FHFA Threatens Suits as Nevada Grapples with ‘Super’ Liens

On January 27, National Mortgage News released an article discussing the Federal Housing Finance Agency’s (FHFA) preparation to argue cases involving Nevada homeowners associations that it believes violate the Housing and Economic Recovery Act of 2008.

Mortgage Program Offers Struggling Homeowners Fresh StartFHFA Threatens Suits as Nevada Grapples with ‘Super’ Liens

A local battle over home foreclosures in Nevada has put the federal government in a tricky spot.

Attorneys for the Federal Housing Finance Agency, which oversees mortgage giants Fannie Mae and Freddie Mac, sought last month in at least two cases to block Nevada homeowners associations from foreclosing on residents who owed the associations money and whose mortgages are held by Fannie. The foreclosures extinguished the Fannie liens, and Fannie is unable to recoup what is owed on the mortgages.

FHFA is preparing to argue those cases violate the Housing and Economic Recovery Act of 2008 — the law that created FHFA and gave the Treasury Department authority to place Fannie and Freddie into conservatorship — and it is seeking an exemption that may prove controversial, according to attorneys tracking the case.

FHFA Director Mel Watt in testimony on Capitol Hill on Tuesday reiterated his concern over the liens, warning that his agency will pursue recourse aggressively.

The issue surfaced last year after the Nevada Supreme Court and the D.C. Court of Appeals ruled in favor of the homeowners associations. The Nevada case especially alarmed lenders in 22 other states where similar statutes stand but are rarely ever used.

Homeowners associations, seeking repayment for unpaid community and condo fees, have sought tens of thousands of dollars in unpaid dues by foreclosing on properties and selling them at huge discounts to market value. The values of the mortgages wiped away from the banks are sometimes several hundred thousand dollars per loan. Lenders were astonished to learn that their first liens were in fact not superior. The associations are calling their payment order a “super priority lien.”

The Nevada legislature reconvenes next week, and its two chambers will have 120 days to attempt to rectify the issues raised by the state Supreme Court decision. It is unclear whether attempts to provide lenders with relief will have enough support to pass a vote.

“After the crisis, people started walking away from their fees, and suddenly there were dozens of people in communities not paying their condo fees, and assessments had to go up,” said Roger Winston, managing partner at Ballard Spahr, which has been involved in more than 250 individual cases in Nevada.

The FHFA has its own legal agents preparing for a fight. It has hired Arnold & Porter in Washington to represent the agency, according to copies of motions filed in federal court in Nevada. Elliot Mogul, an associate at the firm, declined to comment regarding the cases, but local attorneys say the firm may soon file motions in more cases.

In October, Watt met privately with Nevada bankers at an industry gathering in Las Vegas. The FHFA director promised he would use the agency’s powers to halt the foreclosures to protect Fannie Mae from any losses, according to Steve VanSickler, vice chairman of the Nevada Mortgage Lenders Association. VanSickler also serves as chief credit officer of Silver State Schools Credit Union, which has seen two of its mortgages wiped out by homeowners associations. Together, the loans were worth $250,000.

“Watt said that unless changes are made in Nevada, FHFA will no longer buy loans in common interest communities,” said VanSickler, adding that such a scenario would be “devastating” not just for those communities, but also for the state’s real estate market, which sells some 70% of its mortgages to a federal mortgage company.

The Mortgage Bankers Association has previously argued that a lender pullback or higher fees charged to loans could have a chilling effect on available credit in Nevada and any other jurisdictions that give super-lien powers to homeowners associations. JPMorgan Chase, which lost a big case in D.C. against a condo association, said in an email to American Banker: “This situation puts distressed borrowers at greater risk of losing their homes even where they have worked out a mortgage modification with their lender.”

All eyes are on the Fannie and Freddie, Moody’s analyst Yehudah Forster said. “If there is going to be mass shift in operational lending, [guidance] is going to come from them,” he said in an interview.

In December the FHFA outlined its position to defend Fannie and Freddie mortgages by claiming them as its own. It is seeking the same kind of exemption now granted to mortgages insured by the Federal Housing Administration.

An exemption for FHFA would be a “home run” for Nevada bankers, according to Michael Brooks, a partner at Nevada law firm Brooks Hubley, which represents title insurers and advises the California Mortgage Bankers Association.

But an exemption could be controversial, multiple legal experts agreed. It revives thorny issues regarding Fannie and Freddie’s conservatorship. The nature of the conservatorship was and remains hotly controversial. In question now is whether it would really be in the best interest of Fannie to write off its past as an independent entity, even though it may not have much choice in Nevada.

“It’s a head-scratcher,” Brooks said in an interview. “FHFA’s assets may not be sold without the agency’s consent, but does that really mean Fannie and Freddie’s assets are FHFA’s? If I am the trustee of a trust, I don’t claim the trust’s assets as my own.”

According to a senior government official speaking on the condition of anonymity, attorneys representing FHFA have intervened in at least six cases in Nevada, and there may be more on the way in Washington where the D.C. Court of Appeals ruled against JPMorgan. “When you are in conservatorship and the taxpayer is on the hook, Congress decided for [the Federal Deposit Insurance Corp.] and for FHFA, that no one can take action without obtaining consent of the conservator,” the official said.

It may take a year or longer for decisions on the motions pending in Nevada, attorneys say.

At the state house in Carson City, the industry is scraping up lawmaker support to address its biggest grievances; everything else — decisions to alter underwriting practices or reform servicer best practices — is in a state of limbo. If negotiations in the newly elected state Senate and Assembly fail, attorneys for the industry say they are prepared to litigate.

But that is not the ideal solution, according to VanSickler, who on behalf of the Nevada Mortgage Lenders Association has helped forge a working group that includes state senators Scott Hammond, a Republican, and Aaron Ford, a Democrat.

“No, it does not appear that we have broad support,” VanSickler said when asked about the probability of a bill’s passage. The switch in control of the Assembly from Democrats to Republicans may hurt the legislation’s prospects.

Last week, at a final meeting before the legislature convenes on Feb. 2, industry representatives met with Sen. Hammond and an aide for Sen. Ford at the offices of the Greater Las Vegas Association of Realtors. They agreed to three priorities for a new bill: a requirement that homeowners associations notify lenders of foreclosure efforts, a requirement that opening auction bids start at fair market value to prevent fire sales, and some way for bankers to recoup losses on their mortgages.

Banks have complained that they are losing their mortgages because they are not receiving notice of foreclosure. The issue of associations giving notice to lenders is the biggest problem in current statutes, according to Moody’s Investors Service, which describes the super priority liens as a credit risk to mortgage bond investors. Without notice, lenders say they do not have a chance to settle delinquent bills on behalf of the indebted tenant. Homeowners associations and other residential groups argue the responsibility, or blame, should rest with the mortgage servicers. The industry counters that the servicers are not receiving notice of delinquencies. Anecdotes have circulated about banks trying to pay delinquent dues, and homeowners associations simply refusing to take their checks.

“In some states a notice may not be required unless a servicer makes their own filing,” said Forster at Moody’s. “From our perspective the biggest risk is if the servicer does not get notice of HOA foreclosure.”

The Senate working group has agreed to share any forthcoming bill with FHFA director Watt’s office in Washington before it goes for a vote in Carson City.

Other states may be less vulnerable because of state laws that close the gaps that are paining lenders in Nevada and D.C. Jon Skarin, head legal counsel at the Massachusetts Bankers Association says homeowners associations must provide notice in his state, and that has helped to avoid the same kind of controversy.

“I can’t think of many cases when a condo association actually ends up going through foreclosure, though they do have that right,” Skarin said.

Additional pressure is flowing in from investors who are unexpectedly facing the risk of cash flow disruption in mortgage-backed securities backed by Nevada-sourced loans. This month rental home manager Progress Residential had to set aside $1.6 million in a bond issuance to reserve against homeowners-association delinquencies for up to a year.

Kroll Bond Rating Agency described the reserve to guard against possible losses, but other credit experts are unsure if lenders can really count on reserves or escrows as a defense.

“You can’t just add HOA assessments to escrow,” Ballard Spahr’s Winston said.

Federal law says that borrowers with loan-to-value ratios under 80% must give permission for escrow. In addition, many argue that homeowners-association payments follow a far more irregular payment timeline than other kinds of regular dues.

Banks’ costs are piling up, too. The number of homeowners-association lien sales has dwindled down to almost zero, according to Brooks, not because the associations are any less aggressive, but because banks have rushed in to pay off all of their borrowers’ unpaid association fees. The only question other question, he said, is whether this may happen in other states.

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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.