Technology Helps Improve Vendor Management and Performance.

The rapid increase in REO volume has created problems for REO departments at servicers and outsource management companies. Seldom mentioned are the issues that REO agents also face in scaling to meet the rapid rise in REO volumes, which in some regions has grown tenfold over the last year. These REO agents' challenges need to be addressed by servicers if they want these important vendors to optimize their performance and maintain healthy business relationships. New technology can help to improve REO agent management, increase REO agents' efficiency and help them to successfully scale in response to the increasing level of REOs.

REO agents are impacted by spike in REO volumes. Many REO agents have been overwhelmed by the fast-rising REO inventory. However, while they face similar issues to those of REO departments, they lack the necessary automation and IT support, staff and financial resources to fully respond to them. I speak with REO agents across the country each week. Many agents report that they have gone from handling 10 to 20 REOs to 100 to 200 in less than 12 months. These agents have had to scale their REO operations to meet the increased volume by adding people to perform occupancy checks, property preservation, BPOs and closing. Agents that had a team of two or three now have teams of six to 10 people. It takes time for them to recruit the right employees, train them on the REO business and their clients' business rules and then efficiently manage these team members.

The increased REO volume has had a high financial impact on vendors' personnel costs, as well as the money they advance on behalf of their clients for payment of services such as rekey, trash out, lawn cuts and utilities to maintain the property. Agents pay their team's salaries each week but then have to wait 60-90 days in some cases to get reimbursed for REO costs. Some agents have told me that they had to increase the outstanding reimbursable expenses in their REO inventory by $50,000 over the last six months. Expense management is big issue and is straining many REO agents.

How technology can help with the rise in REO volumes: There are several ways that a servicer can use technology to work more effectively with REO agents.

Measuring vendor performance can help to better distribute workload across agents and identify new agents to handle the increased load.

Automating the REO process with workflow to speed assignments, routing, approvals and decisions -- together with converting paperwork to electronic files -- can reduce the time spent per REO by the agents.

Motivating all REO agents to improve their services by making their vendor performance and rankings visible, not only drives better results for REO departments, it also helps agents to increase their competitive advantage.