Eminent Domain Battle Shifts to Pomona, CA

On November 5, the Mortgage Bankers Association (MBA) published an artilce titled Eminent Domain Battle Shifts to Another California City.

Eminent Domain Battle Shifts to Another California City

Popping up like a Hydra, the latest battle over use of eminent domain to seize underwater mortgages has shifted to Pomona, Calif., a city of 150,000 residents outside Los Angeles.

The City of Pomona is currently considering several proposals to address perceived issues in the city’s real estate market–all of which would use the city’s powers of eminent domain. As with other municipalities in California, one proposal, from San Francisco-based Mortgage Resolution Partners, would have the city acquire underwater, but performing, mortgage loans held by private-label mortgage-backed securities.

In a letter this week to Pomona City Council members and City Manager Linda Lowry, the Mortgage Bankers Association and the California Mortgage Bankers Association, Sacramento, expressed “serious concerns” with the MRP proposal and urged them to reject it in favor of supporting programs that are already working to assist underwater borrowers in California.

“We believe that MRP’s proposal in particular raises very serious legal and constitutional issues, in addition to the threat it poses to the City’s housing market and economy,” the letter said. “No jurisdiction has ever used eminent domain to acquire underwater mortgages from securitized pools. Such a novel use of the eminent domain powers is unprecedented and would, in our view, not survive the multiple legal challenges that would ensue.”

Proposals to employ eminent domain to seize underwater mortgages have proliferated over the past year, with California a hotbed of such plans. Over the summer, Richmond, Calif. became one of the largest cities in the U.S. to embrace the private-sector program offered by MRP to seize underwater mortgages through eminent domain–in some instances for as little as 25 cents on the dollar. In letters it sent to more than 30 servicers this summer, the city offered to purchase more than 600 mortgages. The city said if the servicers do not agree to sell, it would seize the mortgages.
Other municipalities, such as Fontana and Ontario, Calif., North Las Vegas, Nev., and towns in Colorado, Illinois and Massachusetts have also considered eminent domain as a strategy to seize underwater mortgages. Most of these have backed off the strategy following discussion with MBA, local mortgage bankers’ groups and other industry group about drawbacks, including potential restriction of future lending.
These drawbacks also include deep constitutional concerns. The American Land Title Association issued a statement this summer (http://www.alta.org/press/9-11-2013%20ALTA%20Eminent%20Domain%20Statement.pdf), saying such create legal uncertainty and confusion and will likely take years to resolve. Bond investors argue that use of eminent domain as proposed is unconstitutional because it benefits a small group of citizens at the expense of out-of-state investors, effectively violating the interstate commerce clause..

MBA has been a leading opponent against such use of eminent domain. MBA President and CEO David Stevens said such eminent domain actions could cause “irreparable harm” to current homeowners and prospective homebuyers. “If it is demonstrated that any local government can simply intervene and abrogate a private lending contract, the uncertainty that will be introduced in to the mortgage system and housing market will impact lending everywhere in the U.S.,” he said.
The Federal Housing Finance Agency and HUD have also expressed concerns with such programs, saying it would severely impact loans guaranteed by Fannie Mae, Freddie Mac and FHA. FHFA said it had the discretion to direct the GSEs to stop their activities in towns that use eminent domain to seize mortgages; HUD expressed “doubt” that such mortgages would qualify for FHA financing. And Fitch Ratings, New York, said such use of eminent domain would likely negatively affect private-label U.S. residential mortgage-backed securities and future lending in those regions. Fitch said should Richmond and other local governments succeed, such programs could “further weigh on private investor confidence and appetite for private-label mortgage-backed securities going forward.”

In their letter, MBA and the California MBA said such action in Pomona might also prove premature, noting that home prices in Pomona have increased by 27.7 percent during the past year, reflecting the broader housing recovery. DataQuick, San Diego, reported last month that mortgage delinquencies for Los Angeles County have declined by 56.4 percent over the same period.

“The market is clearly on the mend and we would urge leaders to exercise caution before the City takes any action that would harm Pomona and be disruptive to the market and this recovery process,” the letter said.

The letter noted MRP’s proposal likely targets the small percentage of Pomona loans that are in private-label securities and then (if past proposals are any indication) narrows this group further to focus on those who are current on their existing mortgages, likely have good credit, and ideally do not have existing home equity loans or other liens on the property.

“While the small group of people that satisfy this criterion would initially appear to be helped, this help comes at the substantial expense of the entire community and other potential mortgage borrowers across the country,” the letter said. “Such a proposal, on its face, also substantially undervalues the existing owners’ holdings due to the nature of the compensation. In our view, it is impossible to argue that fair compensation has been provided when the amount of compensation would be (according to MRP’s own documents) well below the value of the home that collateralizes the mortgage; when it does not reflect the diminution in the value of the overall investment; and when the home that MRP and their partners paid the investors $160,000 for is refinanced shortly thereafter for $190,000–with much of the additional $30,000 going to MRP and its funders. The plan simply does not provide just compensation and could expose a jurisdiction utilizing eminent domain to significant liability beyond the initial condemnation payment.”

Furthermore, the letter said, a homeowner signs both a mortgage and a note. The mortgage note is typically held by the PLS trustee who is often domiciled outside the State of California. “A City’s eminent domain authority does not extend beyond the City’s borders; it certainly does not apply outside the state,” the letter said. “We therefore believe that local governments that seek to use eminent domain in this highly unusual way will face years of costly litigation brought by multiple litigants who, because of fiduciary and other obligations, are forced to sue to protect the assets of their investors. For these and other reasons, Pomona may be tied up in costly litigation with potentially tremendous liability for years.”

In addition to the legal issues, the letter said use of eminent domain would not only significantly tighten credit availability for credit-worthy borrowers in Pomona, it would also increase the cost of available credit in the city as lenders price the risk of such mortgage seizures into the cost of doing business in the community. “Any mortgage loan that is offered will likely require much stronger credit scores, higher interest rates and larger down payments,” the letter said. “This in turn could actually reverse recent increases in housing values in the city.”

The letter also pointed out that many people who invest in private-label securities have their investments held in private pension plans–many of whom are employees of the city.

“PLS losses are suffered not by large institutions, but by everyday savers and investors who have these investments in their pension and 401k plans, college savings plans and individual investment portfolios,” the letter said. “This would undoubtedly include local police, fire, teachers and other public pensioners. In fact, last month, the California Public Employee Retirement System, which holds approximately $11 billion in mortgage-backed investments, publically stated it has ‘some concerns about the precedent this may set and the impact to investors.’”

The letter was signed by Susan Milazzo, executive director of CMBA; and Pete Mills, senior vice president of residential policy and member services with MBA.

Please click here to view the online article.

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: www.safeguardproperties.com.



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.