Fannie-Freddie Fate Hangs on This Week’s Senate Action

Update: On April 29, HousingWire released a breaking news update titled Senate Delays Johnson-Crapo Housing Reform Indefinitely.  Please click here to view the online article.

On April 28, The Washington Post published an article titled Fannie-Freddie Fate Hangs on Senate Action This Week: Mortgages.

Fannie-Freddie Fate Hangs on Senate Action This Week: Mortgages

April 28 (Bloomberg) — A U.S. Senate plan for Fannie Mae and Freddie Mac, the most thorough yet for winding down the two mortgage financiers, faces a first test this week with its authors making last-minute changes to gather more support.

The 22 members of the Senate Banking Committee will decide as early as tomorrow if the bill, the culmination of more than a year of delicate negotiations among Democrats and Republicans, gains momentum or fizzles.

The legislation would replace the companies over five years with federal insurance for mortgage bonds that would kick in only after private investors were wiped out. Current shareholders of Fannie Mae and Freddie Mac would be in line behind the U.S. in getting any compensation from the wind-down.

“To keep the bill from stalling, committee leaders are trying to win over at least a few of the half-dozen Democrats on the panel who haven’t publicly embraced it. They have proposed changes including ones that would prevent big banks from monopolizing the mortgage business and add stronger protections for lending in disadvantaged communities.

Even as the White House and industry groups including the National Association of Realtors are lobbying for quick action on the bill, civil-rights organizations and investors who would benefit from the continued existence of Fannie Mae and Freddie Mac are urging a delay. An impasse would leave the two companies operating indefinitely under federal control.

‘Old System’

“None of us are going to get everything we want,” U.S. Housing and Urban Development Secretary Shaun Donovan said today on a conference call with reporters. “Unfortunately, there are some out there who are working hard to keep this from happening. They’re making a lot of money off the old system and doing everything they can to derail reform efforts.”

Restructuring the mortgage market is the largest piece of unfinished U.S. business from the 2008 credit crisis, when regulators seized Fannie Mae and Freddie Mac as they careened toward insolvency. The companies were bailed out with $187.5 billion from the Treasury while backing a growing share of mortgages as private capital dried up.

Only recently did they return to financial health, sparking calls from private shareholders including Bruce Berkowitz’s Fairholme Capital Management and hedge fund Perry Capital LLC to share in profits they are returning to taxpayers.

Six Democrats and six Republicans on the banking panel have previously endorsed the concept of the bill, written by Chairman Tim Johnson, a South Dakota Democrat, and its senior Republican, Mike Crapo of Idaho. That would be enough to move it out of the committee.

Not ‘Enthused’

Still, Senate Majority Leader Harry Reid, a Nevada Democrat, is expected to allow a full Senate vote only if more party members come on board, said Isaac Boltansky, a policy analyst at Compass Point Research and Trading LLC in Washington.

Reid has expressed reservations about winding down Fannie Mae and Freddie Mac because the companies ensure that homebuyers are able to get affordable fixed-rate mortgages.

“Senate leadership appears far from enthused by the prospects of a floor vote on the measure,” Boltansky said in an interview. “Reforming the mortgage market just doesn’t fit into the pre-election priorities of either party.”

Johnson and Crapo will also have to ensure that any changes they make do not alienate Republicans.

“Leadership has to walk an incredibly fine line in order to secure the uncommitted liberal votes on the committee without eroding the right-leaning senators” who support the concept of the bill, Boltansky said.

Record Profits

Fannie Mae and Freddie Mac, long political flash points in Washington, buy mortgages from lenders and package them into securities on which they guarantee payments of principal and interest; they now back about two-thirds of new home loans.

That dominance has led them to post record profits over the past two years as the housing market rebounded. Fannie Mae reported an $84 billion profit for 2013, the highest-ever for the 80-year-old firm, while Freddie Mac likewise reported a record profit of $48.7 billion.

The two companies last week sent memos to the Banking Committee estimating that mortgage costs would go up as much as 219 basis points for some borrowers under the system created by the bill. Donovan criticized that analysis today on the call with reporters, calling it a “narrative that was crafted by companies that don’t compete in the competitive market.”

Other estimates, including one by Mark Zandi, chief economist at Moody’s Analytics Inc., have projected lower cost increases.

Freddie Mac Chief Executive Officer Donald Layton cast doubt on the need for the bill during a conference in Beverly Hills, California today.

‘Vast Majority’

“Even if there’s no legislation, the vast majority of risk will be going to the private sector,” Layton said, citing a growing number of securitizations in which Fannie Mae and Freddie Mac have been sharing risk with private investors.

The Johnson-Crapo bill is the most detailed congressional proposal on how the two companies would be liquidated and how the system that replaces them would operate. It also is the first to try to balance the Republican goal of heading off future taxpayer bailouts with the desire of Democrats to preserve broad access to the fixed-rate 30-year mortgage.

Fairholme and Perry Capital are pushing the U.S. to return the companies to private ownership, saying shareholders should benefit from their holdings. They have filed lawsuits challenging an arrangement in which the U.S. now keeps 100 percent of Fannie Mae and Freddie Mac’s profits as a return on the government investment. The bill says lawmakers would leave that decision to the courts.

Shares Rise

Groups working on behalf of private investors have begun advertising and lobbying campaigns against the measure. Last month, the 60 Plus Association, an organization that receives funds from the industrialist Koch brothers, aired ads comparing the housing bill to Obamacare.

Shares of Fannie Mae closed April 25 in New York at $3.84, up 28 percent from $3.01 on Dec. 31. Freddie Mac closed at $3.90, a gain for the year of 35 percent.

While investors present their case, civil-rights groups maintain that the bill as written would make it harder for minority and low-income people to get loans. Their arguments have gained traction with Democrats including Sherrod Brown of Ohio, Elizabeth Warren of Massachusetts and Robert Menendez of New Jersey.

Community banks also have stepped in, pressing their Senate supporters for a provision that would keep big financial institutions from dominating all levels of mortgage finance. Johnson and Crapo have proposed adding language to prevent large banks from both originating and guaranteeing loans.

‘How Big’

Among developments Reid will be gauging is the opinion of panel member Chuck Schumer of New York, the Senate’s third- ranking Democrat. Schumer hasn’t yet tipped his hand.

“We all know there is a majority in favor of the bill in the committee,” David Stevens, president of the Mortgage Bankers Association, said in an interview. “The question is how big the majority might get.”

If the bill clears the committee and the Democrat-dominated Senate, it would still have an uncertain path to law. When the Republican-controlled House takes up housing legislation, it’s likely to start with a bill introduced in the Financial Services Committee that would almost completely privatize the market. A House-Senate conference committee would then have to resolve differences, possibly producing a measure very different from either one now on the table.

Election Year

None of that would happen if the Senate bill doesn’t get enough votes in committee to satisfy Reid. In that case, it would almost certainly be dead for the rest of the year. With Johnson stepping down as panel chairman and control of the Senate next year in doubt, the effort to remake the housing finance system probably would have to start over in 2015.

“In an election year, this is not a question of, ‘We’ve got months, we can work on it over the summer,’ ” Donovan said. It will be “very difficult” to persuade House Republicans to act on their bill if the full Senate doesn’t vote on Johnson- Crapo soon, he said.

Keeping the system in limbo indefinitely could be dangerous, said Karen Shaw Petrou, managing partner of Federal Financial Analytics Inc., a policy research group in Washington.

“The status quo is an effective nationalization,” of the mortgage market, she said. “It needs to be a considered policy decision, not an accident of history.”

–With assistance from John Gittelsohn in Los Angeles.

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:



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.