DSNews Robert Klein Contributed Article “Empty Promises”

Robert Klein contributed an article to DSNews about the continuing challenges vacant property management poses to lenders and municipalities.

In Today’s Gloomy Real Estate Market, Vacant Properties Offer a Glimmer of Hope

First it was the subprime explosion. Next it was concerns about adjustable-rate mortgages (ARMs)-creative loans with artificially low “teaser” rates scheduled to reset to higher rates through 2009. Now the new worry is what will happen when the foreclosure moratoriums end.

Add to that mix the dismal unemployment picture. According to CNN, in January alone, more than 200,000 job cuts were announced in the United States, and more than 71,000 came on January 26, the day referred to as “Bloody Monday.”

The Mortgage Bankers Association recently reported that one in 10 homeowners was behind on his or her loan, the highest number since statistics began tracking in 1979. The Bureau of Labor Statistics reported in December, 524,000 jobs were lost, and 1.9 million were lost in the previous four months.

In 2006, Freddie Mac reported 37 percent of all loans more than 90 days’ delinquent were related to job losses. In the first half of 2008, that became 46 percent. In 2009, it is certain to be even higher.

All of these statistics point to the likelihood the foreclosure crisis will be with us for a while-certainly beyond 2009 and probably well into 2010.

Challenges for Investors and Communities

Large inventories of REO properties aren’t in anyone’s best interest. From an investor perspective, taxes, utilities, maintenance and repairs, marketing, and other carrying costs quickly add up and provide a strong incentive to move REO properties off its portfolios as quickly as possible.

At the same time, most investors and servicers are sensitive to the potential impact these properties can have on a neighborhood or community if they are not disposed of responsibly. This is why the preference for most servicers and investors is to return REO properties to family homeownership. When that isn’t possible, the next best thing is to seek alternatives to enhance the community or at least ones that do not contribute to the problems that lead to neighborhood blight.

In an attempt to reduce some of these problems, many cities enacted, or are considering, vacant property registration ordinances or have begun to enforce ordinances that have sat unused on their books for years.

The problem with such ordinances is the parties involved in the most troubled properties are the ones least likely to comply. The conscientious servicers and investors who do maintain their properties and take prompt action when issues arise are the ones who incur the additional burden of compliance paperwork. As a result, municipalities often find they are investing a lot of time and administrative effort for very little return.

Additionally, no matter how well-tended a vacant property is, the reality is that in many communities around the country-its marketability may be limited due to the surplus of properties on the market.

According to a 2008 study by the National Vacant Properties Campaign (NVPC), vacant and abandoned properties in eight Ohio cities cost communities $15 million annually in demolition expenses, service costs, code enforcement, police and fire protection, and other services. This doesn’t even include the millions of dollars lost in annual tax revenues.

Increased Interest in Land Banks and Trusts

Vacant properties do, however, offer potential opportunities for community revitalization, first-time homeownership, land reuse, a stronger tax base, and other benefits. In fact, states, municipalities, community development agencies, housing nonprofit organizations, and other entities are establishing or considering land banks and trusts as a mechanism to facilitate the rehabilitation or repurposing of surplus vacant homes.

Land banks themselves are not a new concept. The cities of Cleveland, St. Louis, Atlanta, and Louisville have had them for decades. In 2003, Genesee County, Michigan, created a land bank that has become a national model for cities considering aggressive programs to facilitate reclamation, demolition, and rehabilitation of vacant properties to spur large-scale economic development.

Late in 2008, the state of Ohio passed legislation to permit the creation of regional land banks across the state to stem the devastation to neighborhoods. In the city of Cleveland in particular, unscrupulous speculators have wreaked havoc on entire neighborhoods that were once thriving communities for hard-working, middle-class families.

Jim Rokakis, treasurer of Cuyahoga County, in which Cleveland resides, led the charge to pass the Ohio legislation and is in the process of creating a countywide land bank whose goal is to be a self-sustaining entity that would accept foreclosed properties in the city and the suburbs.

Another initiative gaining attention is the development of community land trusts. Under a land trust, an entity-usually a not-for-profit corporation-will acquire properties, either as part of a redevelopment project or for rehabbing to provide housing for first-time or lower-income buyers.

Recently, Enterprise Community Partners announced a program with a national servicer to facilitate the transfer of foreclosed properties to municipalities receiving grants from the federal government. Other private entities with national reach have been considering similar initiatives.

Overcoming Logistical and Funding Obstacles

Many servicers have REO alternative disposition programs they utilize to reduce their portfolios and allow their surplus properties to support community and economic development programs in cities across the country.

A major challenge, however, both for servicers wishing to dispose of REO properties and municipalities that might have interest in acquiring them, has been coordinating a partnership that meets the goals and objectives of each.

Because servicers manage national portfolios of properties, they face the challenge to connect with potentially hundreds of different municipalities and entities when they wish to dispose of aged and troubled properties using alternative methods.

Similarly, municipalities and community development organizations looking to acquire properties, either individually or in clusters, have a difficult time figuring out where and how to begin and whom to contact.

One solution being investigated by a handful of industry leaders is the creation of clearinghouses that would maintain databases on surplus properties, offering a “one-stop-shop” both for investors and municipalities. These clearinghouses would match available properties with community opportunities to refurbish homes, putting homeownership within reach for many first-time or low-income buyers, who otherwise might not be able to pursue their dream.

With databases on large pools of properties in specific areas, municipalities and land banks may even be able to identify and assemble surplus parcels in targeted areas to create more attractive land packages for economic or community reuse. Vacant and abandoned properties can be acquired and converted to public gardens, playgrounds, parks, and other green spaces. Even better, vacant lands can be redeveloped for retail and commercial enterprises that provide jobs and strengthen the community’s tax base.

Of course, even with aged and troubled properties being acquired by these entities at minimal cost, funding will be a major hurdle. Communities will incur expenses to hold, maintain, demolish, and repurpose properties. The federal government has allocated $4 billion to communities to acquire foreclosed properties under the Housing and Economic Recovery Act of 2008. But given the enormity of our country’s housing crisis, these dollars won’t go far-especially in the hardest-hit communities.

Overcoming the funding challenge will be an important component in structuring a new and better way to dispose of and reclaim surplus properties. This is why it is essential for the servicing industry to help support programs such as those being developed in Cuyahoga County.

Regardless of the challenges, there is great potential in the concept of aligning the opportunities and needs of investors, servicers, municipalities, and community development organizations to create a resource that benefits everyone.

With a little imagination, a large dose of commitment, and a strong spirit of cooperation between the industry and government, we have the ability to turn today’s foreclosure crisis into an opportunity for community revitalization-providing homes, creating family-friendly neighborhoods, building economic prosperity, and breathing new life into communities now devastated by hopelessness and decay.

In fact, what we may discover is that we can’t afford to commit to anything less.

x

CHIEF EXECUTIVE OFFICER

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.

x

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.

x

CHEIF INFORMATION OFFICER

George Mehok

George Mehok is the chief information officer for Safeguard. He is responsible for all strategic technology decisions, new systems deployments and data center operations supporting a national network of more than 10,000 mobile workers.

George has more than 20 years of leadership experience dedicated to high-growth companies in the mobile telecommunications and financial services industries, spanning startups to global industry leaders.

George played a senior role in the formation of Verizon Wireless, leading the IT product development and strategic planning team. He led the integration planning for the Verizon merger including: GTE, Vodafone-AirTouch, Bell Atlantic Mobile and PrimeCo.

As chief information officer at Revol Wireless, a VC-backed CDMA wireless communications network operator, George’s team implemented an integrated technology infrastructure and award-winning business intelligence platform.

George holds a bachelor’s degree in political science and economics from Eastern Michigan University and an M.B.A. from The Ohio State University. He is a board member of Akron University’s School of Business Center for Information Technology, in addition to an advisory board member for OHTec.

In 2013, George won the Crain’s Cleveland Business CIO of the Year award for his team’s work in completing a major acquisition and technology transformation at Safeguard. In 2015, George’s team was recognized by InformationWeek’s annual Elite 100 ranking of the most innovative U.S.-based users of business technology. The mobile inspection technology developed at Safeguard was selected as InformationWeek’s “One of the top 20 ideas to steal in 2015”.

x

General Counsel and Executive Vice President

Linda Erkkila, Esq.

Linda Erkkila is the general counsel and executive vice president for Safeguard, with oversight responsibilities for the legal, human resources, training, compliance and audit departments. Linda’s broad scope of oversight covers regulatory issues that impact Safeguard’s operations, pro-active risk mitigation, enterprise strategic planning, human capital and training initiatives, compliance and audit services, litigation and claims management, and counsel related to mergers, acquisition and joint ventures.

Linda’s oversight of the legal department along with multiple compliance and human capital focused departments assures that Safeguard’s strategic initiatives align with its resources, leverage opportunities across the company, and contemplate compliance mandates. Her practice spans almost 20 years, and Linda’s experience, both as outside and in-house counsel, covers a wide range of corporate matters, including 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.

x

Chief Financial Officer

Joe Iafigliola

Joe Iafigliola is the Chief Financial Officer for Safeguard. Joe is responsible for oversight of the Control, Quality Assurance, Accounting and 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.

x

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.

x

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.

x

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.

x

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.

x

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.

x

AVP, Mobile and Analytics

Jason Heckman

Jason Heckman is the assistant vice president of mobile and analytics for Safeguard. He is responsible for both Safeguard’s mobile development and strategy as well as the company’s data warehousing and business intelligence. Jason oversees the design, development and release of all Safeguard’s internally developed mobile applications. He also oversees the development and delivery of operational and analytical data technologies throughout the organization.

Jason joined Safeguard as manager of mobile in 2012. During that time he led the development and integration of Safeguard’s mobile applications across the company’s vendor network to provide real-time data from the field. In 2014, he was promoted to director of mobile applications and named assistant vice president in 2017.

Prior to joining Safeguard, Jason was the director of application development and business intelligence for Revol Wireless, a privately held wireless provider in Ohio and Indiana.

Jason holds a bachelor’s degree in business management from Case Western Reserve University in Ohio.

x

AVP, Business Development

Tim Rath

Tim Rath is the AVP of business development for Safeguard. He is responsible for developing innovative growth strategies for Safeguard and developing and overseeing potential partnerships, mergers and acquisitions.

Tim joined Safeguard in 2011 as project director and has filled numerous roles within Vendor Management, most recently serving as director of vendor management, a role he assumed in 2011.

Prior to Safeguard, Tim worked as director of supply chain at PartsSource Inc. in Aurora, Ohio, a provider of medical replacement parts, procurement solutions and healthcare supply chain management technology services. He also has held sales positions with Rexel, ComDoc, and Pier Associates, all based in Ohio.

Tim holds a degree in marketing and sales from The University of Akron in Akron, Ohio. He also earned his FAA Certified Commercial UAS (Drone) Pilot license in 2017.