[Guest]

If you work for a National Service Provider (NSP) and you complete work on FHA properties, your business will go down the proverbial tubes. Please disagree with me if you can share any insight or alternate view. I'll begin by asking you to read an EXCELLENT article on MortgageOrb.com entitled: "Is FHA Claim Processing The Next Servicing Monster?"

Here is the link:
http://www.mortgageorb.com/e107_plugins/content/content.php?content.10897

Here is the link to the referenced analyst note in the article (FHA Claim Denials: The Next Shoe To Drop?):
http://www.thestreet.com/story/11265399/1/mortgage-mess-next-shoe-to-drop-is-fha-analyst.html

The article is long and a little beyond the scope of property preservation however it demonstrates exactly why FHA work is toxic to preservation contractors. To quickly recap some of the finer points:

• 
  * The Federal Housing Authority is insuring more loans than ever
  * The FHA is auditing 100% of the claims - a drastic change from years past
  * The FHA is in financial distress and may cut their losses by denying servicing claims, including claims for preservation work

Here's insight based my observations over the past few years and these articles:

• 
  * The model on which the property preservation industry was built is broken (effectively free lock changes and winterizations? free damage/renovation bids? preservation contractors being accountable for what amounts to a full-out home inspection on nearly every visit?)
  * HUD is actively working to reduce their costs by auditing every claim that is filed and by using inappropriate cost-estimating techniques to determine the amount they will reimburse the banks, NSP's, and ultimately the local preservation contractors
  * HUD has no regard for the discount that NSP's must charge to render their services - they want to pay "fair market value" for preservation services ($250 for a dehumidifier, anyone?) however they fail to consider the enormous expense of managing the services which was traditionally covered by the discount.
  * The NSP's probably locked themselves into contracts where they assure the banks they will incur no preservation-related losses (please correct me if I'm wrong).
  * You-know-what rolls downhill and you, the preservation contractor, is left standing in it

When you think about all of this, it starts to become clear why there are so many bid-cuts. More importantly, this is why you have a huge potential liability for chargebacks. Have you ever seen a HUD chargeback on a property you haven't been to in a year that made no sense? That's because it may have nothing to do with you - it may have something to do with a mistake made by another vendor (who is no longer with the NSP) or by the NSP themselves and an "analyst" or "loss mitigation coordinator" needs to make up for the shortfall somehow.

Have you seen where several NSP's recently limited the liability / E&O insurance carriers they will accept? The NSP's know there will be many more claims and they need to make sure the carriers will cover it. What they don't tell you is how much your premium will jump on the first claim (hint: it's probably a lot).

So, if FHA is insuring an increasing percentage of mortgages while actively working to minimize their losses, where does that leave you? Be very careful with the NSP's and FHA work - I believe it's only going to get worse.

About me
I've been a preservation contractor for a long time and I'm outta-here. I've worked for the siblings, the "safe" company, and several other companies who have acronyms for names. I've been trolling this terrific forum to make sure I have made the right choice and that I'm not missing anything. There are many great contributors on here (mtmtnman, BPWY, and FremontREO to name a few) and I have learned a lot since I discovered this site a short while ago. This is my opportunity to share my observations. Although it's unfortunate I can't point you in a positive direction, hopefully I can at least shine some light on your current direction. Good luck!

 

[Guest]

MFSORACLE,

Nice post...actually one of the best I have seen on any forum.

I hope this is fully understood by the P&P Contractors. As has been wrote many many times "the P&P Contractor IS NOT IMMUNE and we had better take the blinders off". The savvy businessman/woman will understand the flow-down liability that is coming. Its only a matter of time and that time is close.

As all of us with any longevity if the P&P field can attest: we have seen contractors devastated from doing P&P, normally from not understanding the pecularities of this business AND now the servicers will devastate the remaining contractors THUS the reason for trying to recruit EVERYONE that can afford to purchase insurance so they have a place to collect from.

A quote I used to love for P&P but no MORE:
"Only those who will risk going too far can possibly find out how far one can go."
~T. S. Eliot

 

[Guest]

Thanks Fremont!

Something I wanted to highlight about the FHA preservation work - even if it seems like things are rolling relatively smooth now with an NSP, I think the floodgates will open down the line with lots of chargebacks and big problems. HUD is under pressure to cut their losses and the banks and NSP's don't have the cushion they once had to soften the blow for the local guys.

I'm generally an optimistic person and I don't generally say "the sky is falling." However, with regard to FHA preservation work and the NSP's in general, the writing is on the wall - you just need to know how to read it.

 

[Guest]

MFSOracle,
I read both articles you linked to and it reminded me of why I don't read or watch the news. I decided a long time ago that there is absolutely nothing good that I can gain by polluting my mind with all the negative news stories or how bad the economy is or how evil the banks are. In my opinion, those articles were stating the obvious that HUD needs to be less wasteful and more vigilant in holding the lenders accountable. Forget about the fact that in both articles each author was "speculating" about what could potentially happen and how HUD could potentially deal with it. Hell, I thought that HUD was already challenging 100% of the claims.


On a more serious note, I've got to be honest with you. I have a few questions for you that popped into my head right after I read your post and those 2 articles. Please don't think that I am attacking you, because I'm not. I just think it might be helpful to you to think about this from a different perspective. So here is my immediate "knee jerk" reaction to your post:


1) Why is he surfing the internet on a Thursday and Friday afternoon? Shouldn't he be out in the field or doing something to build his business?


2) What is the "real reason" he is publicly "predicting" the collapse of the entire Property Preservation industry? Wait a minute. Why do I get the feeling that he is enjoying talking about all the bad stuff that might happen to an industry where he says he has worked in for" a long time."


3) He can't really be quitting the business because of an article where someone was "speculating" about HUD's financials. What is the real reason?


4) How ironic it is that as he spreads this gloom and doom of a story he proclaims that he is generally optimistic.


I have to pick my son up from school right now but I will continue this if you want.


P.S. I'm sure some of this forum's neighborhood smart as$es will be here soon to cause trouble. So to answer their question (before they even know they are thinking it). about why am I surfing the internet instead of working on this beautiful Friday afternoon. It's because I spent the last few years focusing on building my business so that it mostly runs itself.

 

[Guest]

I know some simple ways they could save money.
1. When someone reports that a roof is in poor condition, shingles cracking and breaking off. Fix it, don't wait for it to leak, the ceiling fall in and mold form (I'm seeing this a lot!
2. When the basement is reported being soaking wet and bid to dry, don't wait 2 months to issue the dry work order. It's pointless at this point and mold is already growing.
That's 2 things I'm seeing happen way too much. It's such a waste of money and really hurts the property value.

 

[Guest]

I know some simple ways they could save money.
1. When someone reports that a roof is in poor condition, shingles cracking and breaking off. Fix it, don't wait for it to leak, the ceiling fall in and mold form (I'm seeing this a lot!
2. When the basement is reported being soaking wet and bid to dry, don't wait 2 months to issue the dry work order. It's pointless at this point and mold is already growing.
That's 2 things I'm seeing happen way too much. It's such a waste of money and really hurts the property value.

Amen to that, was just at one yesterday , completely molded, everything! House sat 14 months wet. Bank asks WHY everything has to be gutted> ? ? ?

 

[Guest]

MFSOracle,
I read both articles you linked to and it reminded me of why I don't read or watch the news. I decided a long time ago that there is absolutely nothing good that I can gain by polluting my mind with all the negative news stories or how bad the economy is or how evil the banks are. In my opinion, those articles were stating the obvious that HUD needs to be less wasteful and more vigilant in holding the lenders accountable. Forget about the fact that in both articles each author was "speculating" about what could potentially happen and how HUD could potentially deal with it. Hell, I thought that HUD was already challenging 100% of the claims.


On a more serious note, I've got to be honest with you. I have a few questions for you that popped into my head right after I read your post and those 2 articles. Please don't think that I am attacking you, because I'm not. I just think it might be helpful to you to think about this from a different perspective. So here is my immediate "knee jerk" reaction to your post:


1) Why is he surfing the internet on a Thursday and Friday afternoon? Shouldn't he be out in the field or doing something to build his business?


2) What is the "real reason" he is publicly "predicting" the collapse of the entire Property Preservation industry? Wait a minute. Why do I get the feeling that he is enjoying talking about all the bad stuff that might happen to an industry where he says he has worked in for" a long time."


3) He can't really be quitting the business because of an article where someone was "speculating" about HUD's financials. What is the real reason?


4) How ironic it is that as he spreads this gloom and doom of a story he proclaims that he is generally optimistic.


I have to pick my son up from school right now but I will continue this if you want.


P.S. I'm sure some of this forum's neighborhood smart as$es will be here soon to cause trouble. So to answer their question (before they even know they are thinking it). about why am I surfing the internet instead of working on this beautiful Friday afternoon. It's because I spent the last few years focusing on building my business so that it mostly runs itself.

Ez,
Thanks for calling me out - I appreciate your skepticism.

I try to stay away from the news as well however I've been keeping a close watch on what's going on in the preservation industry. You're welcome to take the articles as you wish - I would love for someone to share some positive news - however I see the articles as valuable clues in this puzzle. We all "should have" seen the housing bust coming (some did); we all "should have" seen the dot-com bubble getting ready to burst (some did); we all "should have" seen the preservation industry in a free-fall (some do). My intention is not to be a harbinger of doom and gloom - it's to share my struggle to come to grips with the future of this industry, particularly the dangers of touching FHA properties.

Here's some answers to your questions:
1) As I stated - I'm outta here - not building any preservation business - I'm moving in a totally different direction
2) The real reason is altruism - some may find this dialog helpful - everyone is invited to share their own insight
3) I'm not quitting because of the article - I committed to leave this industry a while ago however I can't stop following it - it's like watching a train wreck in slow motion - that's just how I feel.
4) I am optimistic, which is how I survived some really difficult times.

One question for you (and its rhetorical): if you take your gross preservation revenue from last year, subtract your expenses and taxes, and divide that by the number of hours you worked (including time spent thinking about your business), are you thrilled by that hourly rate? Now factor in the potential for ridiculous FHA back-charges. And factor in one (or more) of your clients going belly-up while they owe you too much money.

When I asked myself that question, and answered it honestly, I concluded that I needed to move in a different direction.

 

[Sir Mixalot]

I know some simple ways they could save money.
1. When someone reports that a roof is in poor condition, shingles cracking and breaking off. Fix it, don't wait for it to leak, the ceiling fall in and mold form (I'm seeing this a lot!
2. When the basement is reported being soaking wet and bid to dry, don't wait 2 months to issue the dry work order. It's pointless at this point and mold is already growing.
That's 2 things I'm seeing happen way too much. It's such a waste of money and really hurts the property value.

Amen to that, was just at one yesterday , completely molded, everything! House sat 14 months wet. Bank asks WHY everything has to be gutted> ? ? ?

Yep, seeing a lot of this here in Florida as well.
Heck, I'm seeing mold even if there isn't any water intrusion at all. The humidity is so bad here beachside, that If the power has been cutoff, mold starts to grow within a week without any air conditioning.

 

[BPWY]

2. When the basement is reported being soaking wet and bid to dry, don't wait 2 months to issue the dry work order. It's pointless at this point and mold is already growing.
That's 2 things I'm seeing happen way too much. It's such a waste of money and really hurts the property value.

Amen to that, was just at one yesterday , completely molded, everything! House sat 14 months wet. Bank asks WHY everything has to be gutted> ? ? ?

Hell two months is nothing.


Recently I had one that had water running, active busted pipe.....
I found w/o notes that mentioned the water had been running for 7 to 8 months.
And plenty of others that were left to sit empty and wet.

 

[BPWY]

Thanks Fremont!

Something I wanted to highlight about the FHA preservation work - even if it seems like things are rolling relatively smooth now with an NSP, I think the floodgates will open down the line with lots of chargebacks and big problems. HUD is under pressure to cut their losses and the banks and NSP's don't have the cushion they once had to soften the blow for the local guys.

I'm generally an optimistic person and I don't generally say "the sky is falling." However, with regard to FHA preservation work and the NSP's in general, the writing is on the wall - you just need to know how to read it.

I feel protected from frivolous charge backs because last fall I changed business policies and have not issued a single additional insured on the new one!
From what my agent tells me they don't mess around with frivolous claims, the underwriter will investigate to protect me and their pocket book.

 

[Guest]

MFSOracle,
I read both articles you linked to and it reminded me of why I don't read or watch the news. I decided a long time ago that there is absolutely nothing good that I can gain by polluting my mind with all the negative news stories or how bad the economy is or how evil the banks are. In my opinion, those articles were stating the obvious that HUD needs to be less wasteful and more vigilant in holding the lenders accountable. Forget about the fact that in both articles each author was "speculating" about what could potentially happen and how HUD could potentially deal with it. Hell, I thought that HUD was already challenging 100% of the claims.


On a more serious note, I've got to be honest with you. I have a few questions for you that popped into my head right after I read your post and those 2 articles. Please don't think that I am attacking you, because I'm not. I just think it might be helpful to you to think about this from a different perspective. So here is my immediate "knee jerk" reaction to your post:


1) Why is he surfing the internet on a Thursday and Friday afternoon? Shouldn't he be out in the field or doing something to build his business?


2) What is the "real reason" he is publicly "predicting" the collapse of the entire Property Preservation industry? Wait a minute. Why do I get the feeling that he is enjoying talking about all the bad stuff that might happen to an industry where he says he has worked in for" a long time."


3) He can't really be quitting the business because of an article where someone was "speculating" about HUD's financials. What is the real reason?


4) How ironic it is that as he spreads this gloom and doom of a story he proclaims that he is generally optimistic.


I have to pick my son up from school right now but I will continue this if you want.


P.S. I'm sure some of this forum's neighborhood smart as$es will be here soon to cause trouble. So to answer their question (before they even know they are thinking it). about why am I surfing the internet instead of working on this beautiful Friday afternoon. It's because I spent the last few years focusing on building my business so that it mostly runs itself.

First, you did attack the OP in a very public and real way.

Second, I don't recall seeing the OP state that he/she was getting out of the PP industry solely because the articles he/she posted about.

Third, the local smartas$es as you so eloquently referred to, have many years in the P&P / REO business and are not delusional about its current status, nor are they optimistic about the direction in which it is heading.

This is based on REAL WORLD EXPERIENCE.

A good businessman or woman is constantly monitoring their industry for trends, regulatory changes, litigous and potential loss situations, other avenues of revenue, the cost of doing business, etc.... I could go on and on.

If not, well then, they're just another potential "Titanic Captain".

Based on the links at the bottom of your post it appears that you represent a REO company that's a regional of some sort.

So I ask, could you please post NCRS' current Fee Schedule, its Submitted Bid to Approved bid ratio ( Please take out bids that are cut.), what percentage does NCRS take out on work performed and what mark-up does NCRS apply to submitted vendor bids that are then submitted up the chain?

I look forward to hearing these positive answers as I know that many will find this info useful overall and in the decision process regarding applying to NCRS.

 

[Gypsos]

Third, the local smartas$es as you so eloquently referred to, have many years in the P&P / REO business and are not delusional about its current status, nor are they optimistic about the direction in which it is heading.

This is based on REAL WORLD EXPERIENCE.

Having many years of "REAL WORLD EXPERIENCE" does not give license for uncouth behavior.

I have noticed a trend towards unprovoked sarcasm and insults. To me it rings of a lack of professional decorum.

Regardless of the feelings of some people the industry will not completely collapse. There will always be a need for someone to do this type of work. The trick is to still be standing after the P&P and REO industry finishes reinventing itself.

 

[BPWY]

Regardless of the feelings of some people the industry will not completely collapse. There will always be a need for someone to do this type of work. The trick is to still be standing after the P&P and REO industry finishes reinventing itself.

I didn't take from the original post that he thinks the industry is going away.

Just that there is a potential for A LOT of problems to come down the pike for the contractors. Some real, others not so legit.

 

[Guest]

Having many years of "REAL WORLD EXPERIENCE" does not give license for uncouth behavior.

I have noticed a trend towards unprovoked sarcasm and insults. To me it rings of a lack of professional decorum.

Regardless of the feelings of some people the industry will not completely collapse. There will always be a need for someone to do this type of work. The trick is to still be standing after the P&P and REO industry finishes reinventing itself.

I agree, MakeItEz2GetPd's post was uncouth and lacked professional decorum.

The OP did not target anyone specifically as MakeItEz2GetPd did.

Your response directed at me quite frankly surprises me considering your recent lengthy post in another thread regarding this industry.

It is true that there will always be a need for the P&P / REO industry.

Thus, there's a sucker born every minute to fill those $12 grass cuts, $45 winterizations, $12 per cubic yard (regardless of weight or material) orders etc. etc. etc...

I had a major National tell me that they had been in business for many, many years and in the same breath that they are always looking for new vendors. RED FLAG, RED FLAG, RED FLAG....

My question to them was why if you have been in business for several decades are you still in search of good vendors? The silence was deafening. They burn'em and churn'em... Many have commented about this very company on this forum.

For the record, your other post about the industry was spot on.:thumbup:

 

[HollandPPC]

Every industry has its problems. This industry seems to be particularly sour. Whether it be the con artist nation, regional, or disgusting puke who calls himself a contractor. This forum all too often is the sounding board for hacks complaining about being screwed by hacks. Its amazing the crap that finds its way on this board sometimes.

 

[Guest]

I think people in our industry don't having anyone in their lives who can even begin to understand how things work. So I think this forum is used a lot for venting, venting to people who know exactly what you are talking about and understand. I think there are many frustrated contractors and this forum is their only outlet. That's my view on it anyways.
Maybe we should have a new thread just for venting because I know there are contractors who don't want to hear it. Just a thought.

 

[HollandPPC]

I think people in our industry don't having anyone in their lives who can even begin to understand how things work. So I think this forum is used a lot for venting, venting to people who know exactly what you are talking about and understand. I think there are many frustrated contractors and this forum is their only outlet. That's my view on it anyways.
Maybe we should have a new thread just for venting because I know there are contractors who don't want to hear it. Just a thought.

I do agree you on that one.

 

[Guest]

It's not only the PP/REO contractors that are getting the screws put to them, it's also affecting the bottom line of the Brokers. I do alot of work (and get a % of there commission) for one of the bigger brokers in my area and they are getting squeezed on their commissions. A couple of their accounts went from a min. of $1000.00 per listing to $500.00 (these are for the toads that sell for less than $25000.00). It seems that there is no end to who and how the banks and Gov. insured morgage institutions will cut to the bone. I do see that things aren't getting better for us in the field, and the pressure is in the office as well.

 

[GTX63]

It's not only the PP/REO contractors that are getting the screws put to them, it's also affecting the bottom line of the Brokers.

You can add the appraissers to that list as well.
They have had their rates gashed for the work they do on the REO side.
In the private sector, the Dodd Frank bill put a whole lot more work on their backs and who pays for it? Why, you will, at your closing.

 

[Gypsos]

I agree, MakeItEz2GetPd's post was uncouth and lacked professional decorum.

The OP did not target anyone specifically as MakeItEz2GetPd did.

Your response directed at me quite frankly surprises me considering your recent lengthy post in another thread regarding this industry.

It is true that there will always be a need for the P&P / REO industry.

Thus, there's a sucker born every minute to fill those $12 grass cuts, $45 winterizations, $12 per cubic yard (regardless of weight or material) orders etc. etc. etc...

I had a major National tell me that they had been in business for many, many years and in the same breath that they are always looking for new vendors. RED FLAG, RED FLAG, RED FLAG....

My question to them was why if you have been in business for several decades are you still in search of good vendors? The silence was deafening. They burn'em and churn'em... Many have commented about this very company on this forum.

For the record, your other post about the industry was spot on.:thumbup:

I was not trying to direct an attack at you personally. Sorry if it seemed that way. I just have a cold right now and am a bit grumpy. I find it a bit disconcerting that when someone asks a question, especially new guys, they get sarcasm instead of an honest helpful reply.

I have ignored it so far, but it does get a bit annoying to hear everyone working for what is considered a cheap price called a hack or some other such derogatory comment.

And if you mention that you work for a national and are subcontracting work for $25 a cut... OMG let the flaming begin.

Really? It is called capitalism. I sub yards for $25 per cut and I do not advertise for the help. People who know I do this for a living want to feed their kids and they have asked me if they could sub work from me. I am honest and explain that all I can pay is $25 a yard.

One guy is thrilled to get that. He already has a lawn business and has saturated his market area and has not been able to grow significantly in that last couple of years. I showed him what I get and offered to help him sign up as a vendor with my customer and show him the ropes. He has all the correct insurances.

His standard price is $25 per yard so he is happy to work for me. So does that make me a hack? Am I now part of the problem? Or did I make it possible for someone to earn more than a subsistence income for his family by providing him work at a rate that he is happy to recieve?