Could the Sale of Distressed Loans Decrease Foreclosures?

Investor Update
December 6, 2016

A report by the Federal Housing Administration (FHA) reveals that two-thirds of distressed loans in HUD’s single-family sales program (SLFS) have been resolved by selling to investors with 42 percent of those loans avoiding foreclosure. Distressed or nonperforming (NPL) loans are about 28 months delinquent on average when purchased by investors.

Approximately 28 percent of the 104,000 loans, both resolved and unresolved, avoided foreclosure through one of the six ways: reperformance, forbearance, short sale, deed in lieu of foreclosure, paid in full, and short payoff. Short sales and deeds in lieu of foreclosure were the most common alternatives to foreclosure. Approximately 37 percent of the loans have been foreclosed upon, and 3 percent are being held as rentals. Still, one-third of the distressed loans remain in delinquency.

Laurie Goodman, the Director of the Housing Finance Policy Center at Urban Institute, encourages investors to not change their practices. “Keep in mind what they’ve always kept in mind,” she said. “Investors can do a lot more for the borrower. The GSEs have lost HAMP as a tool, and they’ll be going forward with their own modification program. Investors are going to keep doing what they’ve always done, nothing much will change. Lots of questions need to be asked. What’s the outcome? What’s the probability of success? What will the evaluation methods be?”

The Federal Housing Finance Agency (FHFA) reported a decline in foreclosures because Freddie Mac and Fannie Mae sold fewer NPLs prior to 2015. Only 31 percent of the 25,612 NPL sales that were settled at the end of 2015 were resolved by June 2016. Results show that 16 percent were resolved without a foreclosure, and 15 percent were foreclosed upon.

Approximately 29 percent of the NPLs that had been with the new servicers the longest amount of time avoided foreclosure, compared to the 19 percent of distressed loans that were not sold. The longest amount of time recorded was 14 months. However, fewer of the sold distressed loans were foreclosed upon (26 percent versus 30 percent of the benchmark). These results are especially dramatic considering that the loans that were sold were more delinquent and had a higher loan-to-value ratio than the loans that were not sold.

Investors should be aware of the changes that federal agencies have made in regards to distressed loans and NPLs. “There will be more dispositions than what you saw in 2016, not less,” said Goodman. “HUD has made changes to become more advocate friendly. They’re not going to be held back by administrations. FHFA research displays that loans owned by private investors have better outcomes than our own loans.”

Source: DS News

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CEO

Alan Jaffa

Alan Jaffa is the Chief Executive Officer for Safeguard Properties, 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® Award finalist in 2013.

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Esq., General Counsel and EVP

Linda Erkkila

Linda Erkkila is the General Counsel and Executive Vice President for Safeguard Properties, with oversight of legal, human resources, training, and compliance. Linda’s broad scope of oversight covers regulatory issues that impact Safeguard’s operations, risk mitigation, strategic planning, human resources and training initiatives, compliance, insurance, litigation and claims management, and counsel related to 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. She has practiced law for 25 years and her experience, both as outside and in-house counsel, covers a wide range of corporate matters, including regulatory disclosure, corporate governance compliance, risk assessment, compensation and benefits, litigation management, and mergers and acquisitions.

Linda earned her JD at Cleveland-Marshall College of Law. She holds a degree in economics from Miami University and an MBA. Linda was previously named as both a “Woman of Influence” by HousingWire and as a “Leading Lady” by MReport.

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Michael Greenbaum

Michael Greenbaum is the Chief Operating Officer of Safeguard Properties, where he has played a pivotal role since joining the company in July 2010. Initially brought on as Vice President of REO, Mike’s exceptional leadership and strategic vision quickly propelled him to Vice President of Operations in 2013, and ultimately to COO in 2015. Over his 14-year tenure at Safeguard, Mike has been instrumental in driving change and fostering innovation within the Property Preservation sector, consistently delivering excellence and becoming a trusted partner to clients and investors.

A distinguished graduate of the United States Military Academy at West Point, Mike earned a degree in Quantitative Economics. Following his graduation, he served in the U.S. Army’s Ordnance Branch, where he specialized in supply chain management. Before his tenure at Safeguard, Mike honed his expertise by managing global supply chains for 13 years, leveraging his military and civilian experience to lead with precision and efficacy.

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CFO

Joe Iafigliola

Joe Iafigliola is the Chief Financial Officer for Safeguard Properties. Joe is responsible for the Control, Quality Assurance, Business Development, Marketing, Accounting, and Information Security departments. At the core of his responsibilities is the drive to ensure that Safeguard’s focus remains rooted in Customer Service = Resolution. Through his executive leadership role, he actively supports SGPNOW.com, an on-demand service geared towards real estate and property management professionals as well as individual home owners in need of inspection and property preservation services. Joe is also an integral force behind Compliance Connections, a branch of Safeguard Properties that allows code enforcement professionals to report violations at properties that can then be addressed by the Safeguard vendor network. Compliance Connections also researches and shares vacant property ordinance information with Safeguard clients.

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.

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Business Development

Carrie Tackett

Business Development Safeguard Properties