Mortgage Banking “An Outbreak of Ordinances”

Robert Klein, CEO of Safeguard Properties, contributed an article to the August issue of Mortgage Banking magazine regarding the increasing number of vacant properties and the needs of local government to address the challenges caused by the changing housing market.

An Outbreak of Ordinances

By Robert Klein

As the volume of foreclosures increases across the country, so do the numbers of vacant properties. Vacancies aren’t just a problem in major cities; they’re a growing problem in suburban and rural communities as well.

Particularly in urban areas, vacant properties invite criminal activity, reduce surrounding property values, create safety hazards, deteriorate neighborhoods and stress the budgets of already-cash-strapped municipalities.

In 2005, before the current foreclosure crisis hit its stride, the National Vacant Properties Campaign (NVPC), Washington, D.C., reported more than 25,000 vacant properties and 11,000 abandoned properties in the city of Cleveland; 27,000 abandoned houses and 32,000 vacant lots in Philadelphia; and 42,000 vacant houses and 17,000 vacant lots in Baltimore.

Today, in declining metropolitan markets, vacant properties comprise between 5 percent and 10 percent of a city’s housing stock, and in many cities that percentage is even higher.

NVPC reported in 2005 that the abandoned property rate in St. Louis was 17 percent-?one of the highest in the country. In the previous five years, the city had spent more than $15 million, or about $100 per household, to demolish vacant and abandoned properties.

The problem, and the cost, will only grow as foreclosures continue to increase. According to The Wall Street Journal, at the end of first-quarter 2008, foreclosures nationally were up nearly 29 percent over year-end 2007, and 140 percent over 2006.

Those of us in the mortgage services and field services industries don’t have to refer to statistics to understand the scope of the problem. We have first-hand knowledge of the very real challenges of maintaining vacant properties and keeping them safe and secure.

As an industry, we’ve seen property portfolios grow in communities where we’d expect them to, and even in communities where we wouldn’t have expected it. We’ve seen lower sale prices and properties remaining in inventory for longer periods.

We’ve seen more severe damage to properties than ever before — not only by vandals but also by desperate and frustrated homeowners. And we’ve experienced the criminal activities that occur in and around vacant properties — even those that are regularly inspected and maintained.

Because of what we’ve experienced, we can empathize with cities and understand their need to enact new vacant-property ordinances or strengthen those already on the books as they look to protect their communities from the ravages of blight.

Also because of what we’ve experienced in the field, as an industry we have much to offer cities across the country as they consider and enact vacant-property ordinances.

The servicing industry has experienced first-hand the challenges of complying with many city ordinances that were developed with the best of intentions, but that pose significant challenges to mortgage servicers and field servicers as we attempt to comply with them.

Many ordinances are vague or confusing; in certain instances they may conflict with other laws and regulations, and some actually have the potential to create consequences that are worse than the problem they are attempting to solve. As more ordinances take effect across the country, the challenges will continue to grow.

To address these challenges, mortgage servicers and field servicers have formed a National Vacant Property Registration Committee, comprised of approximately 20 individuals, under the umbrella of the Mortgage Bankers Association (MBA), to reach out to cities and offer our help, support and expertise.

In early July, the committee initiated weekly calls and invited interested industry representatives to offer their views and ask questions about ordinances under consideration and discuss specific issues with proposed or already enacted ordinances.

Among the municipalities whose ordinances are being discussed are: Chicago; Fairfax County, Virginia; City of Riverside, California; Riverside County, California; Dallas; New York City; St. Paul, Minnesota; and Boston; as well as a statewide ordinance in Rhode Island. Ultimately, the committee is preparing to create a model ordinance that would combine the best practices from ordinances around the country and offer it as a starting point for cities to consider as they enact their own legislation.

In creating this model ordinance, the committee recognizes that cities are free to enact whatever ordinances and laws serve the best interests of their respective communities. At the same time, by reaching out and offering the value of our industry’s experience and perspective, we hope to demonstrate the benefit of collaboration to create more uniformity in ordinances, and create ordinances that serve the mutual interests of municipalities and mortgage servicers.

Efforts to date

As a starting point, a listing of all known vacant-property registration ordinances was compiled that includes the name of the municipality, date of enactment and a link to the complete ordinance. That list is updated as new ordinances are identified, and is available at www.safeguardproperties.com/pub/vacant_registration.pdf. At press time, the list includes approximately 47 cities in 18 states, including 12 cities in California; seven in Massachusetts; four in Ohio; three each in New York, Michigan and Delaware; and two each in Illinois, Pennsylvania and Minnesota. Key points of each ordinance are summarized on the listing.

Additionally, industry calls have been held to discuss ordinances being proposed in specific cities. The purpose of these calls was to gather input and discuss solutions that could be offered by the industry as alternatives to ordinance provisions that were viewed as challenging.

As more ordinances are considered across the country, it is essential to have the highest level of participation possible from the industry. The committee will be enlisting the support of industry representatives to write letters and attend public meetings where ordinances are being discussed. Especially in larger cities, it is important to get involved, as ordinances enacted in those cities often become models for other cities to follow.

On a broader scale, committee members have begun raising awareness in forums where municipal leaders gather, describing the challenges the industry faces in complying with ordinances and offering the industry’s support and collaboration. Among those forums was the June gathering of the U.S. Conference of Mayors, where representatives from MBA and other industry representatives had the opportunity to speak on the subject of vacant-property ordinances.

Ordinance issues identified

The goal behind all of the committee’s efforts has been to identify key provisions that raise concerns and develop consensus on a set of recommendations to address those concerns. Some central issues for servicers include the following:

Uniformity in ordinances

When cities enact ordinances, they usually do not consider that national servicers must amend their procedures for each city where they have properties — potentially leading to compliance with hundreds and even thousands of different ordinances. By creating a model ordinance as a guide for cities to consider, the industry hopes municipalities will adopt more uniform ordinances across the country.

Distinguising between pre-sale and post-sale registration

Servicers are concerned about ownership liability and “mortgagee in possession” implications of pre-sale registration. It is important to help municipalities understand the distinction between the rights of servicers pre-sale and post-sale.

For example, some ordinances require registration as soon as seven days after foreclosure initiation. This provision could include occupied properties, because foreclosure proceedings often begin well in advance of property abandonment. Servicers have no control of occupied properties, and even when properties are unoccupied, servicer rights are limited prior to sale.

The industry recognizes the advantage of pre-sale registration so the municipality has a point of contact to address violations and safety post-sale registration, because servicers are recognized at that point as full-fledged owners. Because servicers are not seeking to retain properties in their inventories, the recommendation is to provide a 60-day window for registration after taking title or possession.

Pre-sale ordinance requirements

In pre-sale, servicers only have the right to gain access to the property to protect their collateral interests. Ordinances with requirements that go beyond the preservation and protection stipulations may raise potential conflicts with other laws and regulations. Some examples include provisions that call for the removal of personal property from the interior and exterior of properties, and those that require rekeying of all exits to deny access to homes. In pre-sale, lock changes can only be done to give servicers access to protect their collateral interests — not to deny access to the homeowner. Homeowners have the legal right to access and control the property.

Post-sale ordinance requirements

In general, industry representatives have no issue with post-sale registration, because servicers are recognized at that point as full-fledged owners. Because servicers are not seeking to retain properties in their inventories, the recommendation is to provide a 60-day window for registration after taking title or possession.

Defining vacancy status

Vacancy status can mean different things in different cities. Servicers would like municipalities to clarify and define the term “pre-sale,” differentiating between “vacant and maintained” and “vacant and abandoned.” The industry also supports separate registration requirements for pre-sale and post-sale properties.

Local contact requirements

Ordinances that require that a maintenance contact be located within a specific distance from the property are challenging for servicers that utilize national field service companies that have a central national point of contact. Ordinances that require a local contact may actually add a step and delay the process, because the local contact must initiate contact with the national servicer, who in turn contacts the national field service provider.

Respecting that the intent of this provision is to ensure that responsible parties address problems quickly, the industry is proposing that municipalities identify time frames in which to address safety and maintenance issues. The industry does not have the same concern with city ordinances requiring a local contact for the purpose of serving legal notice.

Registration fees

Registration fees vary significantly from city to city, ranging from a one-time fee of $35 to annual fees of hundreds of dollars. Industry representatives raised the question of whether fees are reimbursable by the Department of Housing and Urban Development (HUD) and other investors, and whether they can be added to the unpaid principal balance (UPB) if the mortgage becomes current. The committee is requesting investor guidance on this issue, and will share that with the industry when it is available.

Penalties

The penalty provisions in some ordinances were considered to be confusing and potentially costly, as failure to comply could result in fines of hundreds of dollars per month per property. Ordinances are unclear as to whether a penalty could be imposed at each occurrence of a violation or upon each visit by an inspector, which could result in significant fines.

In many instances, ordinances include general statements requiring that properties be maintained to applicable building codes and local regulations. These statements are considered to be overly broad. Particularly in cases where a servicer intends to sell a real estate-owned (REO) property “as is,” these provisions may require that the property be brought up to code beyond ensuring the safety and security of the property and its surroundings — such as electrical upgrades, cosmetic repairs and other costly items.

Deregistration of properties

Deregistration of properties could become cumbersome and confusing, because many ordinances do not define a specific deregistration process. Servicers are concerned that deregistration might require inspections to establish proof of occupancy, which would be time-consuming and costly. Industry representatives also suggested that cities define a process for servicers to deregister a property after a loan is sold or reconveyed to the investor or insurer, and the servicer is no longer responsible.

Securing of windows and doors

Because boarded-up homes are unattractive, some cities are considering alternatives to boarding. In situations where metal products are being considered, industry participants raised concerns about vandalism by metal thieves, leaving the property even more vulnerable to further damage and criminal activity. Metal also is more costly. The industry believes that the current industry practice of “bolt-boarding” is the most effective method of keeping a property secure from vandalism. Bolt-boarding involves securing a window or doorway with a 10-inch bolt placed through the center of a board, with a 2×4-foot interior bar holding it in place. Bolt-boarding also does not damage window and door frames.

Signage requirements

Certain ordinances require that properties have a sign visible from the street that displays a name, address and 24-hour contact number. The concern is that this type of sign will call more attention to a vacant property, as it advertises that it is unoccupied, and actually could invite vandalism. Committee participants also questioned how this provision would be enforced in multi-unit structures, within gated communities and on properties that are part of a homeowners or condominium association, as there may be signage restrictions.

Lighting requirements

As with signage, industry representatives expressed concern that lighting requirements also advertise that a property is vacant. Lighting also is expensive to install, and the light fixtures themselves could be targeted by thieves.

Reaching consensus

It is evident that mortgage servicers and municipalities share a common goal — compliance with vacant-property ordinances. Municipalities faced with the growing burden of vacant and abandoned properties want to ensure that the parties responsible will maintain them so they don’t deteriorate, further reduce property values, invite crime and contribute to urban blight. Servicers also want the properties in their portfolios to comply with city ordinances.

The most effective way to achieve that consensus is through outreach and by demonstrating to cities that mortgage servicers and their field servicers are committed and credible partners in efforts to address issues commonly associated with vacant and abandoned properties.

In discussions with municipalities, one of the biggest frustrations they express is their inability to reach a contact when code violations and other issues arise with vacant properties. Too often, the information they have is either outdated or lists a general contact; as a result, code-violation notices wind up in the wrong department or wrong city, and the violations remain unresolved.

When city officials learn about the Property Preservation Resource Center on the MBA Web site (www.mortgagebankers.org/propertypreservation), which lists the property preservation contacts across the country for most mortgage servicers, they appreciate it.

In fact, most mortgage servicers recognize that one of the important advantages of having vacant-property registration ordinances is that more cities will have access to accurate and updated contact information so that property issues can be brought to everyone’s attention and addressed before further damages can occur.

By working together as an industry to unify our voice, reaching out in a spirit of cooperation with municipalities across the country and keeping the channels of communication open, everybody wins.

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CHIEF EXECUTIVE OFFICER

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.

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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.

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CHEIF INFORMATION OFFICER

George Mehok

George Mehok is the chief information officer for Safeguard. He is responsible for all strategic technology decisions, new systems deployments and data center operations supporting a national network of more than 10,000 mobile workers.

George has more than 20 years of leadership experience dedicated to high-growth companies in the mobile telecommunications and financial services industries, spanning startups to global industry leaders.

George played a senior role in the formation of Verizon Wireless, leading the IT product development and strategic planning team. He led the integration planning for the Verizon merger including: GTE, Vodafone-AirTouch, Bell Atlantic Mobile and PrimeCo.

As chief information officer at Revol Wireless, a VC-backed CDMA wireless communications network operator, George’s team implemented an integrated technology infrastructure and award-winning business intelligence platform.

George holds a bachelor’s degree in political science and economics from Eastern Michigan University and an M.B.A. from The Ohio State University. He is a board member of Akron University’s School of Business Center for Information Technology, in addition to an advisory board member for OHTec.

In 2013, George won the Crain’s Cleveland Business CIO of the Year award for his team’s work in completing a major acquisition and technology transformation at Safeguard. In 2015, George’s team was recognized by InformationWeek’s annual Elite 100 ranking of the most innovative U.S.-based users of business technology. The mobile inspection technology developed at Safeguard was selected as InformationWeek’s “One of the top 20 ideas to steal in 2015”.

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General Counsel and Executive Vice President

Linda Erkkila, Esq.

Linda Erkkila is the general counsel and executive vice president for Safeguard, with oversight responsibilities for the legal, human resources, training, compliance and audit departments. Linda’s broad scope of oversight covers regulatory issues that impact Safeguard’s operations, pro-active risk mitigation, enterprise strategic planning, human capital and training initiatives, compliance and audit services, litigation and claims management, and counsel related to mergers, acquisition and joint ventures.

Linda’s oversight of the legal department along with multiple compliance and human capital focused departments assures that Safeguard’s strategic initiatives align with its resources, leverage opportunities across the company, and contemplate compliance mandates. Her practice spans almost 20 years, and Linda’s experience, both as outside and in-house counsel, covers a wide range of corporate matters, including 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.

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Chief Financial Officer

Joe Iafigliola

Joe Iafigliola is the Chief Financial Officer for Safeguard. Joe is responsible for oversight of the Control, Quality Assurance, Accounting and 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.

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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.

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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.

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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.

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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.

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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.

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AVP, Mobile and Analytics

Jason Heckman

Jason Heckman is the assistant vice president of mobile and analytics for Safeguard. He is responsible for both Safeguard’s mobile development and strategy as well as the company’s data warehousing and business intelligence. Jason oversees the design, development and release of all Safeguard’s internally developed mobile applications. He also oversees the development and delivery of operational and analytical data technologies throughout the organization.

Jason joined Safeguard as manager of mobile in 2012. During that time he led the development and integration of Safeguard’s mobile applications across the company’s vendor network to provide real-time data from the field. In 2014, he was promoted to director of mobile applications and named assistant vice president in 2017.

Prior to joining Safeguard, Jason was the director of application development and business intelligence for Revol Wireless, a privately held wireless provider in Ohio and Indiana.

Jason holds a bachelor’s degree in business management from Case Western Reserve University in Ohio.

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AVP, Business Development

Tim Rath

Tim Rath is the AVP of business development for Safeguard. He is responsible for developing innovative growth strategies for Safeguard and developing and overseeing potential partnerships, mergers and acquisitions.

Tim joined Safeguard in 2011 as project director and has filled numerous roles within Vendor Management, most recently serving as director of vendor management, a role he assumed in 2011.

Prior to Safeguard, Tim worked as director of supply chain at PartsSource Inc. in Aurora, Ohio, a provider of medical replacement parts, procurement solutions and healthcare supply chain management technology services. He also has held sales positions with Rexel, ComDoc, and Pier Associates, all based in Ohio.

Tim holds a degree in marketing and sales from The University of Akron in Akron, Ohio. He also earned his FAA Certified Commercial UAS (Drone) Pilot license in 2017.