How to Build a Relationship With the Right Vendor.

As REO inventory increases, some lenders opt to outsource the properties while others opt to avoid inventory pile-up through other methods.

Communication with the servicer should benefit the vendor because not only does the vendor have a chance to work through any problems, but the servicer also can find ways to help the vendor operate more efficiently, according to Allan Martin, CEO of Mortgage Contracting Services.

From an REO property preservation and management perspective, he says this is the time to fine-tune internal processes to place servicers in the best position to manage the delinquent properties that are flooding the market.

"One process that should be examined is the way a company manages its vendor network. Treating these relationships as a company and its contracted employee can lead to disconnected relationships where the proper level of communication isn't maintained," says Mr. Martin. "The best results are produced when vendors are treated as clients. The relationship then becomes a partnership that is based on mutual trust, respect and excellent communication."

He says banks and other servicers have had the luxury of being able to grow and stay ahead of the curve to meet the increased demand of the default market. However, vendors are often small business owners who do not have the financial ability to add staff members and space and then wait for the new business to come, according to Mr. Martin.

"With the current increase in REO volume, many vendors are overwhelmed as they try to scale their operations to meet the new demands."

In today's market, vendors can benefit greatly from a servicer guiding them through how to best respond to the recent growth in the industry, he said. "The relationship then becomes one that has added value for the servicer and cultivates loyalty."