The REO Landscape

SingleSource was founded by Brian Uffelman, Chairman, Brian Cullen, CEO and Andre Lacouture, President. Their friendship began in elementary school and has never wavered since. In 2015, they realized the potential to merge the product offerings of their two companies to create a true one-stop-shop for the industry. The vision and friendship of these entrepreneurs has brought together a strong company culture and created one of the largest privately held vendor management companies. Cullen talked to our editor about the REO space. Here is what he said:

QUESTION: What is the availability of REO inventory?

ANSWER: Right now, we estimate there’s an inventory of roughly 60,000 REO properties nationwide, which is definitely less than normal. Typically, the properties we do see enter REO status have either been vacant or in default for a much longer period of time. This is a direct result of the enhanced incentives provided to mortgage servicers to opt for loan modifications as a preferable alternative to foreclosing on properties.

QUESTION: What role do companies like SingleSource play with vacant properties?

BRIAN CULLEN: After the loan becomes delinquent, companies like SingleSource step in, collaborate with mortgage servicers and investors, and initiate a series of essential steps to manage the property effectively. The first step is determining that a property is indeed vacant, followed by a thorough inspection to determine the property’s condition. We then secure the property by ensuring it is not only safe from unauthorized access, but also protected from potential damages that often arise when a property is left vacant for an extended period. This may involve changing locks, boarding up openings, and removing any hazardous materials or debris.

At that point, we look to the servicer for further instructions and next steps. Depending on the servicer’s goals, we can implement a broad array of integrated services that guides properties from vacancy to sale. This might include conducting property preservation tasks like winterization and lawn maintenance, making necessary repairs, and marketing properties for sale. We can even oversee the negotiation and sales processes and provide closing and title services. We also provide consistent communication and reporting to our clients, including regular updates and insights into each property’s status and progression through the sales pipeline. The goal is to make sure each property receives the proper attention and care needed to protect and enhance its value while resolving issues swiftly and preventing any delays to getting it back on the market.

QUESTION: What are some of the things that servicers need help with?

BRIAN CULLEN: Depending on their existing resources and the size and breadth of their portfolio, mortgage servicers may require a wide variety of assistance. One of the primary areas where they need help is in maintaining the exterior of the property. Properties that have been run down are often a source of neighborhood complaints, particularly when they’ve been left vacant for some time. Exterior maintenance is crucial for preserving the property’s market value and ensuring it doesn’t become a neighborhood eyesore or a target for vandalism. This may encompass things like lawn care, securing doors and windows, and making sure the property is accessible to both inspectors and potential buyers.

Of course, vacant REOs also often require varying degrees of interior work, depending on the state in which the property was left. Some may need minor repairs and basic cleaning, while others may need more extensive rehabilitation or updates, so they meet current market standards. In addition to maintenance and repairs, servicers also often need help ensuring these activities adhere to local, state, and federal regulations, which can be rather complex if they have properties in different states and jurisdictions.

QUESTION: What is your outlook for the volume of REO inventory?

BRIAN CULLEN: Given our analysis of current market trends and the regulatory landscape, we believe that over the next couple of years, the amount of REO inventory could double or even triple. As foreclosure moratoriums are lifted and more forbearance programs come to an end, many properties that were in sort of a holding pattern will likely transition to REOs. In addition, the economic repercussions of the pandemic, combined with higher rates and what has become a challenging economy for many first-time homebuyers, could lead to an uptick in foreclosures. We’re already seeing some signs of this given the recent increase in early-stage delinquencies, particularly among FHA loans.

At SingleSource, we’ve been taking steps to adapt and respond to what we expect will be an increase in REO volume. This includes expanding our capabilities to ensure we continue to provide comprehensive support to our servicing clients, so we can help transform potential obstacles into greater opportunities for new buyers.

QUESTION: If industry players took the right steps, what would you speculate might be the impact on inventory?

BRIAN CULLEN: If all industry stakeholders aligned their efforts, our educated guess is that the inventory of marketable vacant properties will grow three to four times higher during the next two years. However, there’s quite a bit of work needed to make this happen. For one, critical steps need to take place to expedite the transition of vacant properties back to the market. Regulators can play a pivotal role in this sense by adjusting moratorium policies to ensure vacant properties don’t remain in limbo for so long.

If we take the right steps, we can increase the amount of housing inventory, which remains very low and is contributing to today’s high prices. And by reducing the number of neglected properties, we can create stronger communities and enhance the overall health of the housing market while providing more opportunities for buyers. Overall, we have an enormous opportunity to create a more vibrant and balanced real estate market, as long as we’re all willing to put in the effort.

INSIDER PROFILE

Brian Cullen is the CEO and co-founder of SingleSource, a leading provider of property services supporting the U.S. housing industry. Brian’s responsibilities include daily oversight of all aspects of the company as well as various strategic sales and marketing initiatives. He graduated from John Carroll University with a Bachelor of Science in Business Administration and received his MBA from the University of Pittsburgh.