Mortgage Experts Weigh in on Vacant and Abandoned Properties

Recently, a report from the National Mortgage Servicing Association (NMSA) addressed the issue of vacant and abandoned properties in regard to instituting policies that standardize procedures, definitions, and best practices. The report, which was developed with input from several NMSA member organizations such as Wells Fargo, Bank of America, Bank United, Selene Finance, and others, sparked conversation amongst industry leaders nationwide.

          By Brianna Gilpin | DS News | http://bit.ly/2uEa98L

“I’ve seen the worst of the worst and I’ve seen what vacant properties do to the property itself, the value, and the communities,” said Founder and Chairman of Community Blight Solutions Robert Klein. “I think that no plywood boarding, which has been adopted by Fannie Mae and Freddie Mac and the VA, is definitely a step in the right direction where we don’t advertise vandalism and we don’t advertise vacant properties.”

Based on research, the paper discusses how extended periods of vacancy encourage vandalism, squatting, and violent crime—specifically a 19 percent increase in the number of reported crimes per year within 250 feet of a foreclosed home. Klein explained that the concept of combining all the Government Sponsored Enterprises and determining one format of how the industry will protect and preserve the property issues can be summed up in one phrase: “it’s about time.”

“This should’ve been done years ago,” Klein said. “There really is no reason why we have different GSEs all focused on preserving and protecting vacant properties. Why different guidelines should apply to each problem would make life much easier for preserving and protecting the property, for the communities, for the mortgage servicers, and for the GSEs as well.”

Jim Taylor, SVP of Property Preservation at Wells Fargo and Chairman of the NMSA subcommittee on vacant and abandoned properties, and Gui Kahl, SVP of Wells Fargo Home Mortgage and NMSA representative from Wells Fargo, in a joint statement agreed that implementing these ideas will be beneficial for all.

“Finding common ground through the pursuit of these policy recommendations will create meaningful benefits for the consumer, the communities, and investors,” said Taylor and Kahl. “More importantly, such common ground supports NMSA’s leadership and partnership in the pursuit of our mutual mission to create strong, sustainable, inclusive communities and the quality of affordable homes for all.”

The NMSA wants to define terms such as “occupied,” “unoccupied,” “vacant,” and “abandoned.” Because most times vacant and abandoned properties have to go through the same process as a home that remains occupied by the consumer, the likelihood of properties going into states of disrepair is much higher, resulting in detrimental effects on the consumer and lower property values for the neighborhood. The National Community Stabilization Trust (NCST) said in a unified comment that aligning key definitions, guidance, and best practices across all sectors of the industry and regulatory framework is important to them and they are eager to be a part of it.

“In particular, NCST supports NMSA’s efforts to standardize definitions relating to occupancy status of a residential property,” said NCST. “There is no universally accepted taxonomy across the mortgage servicing industry, and where definitions exist at all, they are frequently in conflict, making it difficult for property preservation managers to ensure that they adhere to all relevant rules.”

Specifically, according to NCST, “vacant” and “abandoned” are used interchangeably too often, and the proposed distinctions are nuanced and useful.

“Of particular benefit is the distinction between “unoccupied” and “vacant” in assessing whether a property should be secured and maintained by the servicer, the former status accounting for scenarios and life events such as a homeowner or lawful tenant’s vacation, sabbatical, or long-term hospitalization,” said NCST. “As NMSA works to build industry consensus for the adoption of these standard definitions, we encourage a collaborative approach that brings together community, consumer and industry voices.”

As the NMSA looks to handle this pressing subject, Five Star Institute President and CEO Ed Delgado said he welcomes additional feedback from industry professionals and experts.

“The issue of vacant and abandoned properties has been at the forefront of the mortgage industry for decades,” said Delgado. “I am pleased to see such a favorable response from the industry towards the NMSA paper, that by design offers real solutions. I look forward to a collaborative discussion with federal agencies, business leaders, and mortgage companies and continuing to work with communities to address such an important subject.”

To view the NMSA white paper, click here.