Eminent Domain for Mortgages

On January 12, Commonwealth Magazine (Boston) released an article discussing the idea of using a municipality’s powers of eminent domain to aid homeowners facing foreclosure.

Eminent domain for mortgages

Brockton, other cities consider novel idea

ON THE MORNING OF SEPTEMBER 28, Brockton police arrested 51-year old Tyrone Hubbard and his two sons for trespassing in their own home. Fannie Mae, the federally chartered purchaser of mortgages, was foreclosing on Hubbard’s house and wanted him out. Trying in vain to make peace was City Councilor Jass Stewart, who had arrived to support 20 or so demonstrators staging an eviction blockade. The protest sputtered, the eviction was carried out, and the house remains vacant today. But the grim scene—another brutal foreclosure, cops pitted against residents, and a boarded-up home—galvanized Stewart. Rather than let the banks seize homes, he thought, what if the city did it first?

Stewart is now exploring a new, controversial plan that would have Brockton buy up the mortgages of underwater homeowners—those who owe more on their loans than their homes are worth—using its power of eminent domain. As currently envisioned, the city would pay the original lender “fair compensation” for the mortgage based on the current value of the home rather than what the homeowner paid for it before the crash. The city would then tear up the old mortgage, allowing the homeowner to refinance with a new lender. From there, the owner could stay in his home, making monthly payments in line with its actual value, and the neighborhood would remain stable.

It would be a novel use of government’s sweeping eminent domain powers, which are generally reserved for land-takings to build new roads, schools, libraries, or other projects with a clear public purpose. But those behind the proposal make the case that eminent domain takings of mortgages serve an indisputable common good, that there’s no better way to boost a local economy than by preventing foreclosures and getting homeowners out of debt.

The idea comes from Mortgage Resolution Partners, a group of San Francisco-based entrepreneurs who have agreed to front the money for the city’s eminent domain takings through a group of investors they’ve already lined up. The investors would get their cash back when the new mortgage lenders pay the city for the rights to refinance a homeowner’s new, fairer loan. MRP, in turn, would collect a $4,500 fee on each sale. In order for the plan to work, the city would have to collect enough money from the new mortgage lender to cover the cost of the eminent domain taking plus the $4,500 it owes MRP.

The scheme has never been tested, so it’s un¬clear how smoothly it would work from a legal and financial sense. Yet the proposal is attracting enormous attention around the country at a time when communities are struggling to cope with underwater mortgages.

Compared to Nevada, or even Rhode Island, Massachusetts escaped pretty much unscathed from the 2008 housing crash. But parts of the state, in¬cluding Brockton and other hardscrabble communities such as Lawrence and East Boston, did not (“Broken homes,” CW, Winter 2009). Since 2008, Brockton has experienced more foreclosures than any other city in the state. Vacant properties have begotten more vacant properties. The values of entire neighborhoods have steadily diminished, paralyzing the local economy.
“When you have such a large amount of un¬employed people, you have people breaking into houses” to stay warm, or to steal scrap metal and floorboards, says Robert Jenkins, director of housing at the Brockton Redevelopment Authority. And those who still own their homes? “We have people working three or four jobs to make their payments. In Brockton, if you [just] have those two incomes, or one, you can’t make the payments.”
Still, many of those struggling homeowners owe more than their homes are worth, putting them at high risk of foreclosure. Forty-seven percent of Brockton’s 16,537 mortgages are underwater, far above the statewide average of 16 percent, according to data provided by The Warren Group.

It’s not for lack of trying that Brockton finds itself in this predicament. In 2008, a group of local banks started voluntarily lending to homeowners at below-market interest rates. In 2011, one non-profit, Boston Com¬munity Capital, began buying up Brockton homes facing foreclosure and selling them back to their owners at a discount. Through the $26 million HomeCorps program, created this year using funds from Attorney General Martha Coakley’s blockbuster 2011 national mortgage abuse settlement, Brockton has begun seizing abandoned homes, sprucing them up, and selling them for cheap to first-time homebuyers.

But one large group of homeowners—perhaps the group that’s weighing Brockton’s economy down the most—can’t get much direct help from any of these programs. “I don’t know if there’s anything that addresses underwater loans in the city,” says Stewart, the city councilor. Plenty of resources have been directed at homeowners facing foreclosure, and those who are above water on their loans. But little or no money has been directed to those in between. That’s where eminent domain—the public authority to seize private property—comes in.

The idea got its start in 2008, when Harvard Law School professor Howell Jackson began arguing that the federal government was legally authorized (and, to some extent, morally obligated) to seize underwater mortgages through the bank bailout, known formally as the Troubled Asset Relief Program. Instead of bailing out banks for losing money on all the bad mortgages they financed, he figured, why not bail out those who held the mortgages themselves, many of whom were victims of predatory lending.

Jackson was inspired by the Home Owners Loan Cor¬p¬oration (HOLC), a 1933 New Deal program that bought up 1 million mortgages en masse and sold them back to their owners for cheap. By averting “the threatened collapse of the real estate market,” wrote historian Arthur Schles¬inger Jr., “no single measure consolidated so much middle-class support for the [Roosevelt] Administration.”

The Obama administration didn’t embrace Jackson’s idea. Despite repeated calls for a new, eminent domain-driven HOLC 2.0, most vociferously from US Rep. Brad Miller of North Carolina, the proposal went nowhere. Federal Housing Finance Agency chief Edward DeMarco also opposes any sort of principal reduction on federally-backed loans.

But by 2011, a new take on the proposal was brewing. If the feds weren’t going to do anything, what if municipalities acted instead? A big hurdle was funding. While Jackson’s plan would have drawn its financing from $700 billion in TARP money, most cities and towns don’t have the money to buy up mortgages using eminent domain, which requires “fair compensation.”

Mortgage Resolution Partners, created in June 2011 by a group of businessmen and venture capitalists, stepped up to the plate, offering funding for the eminent domain takings. Last June, after convincing California’s San Bernardino County to create a special legal body to collect mortgages, MRP got its first surge of national attention, earning high praise both from center-left pragmatists like the New York Times’s Joe Nocera (“Nothing has yet worked to stem the terrible tide of foreclosures. It’s time to give eminent domain a try”) and raving liberals like Rolling Stone’s Matt Taibbi (“This story has the potential to be the first true open, pitched battle between Wall Street and the homeowners and communities who have been the primary victims of financial corruption”).

Mortgage Resolution Partners founder and CEO Steven Gluckstern says he’s in contact with officials in about 10 areas nationwide, including Chicago and Suffolk County, Long Island, but was cagey about details: He’s worried cities outed in public will get pressured by the financial industry to abandon ship. At the risk of jeopardizing Brockton’s plans, Gluckstern and a top aide first met with Stewart, the city councilor from Brockton, in early December.

Not surprisingly, the Mortgage Bankers Association, and several dozen other industry groups, have come out against eminent domain takings of mortgages. The takings would force lenders to admit they had lost money on their original mortgages. Mortgage bankers also claim the plan would distort credit markets and crowd out future investors. As to the question of whether the eminent domain taking of a mortgage is unconstitutional—another common charge—David Reiss, a professor at Brooklyn School of Law, has pointed to a 1935 case in which the Supreme Court itself floated the idea of mortgage relief through eminent domain.

MRP has also received criticism from the left, as some have questioned the group’s profit motive. (MRP is headed by veterans of General Electric, Bank of America, and Berkshire Hathaway.) Facing criticism from Reuters financial blogger Felix Salmon and American Prospect co-founder Robert Kuttner, among others, MRP backed down from its original plan to only help underwater homeowners still current on their mortgage payments, while excluding truly desperate borrowers who had stopped paying.

Still, while many early advocates of eminent domain mortgage relief think MRP’s plan is imperfect, they also think it’s better than nothing. Jackson still prefers his TARP proposal, but acknowledges the eminent domain approach is more politically feasible. “With a new Demo¬cratic administration coming in,” Jackson says of his 2008 effort, “I totally understand why it didn’t work politically.” Julia Gordon, director of housing finance and policy for the Center for American Progress, a liberal-leaning Wash¬ington think tank, says that while it makes her “uncomfortable” that MRP would make money from the proposal, she concedes that “when it comes to the general principle, my feeling is that’s what eminent domain is for.”

Ultimately, the strongest opposition to the plan may come from within Brockton itself. Robert Jenkins, the Brockton Redevelopment Authority housing director, says he’s scared the plan will backfire, and bury the city in legal fees. He was so down on the idea that he denied knowing about any efforts within Brockton to make it happen; Stewart says they talked it over just days earlier.

Brockton Mayor Linda Balzotti is worried about the cost. “We’re obviously a cash-strapped community,” she says. “I’m not sure we want to get into the business of buying properties and then selling them off. I’m not sure if I want to get into the real estate business.”

Even Stewart, who’s championing the plan, is at odds with one particular aspect of MRP’s terms. The group wants to get maximum “bang for the buck” by targeting only those “private-label” loans that are held by complicated trusts, while ignoring federally-backed or bank-owned mortgages. Banks are more likely to refinance on their own, while the federal government isn’t worth messing with, MRP argues. That said, the private-label mortgages (think Countrywide) only comprise about 10 percent of the market, which would exclude the vast majority of Stewart’s constituents.

But Stewart, who at press time was planning to hold his first public meeting on the idea with MRP and Harvard Legal Aid Bureau, is cautiously optimistic. “Any time you mention eminent domain people feel a   little nervous,” he says. But the more he talks about it with his colleagues, “through little side conversations” whenever he can, the more he senses they’re warming to the idea. “If you’re talking about putting the city and its residents in the driver’s seat, this is the only way to do it,” he says. 

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About Safeguard 
Safeguard Properties is the mortgage field services industry leader, preserving vacant and foreclosed properties across the U.S., Puerto Rico, Virgin Islands and Guam. Founded in 1990 by Robert Klein and headquartered in Cleveland, Ohio, Safeguard provides the highest quality service to our clients by leveraging innovative technologies and proactively developing industry best practices and quality control procedures. Consistent with Safeguard’s values and mission, we are an active supporter of hundreds of charitable efforts across the country. Annually, Safeguard gives back to communities in partnership with our employees, vendors and clients. We also are dedicated to working with community leaders and officials to eliminate blight and stabilize neighborhoods. Safeguard is dedicated to preserving today and protecting tomorrow.  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.