Alan Jaffa Comments on Assets Exiting Bank Books

On February 18, Crain’s Cleveland Business published an article titled More Problem Assets Exit Bank Books.  In it, Safeguard’s Alan Jaffa, CEO, is quoted explaining how assets may be off the bank’s books but in another entity’s portfolio.

More problem assets exit bank books

Number of foreclosed properties owned by most local financial institutions is falling

The volume of foreclosed properties owned by most local banks fell last year by double-digit percentages, in some cases by the steepest rates since the foreclosure crisis struck — a corner bankers say was turned thanks to an improving real estate market and fewer properties going into foreclosure.

Institutions big and small reported that they carried as of Dec. 31 the lowest level of foreclosed property since at least 2010, which observers say should mean fewer vacant homes in neighborhoods and more lending by banks less burdened by foreclosed assets.

“Some of the problems banks have been wrestling with for four or five years are being resolved,” said Charlie Crowley, an investment banker who works primarily with financial institutions. “It’s good for profitability, and also a sign … that more (consumers) are probably getting their debts under control.”

KeyCorp’s foreclosed assets were valued at $22 million as of Dec. 31, down 66% from $65 million at Dec. 31, 2011, and down 83% from $129 million at Dec. 31, 2010, according to public filings.

Others shedding problem assets include regional giant Columbus-based Huntington Bancshares Inc., which reduced its portfolio by 27% in 2012 and by 42% in 2011, and tiny Middlefield Banc Corp., which trimmed its foreclosed assets by 16% last year.

Similar improvement during 2012 was reported by LNB Bancorp Inc. and Cincinnati-based Fifth Third Bancorp, according to data from SNL Financial.

“Overall, the (real estate) market has stabilized,” said Dale Clayton, senior vice president and national manager of the asset recovery group for KeyBank. “We still have consumer mortgages (in foreclosure) … that will continue to be higher than average until employment rates improve, (but) our bank is pretty much through the real estate crisis.”

One exception is PNC Financial Services Group Inc., which acquired Cleveland-based National City Corp. in 2008: Its line item for “other real estate owned” — or OREO, the term for foreclosures in bank filings — has increased every year since 2007 and stood at $920 million at Dec. 31, 2012, up 5% from $876 million as of Dec. 31, 2011, and up 10% from $835 million as of Dec. 31, 2010, SNL reported.

Industrywide, aggregate OREO stood at $38.5 billion as of Dec. 31, 2012, down 16% from $46 billion the year before and down 27% from $52.6 billion as of Dec. 31, 2010, according to SNL.

Investors pounce

The industrywide decline in OREO portfolios largely is the result of the improving housing market, which observers say is firming up housing prices and increasing sales.

“This has been mostly a real estate-led recovery as opposed to a jobs-based recovery,” said Tim O’Dell, CEO of Central Federal Corp., the Fairlawn parent company of CFBank.

Although the company hasn’t reported its year-end numbers for 2012, Central Federal’s foreclosed assets fell 47% to $2.4 million on Dec. 31, 2011, from $4.5 million as of Dec. 31, 2010.

When banks foreclose on properties, they write them down to appraised levels, said Mr. Crowley, a Cleveland managing director for Philadelphia-based Boenning & Scattergood Inc. In recent years, there were not always buyers of the properties even at those levels, and banks “were reluctant in many cases to recognize steeper losses than they had already taken,” which would have happened had they sold properties below their appraised values, Mr. Crowley said.

And if the banks’ capital levels were stretched, they were even less inclined to take bigger hits by selling properties, he noted.

“Now that the real estate market has recovered somewhat, it is much easier for these banks to sell OREO properties without significant additional losses,” Mr. Crowley said. “Also, as the banks have boosted their capital levels over the last couple of years, they are able to tolerate additional losses in some cases just to get rid of problems.”

Mr. O’Dell agreed that buyers had been scarce.

“There were times that, even if you were willing to sell a property at a significant discount, there just weren’t many buyers out there,” he said. “We have seen the return of interested buyers in these properties. It gives us confidence to go out and make new loans.”

KeyBank’s Mr. Clayton said there is “significant capital in the market that continues to chase distressed real estate assets.” When investors are buying up more distressed loans and commercial notes, fewer of those distressed assets end up in foreclosure, Mr. Clayton said.

“Lenders, not developers’

Fewer foreclosed assets on their books saves banks money, as foreclosed properties are expensive to own, Mr. Clayton said. The average lifetime cost to hold and sell such assets, Mr. Clayton estimated, is 10% to 12% of their value.

A bank’s costs include the hiring of property managers and the engagement of brokers to sell properties; all the while, the foreclosed assets aren’t earning the interest they were supposed to glean.

A number of institutions noted in their earnings releases last month that their noninterest income increased, in part, because their costs associated with “other real estate owned” had decreased.

“We’re not really good owners of real estate,” Mr. Clayton said. “We’re lenders, not developers.”

KeyCorp’s other real estate owned portfolio now is at a normalized level, Mr. Clayton said, and that returns capital to the bank for other uses, such as lending.

It also means a cut to the related work force: KeyCorp’s full-time-equivalent workout employees — or those who modify and manage nonperforming assets — are down two-thirds from the staff’s height in 2009 and 2010, Mr. Clayton said. Some of those employees are commercial lenders who now have returned to making loans.

“The struggle now is how do you reduce staff as quickly as you reduce assets and be as efficient as possible,” he said.

The decline in foreclosed properties on bank books is a very positive development, said Kevin T. Jacques, who for 14 years worked for the U.S. Department of the Treasury and now is the Boynton D. Murch Chair in Finance at Baldwin Wallace University.

“It should mean the worst of that should be over, and we can begin to start to see fewer vacant properties and a stabilization of our neighborhoods,” Dr. Jacques said.

“Is this sustainable? Depends on two things,” Dr. Jacques added. “One, how large is banks’ remaining inventory of OREO, and two, what happens to the national and regional economy in 2013?”

Off the books

Contrary to many banks’ balance sheet numbers, Safeguard Properties, a Valley View company that maintains defaulted and foreclosed properties for mortgage servicers, is not experiencing a decline in the total number of foreclosed properties and expects volumes to remain consistent for the next couple years, CEO Alan Jaffa said.

A decrease in the number of foreclosed properties on a bank’s balance sheet does not necessarily mean the property is no longer an unsold foreclosure, he wrote in an email. That’s because some properties — particularly those with government-sponsored investors and those with government-backed loans — are conveyed to those investors after a foreclosure is completed.

“The property may no longer be on the bank’s books, but may be an (OREO) in a different entity’s portfolio,” Mr. Jaffa said.

He also noted that Safeguard Properties is not seeing a decrease in default rates and in the number of properties in default 120 days or older, which Mr. Jaffa said often are “predictors of future foreclosure filings.”

To view the online article, please click here.

About Safeguard 
Safeguard Properties is the largest mortgage field services company in the U.S. Founded in 1990 by Robert Klein and based in Valley View, Ohio, the company inspects and maintains defaulted and foreclosed properties for mortgage servicers, lenders,  and other financial institutions. Safeguard employs approximately 1,700 people, in addition to a network of thousands of contractors nationally. Website:



Alan Jaffa

Alan Jaffa is the chief executive officer for Safeguard, steering the company as the mortgage field services industry leader. He also serves on the board of advisors for SCG Partners, a middle-market private equity fund focused on diversifying and expanding Safeguard Properties’ business model into complimentary markets.

Alan joined Safeguard in 1995, learning the business from the ground up. He was promoted to chief operating officer in 2002, and was named CEO in May 2010. His hands-on experience has given him unique insights as a leader to innovate, improve and strengthen Safeguard’s processes to assure that the company adheres to the highest standards of quality and customer service.

Under Alan’s leadership, Safeguard has grown significantly with strategies that have included new and expanded services, technology investments that deliver higher quality and greater efficiency to clients, and strategic acquisitions. He takes a team approach to process improvement, involving staff at all levels of the organization to address issues, brainstorm solutions, and identify new and better ways to serve clients.

In 2008, Alan was recognized by Crain’s Cleveland Business in its annual “40-Under-40” profile of young leaders. He also was named a NEO Ernst & Young Entrepreneur of the Year® finalist in 2013.


Chief Operating Officer

Michael Greenbaum

Michael Greenbaum is the chief operating officer for Safeguard. Mike has been instrumental in aligning operations to become more efficient, effective, and compliant with our ever-changing industry requirements. Mike has a proven track record of excellence, partnership and collaboration at Safeguard. Under Mike’s leadership, all operational departments of Safeguard have reviewed, updated and enhanced their business processes to maximize efficiency and improve quality control.

Mike joined Safeguard in July 2010 as vice president of REO and has continued to take on additional duties and responsibilities within the organization, including the role of vice president of operations in 2013 and then COO in 2015.

Mike built his business career in supply-chain management, operations, finance and marketing. He has held senior management and executive positions with Erico, a manufacturing company in Solon, Ohio; Accel, Inc., a packaging company in Lewis Center, Ohio; and McMaster-Carr, an industrial supply company in Aurora, Ohio.

Before entering the business world, Mike served in the U.S. Army, Ordinance Branch, and specialized in supply chain management. He is a distinguished graduate of West Point (U.S. Military Academy), where he majored in quantitative economics.



Sean Reddington

Sean Reddington is the new Chief Information Officer for Safeguard Properties LLC. Sean has over 15+ years of experience in Information Services Management with a strong focus on Product and Application Management. Sean is responsible for Safeguard’s technological direction, including planning, implementation and maintaining all operational systems

Sean has a proven record of accomplishment for increasing operational efficiencies, improving customer service levels, and implementing and maintaining IT initiatives to support successful business processes.  He has provided the vision and dedicated leadership for key technologies for Fortune 100 companies, and nationally recognized consulting firms including enterprise system architecture, security, desktop and database management systems. Sean possesses strong functional and system knowledge of information security, systems and software, contracts management, budgeting, human resources and legal and related regulatory compliance.

Sean joined Safeguard Properties LLC from RenPSG Inc. which is a nationally leading Philintropic Software Platform in the Fintech space. He oversaw the organization’s technological direction including planning, implementing and maintaining the best practices that align with all corporate functions. He also provided day-to-day technology operations, enterprise security, information risk and vulnerability management, audit and compliance, security awareness and training.

Prior to RenPSG, Sean worked for DMI Consulting as a Client Success Director where he guided the delivery in a multibillion-dollar Fortune 500 enterprise client account. He was responsible for all project deliveries in terms of quality, budget and timeliness and led the team to coordinate development and definition of project scope and limitations. Sean also worked for KPMG Consulting in their Microsoft Practice and Technicolor’s Ebusiness Division where he had responsibility for application development, maintenance, and support.

Sean is a graduate of Rutgers University with a Bachelor of Arts and received his Masters in International Business from Central Michigan University. He was also a commissioned officer in the United States Air Force prior to his career in the business world.


General Counsel and Executive Vice President

Linda Erkkila, Esq.

Linda Erkkila is the general counsel and executive vice president for Safeguard and oversees the legal, human resources, training, and compliance departments. Linda’s responsibilities cover regulatory issues that impact Safeguard’s operations, risk mitigation, enterprise strategic planning, human resources and training initiatives, compliance, litigation and claims management, and mergers, acquisition and joint ventures.

Linda assures that Safeguard’s strategic initiatives align with its resources, leverage opportunities across the company, and contemplate compliance mandates. Her practice spans over 20 years, and Linda’s experience covers regulatory disclosure, corporate governance compliance, risk assessment, executive compensation, litigation management, and merger and acquisition activity. Her experience at a former Fortune 500 financial institution during the subprime crisis helped develop Linda’s pro-active approach to change management during periods of heightened regulatory scrutiny.

Linda previously served as vice president and attorney for National City Corporation, as securities and corporate governance counsel for Agilysys Inc., and as an associate at Thompson Hine LLP. She earned her JD at Cleveland-Marshall College of Law. Linda holds a degree in economics from Miami University and an MBA. In 2017, Linda was named as both a “Woman of Influence” by HousingWire and as a “Leading Lady” by MReport.


Chief Financial Officer

Joe Iafigliola

Joe Iafigliola is the Chief Financial Officer for Safeguard. Joe is responsible for the Control, Quality Assurance, Business Development, Accounting & Information Security departments, and is a Managing Director of SCG Partners, a middle-market private equity fund focused on diversifying and expanding Safeguard Properties’ business model into complimentary markets.

Joe has been in a wide variety of roles in finance, supply chain management, information systems development, and sales and marketing. His career includes senior positions with McMaster-Carr Supply Company, Newell/Rubbermaid, and Procter and Gamble.

Joe has an MBA from The Weatherhead School of Management at Case Western Reserve University, is a Certified Management Accountant (CMA), and holds a bachelor’s degree from The Ohio State University’s Honors Accounting program.


AVP, High Risk and Investor Compliance

Steve Meyer

Steve Meyer is the assistant vice president of high risk and investor compliance for Safeguard. In this role, Steve is responsible for managing our clients’ conveyance processes, Safeguard’s investor compliance team and developing our working relationships with cities and municipalities around the country. He also works directly with our clients in our many outreach efforts and he represents Safeguard at a number of industry conferences each year.

Steve joined Safeguard in 1998 as manager over the hazard claims team. He was instrumental in the development and creation of policies, procedures and operating protocol. Under Steve’s leadership, the department became one of the largest within Safeguard. In 2002, he assumed responsibility for the newly-formed high risk department, once again building its success. Steve was promoted to director over these two areas in 2007, and he was promoted to assistant vice president in 2012.

Prior to joining Safeguard, Steve spent 10 years within the insurance industry, holding a number of positions including multi-line property adjuster, branch claims supervisor, and multi-line and subrogation/litigation supervisor. Steve is a graduate of Grove City College.


AVP, Operations

Jennifer Jozity

Jennifer Jozity is the assistant vice president of operations, overseeing inspections, REO and property preservation for Safeguard. Jen ensures quality work is performed in the field and internally, to meet and exceed our clients’ expectations. Jen has demonstrated the ability to deliver consistent results in order audit and order management.  She will build upon these strengths in order to deliver this level of excellence in both REO and property preservation operations.

Jen joined Safeguard in 1997 and was promoted to director of inspections operations in 2009 and assistant vice president of inspections operations in 2012.

She graduated from Cleveland State University with a degree in business.


AVP, Finance

Jennifer Anspach

Jennifer Anspach is the assistant vice president of finance for Safeguard. She is responsible for the company’s national workforce of approximately 1,000 employees. She manages recruitment strategies, employee relations, training, personnel policies, retention, payroll and benefits programs. Additionally, Jennifer has oversight of the accounts receivable and loss functions formerly within the accounting department.

Jennifer joined the company in April 2009 as a manager of accounting and finance and a year later was promoted to director. She was named AVP of human capital in 2014. Prior to joining Safeguard, she held several management positions at OfficeMax and InkStop in both operations and finance.

Jennifer is a graduate of Youngstown State University. She was named a Crain’s Cleveland Business Archer Award finalist for HR Executive of the Year in 2017.


AVP, Application Architecture

Rick Moran

Rick Moran is the assistant vice president of application architecture for Safeguard. Rick is responsible for evolving the Safeguard IT systems. He leads the design of Safeguard’s enterprise application architecture. This includes Safeguard’s real-time integration with other systems, vendors and clients; the future upgrade roadmap for systems; and standards designed to meet availability, security, performance and goals.

Rick has been with Safeguard since 2011. During that time, he has led the system upgrades necessary to support Safeguard’s growth. In addition, Rick’s team has designed and implemented several innovative systems.

Prior to joining Safeguard, Rick was director of enterprise architecture at Revol Wireless, a privately held CDMA Wireless provider in Ohio and Indiana, and operated his own consulting firm providing services to the manufacturing, telecommunications, and energy sectors.


AVP, Technology Infrastructure and Cloud Services

Steve Machovina

Steve Machovina is the assistant vice president of technology infrastructure and cloud services for Safeguard. He is responsible for the overall management and design of Safeguard’s hybrid cloud infrastructure. He manages all technology engineering staff who support data centers, telecommunications, network, servers, storage, service monitoring, and disaster recovery.

Steve joined Safeguard in November 2013 as director of information technology operations.

Prior to joining Safeguard, Steve was vice president of information technology at Revol Wireless, a privately held wireless provider in Ohio and Indiana. He also held management positions with Northcoast PCS and Corecomm Communications, and spent nine years as a Coast Guard officer and pilot.

Steve holds a BBA in management information systems from Kent State University in Ohio and an MBA from Wayne State University in Michigan.


Assistant Vice president of Application Development

Steve Goberish

Steve Goberish, is the assistant vice president of application development for Safeguard. He is responsible for the maintenance and evolution of Safeguard’s vendor systems ensuring high-availability, security and scalability while advancing the vendor products’ capabilities and enhancing the vendor experience.

Prior to joining Safeguard, Steve was a senior technical architect and development manager at First American Title Insurance, a publicly held title insurance provider based in southern California, in addition to managing and developing applications in multiple sectors from insurance to VOIP.

Steve has a bachelor’s degree from Kent State University in Ohio.