There is a famous quote that has been attributed to Abraham Lincoln that states, “Give me six hours to chop down a tree and I will spend the first four sharpening the ax.” Whether or not he said it is up for debate, but nonetheless, it is interesting because it highlights the importance of being prepared. In this case, no matter how strong you are, if you do not prepare your ax by sharpening it, chopping down the tree will be nearly impossible.
The same can be applied to business, especially in the mortgage servicing and property preservation industry. Over the past few years, we have experienced a downturn in volume, allowing time to adjust business practices and prepare for fluctuations in the market. It also has given us an opportunity to adjust processes for the latest crisis, the COVID-19 pandemic.
COVID-19 and other major disasters have taught us that our playbook is always in need of modification, just like the 2008 housing crisis helped us prepare. We can plan for the future, but we have to maintain the flexibility to adjust when a curveball comes our way.
Planning is great when things go as predicted but being prepared is imperative for when things do not go as planned. Property preservation companies need to remain focused on what is next, relying on what we learned from prior events to be prepared for anything in the future.
Educate
An important factor in remaining prepared is educating your company on things like market conditions, lessons learned, government guidance and other key indicators that will signal change.
Ensuring you understand current market conditions will help drive business needs. Things like foreclosure and eviction forbearances, unemployment, elections, and COVID-19 relief bills can factor into where the economy currently is headed. It also indicates potential volume fluctuations for defaulted loans. Successful property preservation companies need to have the ability to scale up to accommodate spikes in volumes.
Another method for remaining equipped is establishing protocols based on lessons learned from past experiences. The 2008 housing crisis taught mortgage servicers and property preservation companies that routine inspections and being flexible enough to scale your business were necessary. It also highlighted the need for maintaining close partnerships with municipalities and code enforcement officials across the country to ensure potential violations were addressed in a timely manner. The crisis exposed some of the weaknesses within the already-established systems and processes that needed to be altered in the event something like this would happen again.
Stay informed of updates from the investors and government-sponsored enterprises (GSEs) is most critical in remaining prepared. Things can happen quickly and change often when volumes increase or there is a significant change in the market. Things to be aware of include inspection requirements and new servicing guidelines, like those recently released by the FHA. Additionally, try to identify the key indicators that will signal any changes in the market. You will need to know where to find that information and how to apply it to your day-to-day operations.
Assess and Understand
Once the education part of preparedness is complete, servicers need to assess your current operations and understand what changes need to be implemented to remain prepared. Ask questions like:
– What is our current property preservation strategy?
– Do we have the right allowables in place?
– Do we have the right or enough vendors?
– Do our vendors understand current conditions?
– How are our vendors performing today?
– What are the steps and how long does it take to on-board a new vendor in my organization?
– Does our field service provider have a plan to scale capacity?
These items are critical when scaling up in the event of a significant increase in volume. Your property preservation provider must be able to recruit qualified vendors, train them properly and get them in the field quickly. The company also needs to have the proper controls in place to ensure work is completed on time and with consistent quality. The most innovative technology must be in place to ensure contractors are at the correct properties and have the ability to report results quickly.
Maintaining good relationships and open lines of communication are other dynamics to consider when preparing for market shifts. Communicate openly and often to ensure your property preservation company has all of the information it needs to protect your portfolio. Customer service is always imperative, but especially in times of change. Check in with your contacts and collaborate on process improvement. Maybe they can help you sharpen that ax to remain prepared for anything.
Published in the Property Preservation Executive Forum (Fall 2020 Newsletter)