland of A&M, did send a one line demand of sorts from his phone. No transparency, none at all.
Fiscal responsibility. The Property Preservation Industry; the large National and Regional Order Mills like to preach this to the Contractors, but it is hard to be fiscally responsible when the very Industry upon which information should be emanating from has entered into a Stealth Mode. Do not think, for a moment, that the financial institutions do not see this Pattern emerging. The one thing banks are keen to is whether or not a Company handling their accounts are financially solvent. Even the perception that a Company is not capable of handling its day-to-day affairs will cause a stampede away from that Company. One would think, then, that it would be ever more so important to be in front of the bus as opposed to being run over by the bus!
As early as 08 May 2013, Kerri Panchuck of HousingWire was reporting on Carrington Holding Company‘s (CARRINGTON) rebranding. In a nutshell, CARRINGTON along with other Large Mortgage Servicing Institutions, were creating a one stop shop for the assembly line model with respect to foreclosed properties. Derrick Logan, on 18 June 2013, wrote an OpEd Piece in HousingWire breaking down the reality with a little more candor,
To remain competitive, companies should strive to provide a cradle-to-grave offering. This should include preservation, rental programs, repair and 24-hour emergency services, short sale closing management, property inspections, asset management, administration services such as HOA, utility management, municipality and VPR services, for a start.
Pay attention to the writing on the wall. We have all been victims of the false stop and start of this industry. The truth is diversifying is taking control of tomorrow and, regardless of whether it means default or origination, merger or acquisition, or some other form of related business model, the time to react is right now. As the competition heats up between asset management firms ahead of what could be a shakeout, those firms that master the cradle-to-grave offering are the most likely winners.
Ultimately, the writing IS on the wall. With Inventory levels at all time lows and Institutional Buyers gobbling up homes like Jaba The Hut, the days of the Regional Order Mills are numbered. Why? Well, Regional Order Mills simply are not capable of doing anything other than moving Work Orders from Point A to Point B. Rare exceptions like ASONS and Inspection Experts, Inc. (IE Inc); firms which have shifted their focus onto General Services Administration (GSA) type Schedules are the exceptions and not the norm. Most Regional Order Mills simply do not have the ability to do much else other than take a bulk of orders from a National Order Mill and then farm them out to Contractors and then reprocess them back. The reality is that most One Stop Shop Models, like CARRINGTON, realized early on that Tech is King; that infrastructure is critical to the movement of data.
Nationals like Safeguard Properties (SGP) have seemed to abandon this concept. In all of my years, I have never seen nor heard of the amount of downtime, coupled with lag time, associated with their Servers. Even when we worked the very few weeks that we did, it was a NIGHTMARE to move simple forms from our computers to their Servers. They additionally, in my opinion, gambled wrong on Richardson, TX.
Data the Crown Jewel, it is ever more so important, to be able to move that data! Foreclosurepedia is both working on an Article and establishing in roads with Google Developers in Kansas City, KS, as well as putting together options for a facility there. Gigabit ethernet folks! This is the future! Did I forget to mention that Google is paying FOR ALL THE INFRASTRUCTURE?! One Stop Shops with the ability to stream ALL the data necessary to ANYONE! One of the Projects we are Consulting upon is the establishment of our ISTAR Database for Investors. This allows for Investors to be able to view the Interior of any Property based upon Contractor’s Inspections. Imagine the ability of an Investor to see the INSIDE of a Property he or she is bidding on! With tight margins for profit and fast bidding on the courthouse steps, this data is PRICELESS! Never fear … we have set a price on it! 😉
So, we are reaching the Twilight of the Regional Order Mills Chapter. Some have reached out to us to Market their voluminous stores of data for our ISTAR Database and others to simply move into the GSA Schedules. Our A Team, a team comprised of Federal Contract Writers (GSA, DoD, DoI, DoE, DoS, USDA, FDIC as well as City and State Contracts), Brokers and Contractors, has been working overtime. It would appear that the only Regional Order Mills not concerned are the very same ones whom believe that cloaking themselves in the Toys-R-Us Invisibility Mode Ring will allow them to weather the proverbial storm.
The United States Marine Corps has a slogan: Improvise, Adapt and Overcome! The Regional Order Mills would do well to study upon that. While I do not know how many of the owners have previous military experience, I have found that the methodologies of the US Military have served me well even as the Industry has turned its back upon me for simply telling the Truth. You see, Truth is Blinding in its Brilliance to the Masses and must only be released in small doses apparently. The proverbial opiate that the High Priests of the Property Preservation Industry seems to be procrastination; by burying their collective heads in the sand, it would appear to the outsider that they hope the ying and the yang will come back into harmony. No Chi for me if you please!