Technology Aids in the Liquidation of REO.

NEW YORK -- In seeking to achieve maximum return on investment on their REO portfolios, most lenders and asset managers focus on obtaining the highest possible sales price. In today's market, industry insiders say technology is being used more than ever to achieve increased effectiveness in the liquidation process.

In order to reduce time and human error, many firms offer REO software management tools that allow for data exchange between the lender, servicing agent, asset manager, property improvement firm, real estate agent, title-company, escrow agent and law firm. REO Wholesale Direct in Coppell, Texas, has developed a proprietary, Internet-based system of data and documentation exchange among all parties. This technology, which has a patent pending, is flexible for customization to a variety of applications, according to Bren Stimpson, chief executive officer and president of RWD.

"Although sales price is important, portfolio managers should perhaps consider more deeply how to optimize portfolio disposition margins, rather than how to obtain maximum sales price on individual properties," said Mr. Stimpson. "It is portfolio margin, not individual property sales price, that creates maximum ROI."

Lenders should determine the total costs of carrying REOs for an average of 100-140 days, for as long as 180 days and more, Mr. Stimpson suggests. Not every lender or asset manager will incur all of these costs. However, portfolio managers should focus on the relationship of reducing time on market through sales price reductions, or using alternative sales channels instead of open market listings or auction transactions, to reduce costs and create greater portfolio margin, he said.

Lenders and asset managers are accustomed to the way things are - the status quo - that it's difficult to think differently, much less "radically different," according to Mr. Stimpson. "True progress results not from incremental changes to an existing system but to creating an entirely different system in order to achieve the same results more rapidly and profitably."

RWD, which serves as a nationwide clearinghouse, claims it can help asset managers, lenders and portfolio servicers to solve a major problem: the increasing rate of foreclosures nationwide. "We have developed relationships with investors who buy REO properties in large quantities, in as-is conditions, at pre-determined fixed prices and all cash with no financing contingencies in 30 days or less.

"Think differently. What would it mean if every month, your entire newly foreclosed property portfolio could be liquidated, reliably, at fixed prices? What costs could you save? What overhead could you eliminate? You could focus less ...