Counsel’s Corner: Difficulty of Forecasting Presents an Ongoing Challenge

Adam E. Codilis is VP and attorney at law for Chicago-based Codilis & Associates. He concentrates his practice in creditor’s rights, mortgage foreclosure, bankruptcy, litigation, and REO transactions. He also works for the firm as a client relationship manager. He had worked for the firm as a law clerk and legal assistant prior to licensing, but joined the firm as an attorney in November 2009. Adam also serves as an Advisory Board Member and Chairperson of the Government Affairs Subcommittee for the Legal League 100 and was appointed to be on the Membership Committee for the Chicago Bar Association. Adam recently spoke with DS News about the difficulty of forecasting in the default servicing space.

What is currently the biggest challenge you are facing in the default servicing industry?

The biggest challenge facing the default servicing industry is forecasting. The default servicing industry has been subject to ever-evolving compliance that impacts each process. Because of this, default servicing law firms have to be experts in federal law, state law, county rules, municipal ordinances as well as individual judge’s court rules. We must balance all of that with the appropriate staff who must have the required understanding of all the rules. Additionally, we have to allocate the right amount of staff to meet all of our clients’ needs and expectations and do so without a clear expectation as to what the volumes will look like next month, next year, and so on. . .

How tough will it be to evolve in step with compliance that is also evolving?

The evolution will be difficult because we don’t have the ability to predict the change. For instance, clients finally got a handle on the CFPB’s new Mortgage Servicing Rules and their application. Then last December, we had another 500 pages of proposed rulemaking amending those rules. Rules are rules—interpreting, comprehending and applying rules is a manageable task. But uncertainty regarding rule changes coupled with uncertainty regarding volumes makes this industry that much more challenging—but we are always up for a challenge.

How has your firm evolved in the last year?

I could talk for hours about our technology, proprietary software, business initiatives and growth model, but all of that would be for naught without our people. Codilis & Associates hires and molds exceptional attorneys and staff that understand the law impacting our clients. As lawyers, the best way to represent your clients is to shape case law. We continue to do that. In fact, our firm is 84-2-1 in our last 87 appeals. We recently argued a case before the Illinois Supreme Court and were also retained to file an Amicus brief on behalf of a government sponsored enterprise.

Foreclosure volume has been declining all over, including in Illinois. What is your firm doing to adapt to the decline?

Grow. With decreasing volumes, clients have the ability to better compare the firms they are using. Codilis & Associates has been fortunate enough to continue to capture more market share in a decreasing market. In addition, we’ve always diversified into other areas of practice and we continue to do so.

Do you think that foreclosure volume has declined to its lowest point yet?

I’m not sure. Like most of us, I get the daily emails from the papers, magazines, and trade/industry organizations. Every day I seem to read two different articles on the same issue going in completely different directions. What I do know is this: volumes have declined, no doubt. But I also think the issue is much more local than everyone discusses and “hitting bottom” will change depending on where you are. In Illinois, some cities/municipalities have recovered and others are still seeing new defaults.

I think it all comes back to the basic economics of supply and demand. Areas in demand seemed to have recovered more favorably. Those that lack demand, continue to see new defaults, workouts and distressed properties. What’s more, mortgage rates continue to be historically low. I’m unsure what an increased interest rate would do to the accessibility of mortgage lending. I also think that if the rates went up and changed affordability, supply and demand would again dictate property values. If those who purchased in the last 4-5 years became underwater, we may see a new default wave.