FHFA Statement on Housing Reform, Fundamentals of Credit Risk Transfers

On December 10, the Federal Housing Finance Agency (FHFA) released a statement by Deputy Director of the Division of Conservatorship, Wanda DeLeo, before the U.S. Senate Committee on Banking, Housing, and Urban Affairs titled Housing Finance Reform: Fundamentals of Transferring Credit Risk in a Future Housing Finance System.

“Housing Finance Reform: Fundamentals of Transferring Credit Risk in a Future Housing Finance System”

Chairman Johnson, Ranking Member Crapo, and members of the Committee,
my name is Wanda DeLeo and I am the Deputy Director of the Office of Strategic
Initiatives at the Federal Housing Finance Agency(FHFA). Thank you for the
opportunity to appear before you today to discuss the credit risk transfer activities
we have asked Fannie Mae and Freddie Mac, or the Enterprises as I will refer to
them, to participate in, particularly securities market sales of credit-linked debt
instruments. I’d like to start by recognizing the important work this Committee has
undertaken to redesign the nation’s housing finance structure, including specifically
the current work of the Chairman and Ranking Member, the efforts of Senators
Corker and Warner, and those of their cosponsors, as well. We remain eager to
help in any way we can.

More than five years into conservatorship, the Enterprises continue to provide funding
for roughly two-thirds of all new mortgages. Combined with direct government
guarantees through FHA and VA, this amounts to roughly 90 percent of new loans
being supported by the federal government. Enterprise losses since the financial crisis
in 2008 required the Treasury to inject $187.5 billion of capital into those companies.
While the new loans they insure or guarantee are of much higher quality than those
that led to most of the losses, it is prudent to seek alternative funding mechanisms
that place less potential burden on taxpayers. Our credit risk transfer program is
designed to do exactly that.

Improved housing market conditions, coupled with policy changes and strong efforts of
staff of both Enterprises to address still serious deficiencies in their business
operations, have enabled a welcome return to profitability. But that should not blind us
to the very real costs associated with the Enterprises’ failures. The dividends they have
paid to the Treasury reflect not a return of capital, but payment for the extraordinary
risk the government was forced to take in view of the potential at the time for economic
disaster. The current earnings are only possible because of the Treasury investment;
no one even today would be purchasing Enterprise debt in the absence of it.

It is in keeping with FHFA’s responsibilities as conservator to minimize taxpayer risks
while helping to ensure the secondary mortgage market continues to serve its
functions. At the same time, we are seeking to develop standards, norms, experience,
and private investment capacities that can continue into the future of a new secondary
market structure. Credit risk transfers can help us simultaneously in all three of our
broad conservatorship goals: build, contract, and maintain. Accordingly, we have set a
target for each of the Enterprises to conduct multiple types of risk sharing transactions
involving single family mortgages with a total of at least $30 billion of unpaid principal
balances in 2013. We specified that the transactions be economically sensible,
operationally well-controlled, transparent to the marketplace, and involve a meaningful
transference of risk. Further, we informed the Enterprises that our evaluation for
assessing their performance on FHFA’s conservatorship scorecard objectives will also
consider the utility of the transactions to furthering the long-term strategic goal of risk
transfer. We will make final judgments later this year, but clearly the transactions
completed this year have accomplished a great deal.

The Enterprises have initially focused on two broad categories of credit risk sharing transactions. One transaction category is pre-funded capital markets transactions, which include Freddie Mac’s Structured Agency Credit Risk securities (STACRs) and Fannie Mae’s Connecticut Avenue Securities (C-deals). In these transactions, investors buy debt securities that offer relatively higher returns if the credit performance of loans in a reference pool is good, but may lose principal when credit performance deteriorates. There is no counterparty risk for the Enterprises because when investors buy the securities, they are putting up cash that covers their maximum losses. This approach offers efficient, competitive, market pricing of risk. It also spreads risk across many investors with varying degrees of leverage, and with varying degrees of risk concentration in mortgages. Less risk concentration and less leverage has the potential to reduce systemic risk relative to past and current practices that channel the bulk of the risk into a very small number of highly leveraged institutions, such as the Enterprises. A possible downside is that overreliance on this approach may leave the market for risk more prone to price change in response to changing market conditions.

The other transaction category for this year’s Enterprise transactions is insurance or guarantee agreements. In these, a mortgage insurer, re-insurer, or other guarantor pays claims in the event of loss. These deals can take advantage of such firms’ mortgage expertise and dedicated capital, and they may be less quick to leave the market during a temporary market disturbance, especially one not directly related to housing markets. However, this approach involves more counterparty risk, more vulnerability to housing market weakness when the counterparties are not diversified, and a more limited set of bidders for the risk.

In both types of transactions, the Enterprises essentially use a portion of their guarantee fee income from the reference pool to purchase credit protection, either through higher interest rates paid on the capital market transactions, or though premiums paid to insurance companies. FHFA worked closely with the Enterprises on each of this year’s transactions, and in each case was confident that conservatorship goals would be served. Reaching this point required strong efforts by many over an extended period of time, and I want to recognize the excellent work of the staffs of Fannie Mae and Freddie Mac, including those sitting beside me today.

Please click here to view the statement in its entirety.

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.