Insurance Exec Finds Gap to Fill With Defaults

The process of foreclosing on a piece of real estate is daunting in detail.

It involves mailing letters, posting public notices and other standardized procedures – which must be done on a strict timetable and to exacting specifications.

The whole process takes about 120 days if all goes to plan, but if there is a hiccup, the routine must be started from scratch. Talk about pressure.

But the way Selina Parelskin sees it, yes, it’s fun.

As founder of Beacon Default Management Inc., Parelskin is hired by banks and other clients to handle the default process for them. Since opening Beacon a year ago February, the firm has handled more than 100 cases. Parelskin, who still works as a title insurance underwriter for Fidelity National Financial Inc., said business is growing quickly.

“I’ve done title insurance and worked in a law firm and you are not learning anything. It becomes rudimentary,” she said. “This is great for me. It’s been very exciting. These deals are big so the mistakes – if you make them – are big.”

Beacon was founded because Parelskin saw a void in the marketplace. While title insurance companies have default divisions, they had been downsized over the last decade as the need decreased during the boom. But as early as 2007, Parelskin realized that the transactional deal work she was doing would slow and most title companies weren’t prepared to handle the coming onslaught of commercial defaults.

Beacon is a paid a fee based on the unpaid principal balance of the loan. It handles nonjudicial foreclosures, which typically involve lenders seeking to take possession of a property. (Judicial foreclosures involve the lender seeking to be made whole for any losses by enforcing financial guarantees made by individuals or business entities.)

The company works with a variety of clients, including banks and asset managers. Clients include Builders Bank, KeyBank and the special loan servicing arms of financial companies such as ING Clarion.

Under the default process, once a borrower becomes 60 days delinquent, the lender can start a foreclosure proceeding by hiring a trustee such as Beacon. Beacon then files a public notice of default, kicking off a strict timetable. After the notice is filed, a series of letters and public postings are sent out, some as soon as 10 days after the default notice.

If the situation is not remedied after several months, the asset can be sold. However, a borrower has until five days prior to a sale to bring its loan current and stave off a sale. If that is not done, the property is sold at auction.

“What’s interesting about their business is that there is a lot of liability they take on if it is not done properly. It’s a hairy job,” said Matthew May, president of retail brokerage May Realty Advisors. “Done properly, they allow entities such as a bank to be able to move forward with a transaction with a clear title.”