Defining Default Property ServicesDecember 12, 2019
Defining Default Property Services
Many times when people refer to property services, they mean the management of real estate that is either being rented or potentially being marketed to sell. This is very different from default property service and default property management.
Typical property management is the operation, control, and oversight of real estate management where an entity has to care for and monitor the asset through its useable life. This is very similar to the management of any business. Additionally, property management is different from mortgage field services in that the property manager owns or leases equipment, tooling, and the physical assets of the property being managed.
Property management involves the processes, systems, and people required to manage the life cycle of all acquired property including acquisition, control, accountability, responsibility, maintenance, utilization, and disposition. Default property services only applies to those properties where a bank has a loan, and that loan is in default.
Default property management for single family properties is generally defined by the following cycle:
- A borrower (called the mortgagor) obtains a loan from a lending institution.
- Often that loan is serviced by the same institution that originated the loan, however it is not uncommon for the originator to sell the servicing rights to another entity. This is mortgage servicing provided by a mortgage servicer.
- The mortgagor typically has an event that causes payments to be missed, this is referred to as a default.
- If the loan is not redeemed and paid to eliminate the default, the property will go through a foreclosure process.
- Once the property is vacant, based on the loan agreement between the mortgagor and the lender, the lender is required to take certain actions to protect the home and prevent blight in neighborhoods.
- These services are referred to as “Default Property Services”.
Default property management to complete property preservation occurs on these vacant properties. These services include what you’d expect to maintain the value of a home. Grass cuts, debris removal, finding water issues, and ensuring the property is secure.
The exact services performed are determined by the GSE (Fannie Mae, Freddie Mac, FHA, VA, USDA) or by the servicer and the loan agreement they have with the mortgagor. Safeguard Properties is the leading mortgage field services company and completes this work all throughout the U.S.
Vacant properties are the focus, the definition of what constitutes a vacancy is defined by the GSE and often by the local governing authority. The mortgage field services companies abide by these laws and requirements to perform their work. This can include requirements to work with code enforcement officials or requirements on what time of day inspections can be performed.
Foreclosure is a legal process in which the mortgagee attempts to recover the unpaid amount of a loan from a mortgagor that has stopped making payments. The mortgagee may recover the amounts owed by forcing the asset to be sold and using those funds to pay the unpaid balance, with the remainder of the funds provided back to the mortgagor.
Usually a lender obtains a firm interest in the home so when they lend the money to the borrower they use the home as collateral in the case of non-payment of the loan. The foreclosure process as applied to residential loans is a bank or other secured creditor selling or repossessing real property after the owner has failed to comply with an agreement between the lender and borrower called a "mortgage" or "deed of trust".
Commonly, the violation of the mortgage is a default in payment of a promissory note, secured by a lien on the property. When the process is complete, the lender can sell the property and keep the proceeds to pay off its mortgage and any legal costs.
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