Editor's note: This feature originally appeared in the November print edition of DS News. Click here to view the full issue.
Ed Mullen manages Cyprexx’s operations divisions, including repairs, REO preservation, property preservation, and inspections. Mullen formerly served as CFO of Cunningham Lindsey Group Limited. He also served as the COO, CFO, and EVP for Broadspire Services, Inc. Throughout his tenure with Broadspire, he was responsible for casualty claim- and medical- management operations, quality programs, information technology, human resources, legal, and financial. Before joining Broadspire, Mullen had a 20-year career at Bausch & Lomb. Initially based in Waterford, Ireland, he was closely linked to operations in the financial roles and undertook in-country international assignments in England and Germany. He moved to the United States in 1988.
Mullen spoke to DS News about the challenges facing the property preservation and
field services industries, lessons learned from the rash of hurricanes over the past several years, and how technology is reshaping property preservation.
What trends and challenges are you seeing within the property preservation and REO spaces right now?
Historically, low default rates are driving current volume. Volume is significantly lower, even below what had become “the new normal” after we worked through the credit default cycle. It’s good news for the world, it’s good news for the economy, but it’s bad news if you’re a field service vendor. These decreased volumes are putting a lot of pressure on vendors, so there has been a higher vendor attrition and turnover rate as field vendors look for other sources of income. We're seeing quite a few of them migrate into construction as construction starts to pick up—either home construction or just general infrastructure. at starts to get tricky in remote areas where you’re relying on a certain volume to feed vendors or keep them interested.
With the leveling off of the inventory that’s in either preforeclosure or REO, quite a few more remote and challenging properties are coming into our book of business. These are properties that require a much higher level of work just to bring them up to standard.
Turn times as properties get into REO have also been very rapid. This could be due to housing demand, where builders pulled back from building new houses coming out of the housing debacle. There’s less maintenance involved, and there’s less risk for the servicers.
We’re also seeing a trend of fewer major repairs happening. Even though some properties are not in great shape, there appears to be an increased market to sell REO properties as-is. We’re seeing more touch-ups, fixing safety issues and code violations but not making significant repairs. Some people may be buying these properties and repairing them themselves, and I think that comes back to changes in the overall market dynamics.
In terms of significant changes then within the larger industry, Fannie Mae has a strategic initiative right now where they’re offering to take responsibility and liability for preforeclosure inspections and property preservation from servicers, if they elect to do it. That could be a real game changer, especially if the other GSEs opt into it. If they can get properties back from the servicers in a quicker fashion, those properties will potentially be in a lot better shape, if and when they go to REO. That would give you a better product because the GSEs would maintain them at their standard throughout the cycle.
Cyprexx and other competitors are leading a roll-out of this strategy, and if it’s successful, then we’ll roll out across all our states. I think you’ll see servicers opting into that program, as it has a significant cash-flow benefit to them.
We’re in the midst of another damaging hurricane season this year. What lessons did the industry take away from what happened during last year’s storm season that you’re seeing applied now?
One thing the industry needs to recognize is that FEMA is a great resource, but it’s limited. It can take quite a while for FEMA to work through the neighborhoods, particularly ones that are not on main arteries or roads. The industry needs to become more proactive as far as clearing away garbage and debris and not just waiting on FEMA to step in. One huge lesson we took away from 2017 was the infamous surge pricing.
We know we have to be responsible for maintaining appropriate spending levels, but we have to keep in mind that pricing during and after a storm is not normal—it’s not business as usual. It happens before the event and afterward. It’s unfortunate, but it’s the reality because resources are scarce. You’ve got field services companies competing with neighbors when the crews show up at a site. Neighbors are walking up to the crews and saying, “I’ll give you cash if you come to my lot first.” We speak to vendors and encourage them not to engage in price gouging, reminding them that we have an ongoing business relationship, but at the end of the day, many of them are using contract labor. We’re trying to secure agreements with key vendors that set a preapproved spending level.
How is technology transforming the landscape of property preservation right now?
There are two exciting areas. One is the access-management software and the other is drone technology. Drone technology is a game changer in areas where it’s difficult to assess roof damage, where you can’t really get up to it or where there’s difficulty in actually reaching the properties in the first place.
Access-management software is related to the whole “internet of things,” and it could help reduce costs for property preservation, especially when you look at digital keyless entry-management systems. It gives you enhanced security because you have more control. It simplifies property management. A keyless environment eliminates all the issues with duplicate keys, theft, and vandalism, and you have an electronic trail of who enters the property. Unfortunately, many of these properties are without power after a storm, and they certainly don’t have WiFi connectivity. Use of a Bluetooth lock is attractive.
As this technology becomes more familiar and people see how easy it is to install,
how easy it is to manage, it will become more widely adopted. You can add vendors from your keyboard in your office. You can grant someone access to properties at selected times of the day. If it’s a maintenance clean once a month, you can schedule it so the lock will only open during those hours. It’s an exciting technology that will provide more control and reduce costs for things such as rekeying. If someone puts a lock on
the wrong door, you can let them back into the property in seconds rather than having somebody to go back out. Eventually, I think you’ll see lockboxes becoming a thing of the past, and that’s good—lock boxes scream that a property is vacant more than just about anything else.
What is one thing you wish more people understood about what you do?
We help maintain property values in the neighborhoods we go into. Blighted properties, boarded-up properties—these can be real value killers for a neighborhood. When we send our vendors in, those guys work in stressful, very tough working conditions, but they can perform miracles on these distressed properties. We’ll have neighbors come up to us and say, “Thank God—at least somebody is taking care of that.” Even in well-kept neighborhoods, it only takes one property to create a negative economic impact.