Altisource Study Looks at Default Servicing Trends

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Altisource Portfolio Solutions’ new “The State of the Default Servicing Industry” report contends that despite historically low delinquency rates, servicing professionals expect delinquency rates for certain loan types to grow – specifically FHA and private-lender loans.

Separately, vendor performance is becoming increasingly challenging as portfolios shift to rural areas and vendor pools for distressed loans and properties continue to diminish during this strong economic environment.

Nearly one-quarter (22%) of respondents to Altisource’s fourth-annual Default Servicing Survey said their biggest challenge when managing vendors is vendor performance; 17% cited costs, and another 17% cited strategic alignment.

When evaluating a vendor to manage their default portfolio, a significant majority of servicing professionals surveyed (96%) said property preservation and inspection is a leading consideration; 95% pointed to end-to-end default disposition capabilities, and 94% cited a strong marketing platform/marketing scale.

Due to the increasingly complex requirements around vendor management and vendor oversight, servicers are looking to vendors that can manage multiple pieces of the default lifecycle (i.e., REO asset management, property inspection and auction services) and that can seamlessly integrate with their current technology platforms.

An overwhelming majority of servicing professionals surveyed (94%) said their organization is likely to select a single-vendor approach to managing the default lifecycle. 

Of the servicing professionals surveyed, 89% cited they are currently using online auctions (up from 76% in 2018) as part of their long-term strategy for asset disposition, and 72% would like to do more online auctions (up from 50% in 2018).

According to the report, online auctions appear to have proven to be the best way to engage the broadest set of bidders and buyers because they allow bidders from all over the U.S. to easily engage in the auction. Because of this, more bidders are ultimately participating and competing against each other, which produces higher bids for sellers than would be achieved offline where not all buyers in the market are participating.

“The survey uncovered many industry insights, including vendor management challenges and the importance of online auctions as a disposition tool,” says Patrick G. McClain, vice president, enterprise sales, for Altisource.

“With historically low delinquency rates, we may see a higher rate of FHA defaults in markets experiencing economic turmoil with little housing liquidity, such as rural areas. In addition, servicers are using a single-vendor approach to manage multiple pieces of the default lifecycle to help mitigate losses and streamline efforts,” he adds.

To access the full report, click here.

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