Editor's note: This feature appeared in the May edition of DS News.
Scott Arnold leads Property Preservation and REO operations for Wells Fargo Home Lending Servicing.
Arnold is located in West Des Moines, Iowa. A 20-year veteran in the mortgage services industry, Arnold joined Wells Fargo in 2012. He has held a series of leadership roles in mortgage and consumer lending, including SVP of FHA Servicing, Claims, and Default Accounts Payable at Wells Fargo, Director of Fannie Mae’s National Servicing Organization, VP of Marix Servicing’s Homeowner’s Assistance and REO team, VP of Chase Home Loan Servicing’s Default Operations, and VP of Bank of America Mortgage’s Foreclosure Servicing team.
Arnold spoke to DS News on trends within property preservation and what Wells Fargo is doing to mitigate those challenges.
What are some of the trends changing how the industry approaches property preservation?
There is much greater use of data associated with property condition, location characteristics, and potential loss outcomes that are influencing actions taken to preserve or liquidate assets. Gathering the necessary data early in the default process has become a key focus.
Also, relying solely on a third-party provider to preserve and protect the asset is a thing of the past. Servicers are starting to take more ownership of the activities associated with property preservation to ensure the asset is well preserved, state and local requirements are met, and key milestones are followed up on and executed timely.
What is the role technology plays in how property preservation is done today?
There are a significant number of investor and insurer requirements pertaining to the property preservation process. Creating workflow and/or capabilities to manage these requirements and store the applicable data to “tell the story” has become critical for servicers to reduce exposure and losses.
Getting timely results from inspection or property preservation activity is critical across the business. Connectivity across multiple applications, systems, and vendors can be challenging, but the industry has devoted the time and money to drive more automation that can deliver results from the field to the servicer as quickly as possible.
Overall, what are the main challenges impacting the industry? How does Wells Fargo work to address and mitigate these challenges?
Delinquencies are down and inventory is extremely low. Although this is a great scenario for the economy, it poses other challenges in this industry. Less concentration of properties in an area results in contractors/vendors spending more time driving from property to property.
Additionally, vendor networks have shrunk because there are not as many contractors in the business making it more difficult for timely execution of requested work. Last, inventory today is typically more challenging to preserve because of aging homes, mortgage neglect from deferred maintenance, or abandonment after natural disasters, just to name a few. At Wells Fargo, we have a dedicated team of asset managers assigned to vacant properties to oversee all property preservation activities to make sure the asset is being maintained to all stakeholder’s expectations.
Local municipalities continue to add requirements for reporting and registering vacant and abandoned properties. Many municipalities have specific forms to complete the registration that include various data points pertaining to the property and/or the status of the loan. There is no consistent approach or standard established across the industry. It has become very challenging for servicers or vendors to keep up with updates to the requirements across the country. Most registrations also require a fee, increasing servicers cost to service. At Wells Fargo, teams work with local municipalities to add specific requirements to ongoing reporting as well as controls to ensure timely and accurate registration.
There are significant risks associated with property preservation activities. It’s absolutely critical that a contractor is deployed to the right property to inspect, mow the grass, or even perform necessary repairs. Showing up at the wrong house and taking any action is one of the worst things that can happen in this business. Additionally, even if you ensure the right property is identified, vendors and contractors need to ensure the status of the loan warrants the action that has been requested.
A loan can reinstate, pay off, or be sold to another party that may have taken immediate possession. Timely and effective communication between vendors and servicers is absolutely key to the property preservation process. Wells Fargo provides all vendors a validated photo of the property in which services should be performed. A recent inspection photo is compared to the origination appraisal or other sources to validate that the correct property is identified. This validated photo becomes the profile picture and is included with all subsequent inspections and work orders. To ensure statuses are communicated timely, very specific controls are in place to immediately notify vendors with loan status changes and ensure appropriate cancellation of work is issued.
What is the most rewarding aspect of your role?
Throughout my career, including the time in my current role, I’ve had an opportunity to mentor a significant number of people. Staying connected with these individuals and watching them grow is extremely rewarding for me. There are a number of individuals that come to mind that have been very successful in the industry that I was fortunate enough to have worked within the early stages of their career.