REOlytics is a Real Estate Owned (REO) Decision Management Technology

Periodically, the mortgage industry is challenged by significant risks, rewards, and complexities.  The industry typically responds by developing innovative software tools such as when FNMA created the Desktop Underwriter (DU) in response to substantial volume increases and new loan programs saturating the mortgage origination process.

With REOlytics, significant savings are realized with better decisions, increased productivity, better pricing, faster disposition decisions, lower valuation costs, and a forensic record.

Utilizing REOlytics, servicers of REO properties gain an indispensable and easy to use, probability-based, web application that features:

An REO Strategic Management System
Simultaneous Modeling of Multiple Sale Methods
Continuous, Real-Time Property Metrics
“What-If” Testing of User Alternative Assumptions
Case Shiller and Altos Research Granular Data
Investor Basis and Market Vantage Point Analysis
Probable Sale Results: Cash Flow and Gain/Loss on Sale
Calculated Minimum Sales Price
Offer Acceptance Analyzer
Forensic Database
Probabilistic Financial Modeling
Rapid Client Setup and Implementation

Our value proposition is very clear when measured in dollars: 1) REOlytics lowers cumulative appraisal costs; 2) REOlytics lowers staffing requirements; 3) REOlytics improves decisions for an increase in net sales proceeds; 4) REOlytics lowers costs associated with MBS Investor Challenges; 5) REOlytics lowers Regulatory Compliance and Audit costs.

Limited Sales Methods: Most servicers only consider a traditional Realtor listing for disposing a property; this is the way it has always been done, and they do not have the people or the tools for a comprehensive scenario analysis. REOlytics solves this problem. Especially where long absorption times are involved, auction or bulk sale disposition methods may significantly improve the NPV of a property or portfolio resulting in millions of savings for an institution.

Inaccurate Valuation Methods: Most servicers base REO property valuations solely on a broker’s price opinion or independent appraisal.  This method ignores carry costs, absorption times, and fluctuating values. REOlytics solves this problem by augmenting an institution’s valuation with continuous, real-time property metrics: Case-Shiller home price forecasts at zip-code levels and Altos Research absorption times by home price tranches at zip-code levels.

Inaccurate Cash Flow Modeling: The financial models currently used by virtually all servicers are “deterministic” and project property cash flows using an assumed sale date.  In reality, the time it takes to sell a property, once it has been listed, is a probabilistic variable.  Therefore, when the probability of a property selling after being on the market for some specific amount of time is taken into account, the likely cash flows are markedly different.  Now the institutions have cash flow problems in addition to their asset problems.  REOlytics solves this problem with “Probabilistic” Cash Flow Modeling. This “proprietary” finding is extremely powerful for purposes of modeling REO cash flows because, given a property’s absorption time, it allows us to easily generate a probability distribution— using the REOlytic’s Absorption Time Probability Generator (ATPG) module— for the month in which a given property will sell.

In 2008 Jay Ledbetter founded and funded REOlytics while at BRES Advisors.   BRES Advisors engaged The Stratmor Group, The Stahura-Brenner Group, and Deer Valley Asset Management to assist in the development of the REOlytics System.  Collectively, these four firms provided the diverse skills and experience necessary to develop a system such as REOlytics, including broad and deep knowledge of the mortgage and residential real estate industries, strong financial and analytic skills, and the IT skills necessary to transform business requirements and analytic models into a web-based, user friendly, commercial-grade software system.

 

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