MortgageOrb How Creative Disposition Can Aid Communities

Robert Klein, CEO of Safeguard Properties, contributed an article to MortgageOrb.com and Servicing Management magazine about the challenges facing communities and servicers with the high number of REO properties on the books.

How Creative Disposition Can Aid Communities

By Robert Klein on Wednesday 29 April 2009

Every day, more statistics are released that confirm what most of us in the industry already fear: The mortgage crisis probably has a way to go before it reaches the bottom. It would be difficult to find an economist willing to predict that the worst of the country’s entire financial crisis is nearing an end. Most believe it will continue well into 2010.

RealtyTrac reported that more than 3 million foreclosures were filed in 2008 – an increase of 81% from 2007 and 225% from 2006. Nearly 2% of all homes in the U.S. received at least one foreclosure filing in 2008, and banks repossessed more than 850,000 homes in 2008 – more than double the repossessions in 2007.

Even when the crisis ends, it will take some time – maybe years – for servicers and investors to clear the glut of real estate owned (REO) properties from their portfolios. Not only is the sheer volume of REO properties difficult to move, but these properties face stiff competition from traditional-sale homes that have languished in a weak real estate market, even as sale prices fall and interest rates drop to levels not seen in decades.

Meanwhile, the longer REO properties remain unoccupied, the greater the risk is that they will incur some sort of damage, even though the vast majority of servicers and lenders act responsibly to protect properties and respond quickly when issues come to their attention.

In these challenging times, it is essential for the industry to rethink its practices relative to REO maintenance and disposition. There are no fewer than three areas of critical concern:
effective preservation and protection of REO properties,
enhanced marketability to return properties to occupancy more quickly, and
creative disposition of properties with limited marketability.

Property preservation
Even the most regularly inspected, maintained and protected REO properties can fall victim to vandalism, theft, weather damage and other problems. They key is to identify problems as quickly as possible so that they can be addressed before the situation becomes worse.

For years, the industry has posted stickers on the doors of vacant properties with contact information so that code enforcement officials, neighbors, law enforcement officials and others who identify conditions can make property preservation contacts aware of them. More recently, door hangers placed at neighboring properties have begun to show promise, inviting more sets of eyes to watch out for and report issues when they arise.

On another level, the industry also has attempted to reach out to code enforcement officials to overcome the challenges of outdated or inaccurate court information that has resulted in delays and even failures of code violation notices reaching responsible parties.

As a resource for code enforcement officials, the Mortgage Bankers Association (MBA) has posted property preservation contact information for the major mortgage service companies on its Web site. While this resource has been effective in many instances, too many code enforcement officials still have been unaware of its existence. As a result, in many cities, too many code violation notices have failed to reach the right party in a timely manner.

Despite industry efforts to help, the fact remains that vacant properties continue to pose challenges to city code enforcement officials. This reality is what has driven many cities to consider or enact vacant property registration ordinances.

The difficulties with these ordinances for the mortgage servicing industry have been well documented. Their monumental volume makes compliance difficult, and the parties responsible for the most troublesome properties often are the ones least likely to comply. The majority of servicers that are both proactive and responsive incur the largest burden of paperwork with which to comply, and cities are beginning to realize they are investing much time and significant administrative resources for very little return.

This is why the MBA convened a Vacant Property Ordinance Committee to identify a better alternative. The committee is now piloting a program with the Mortgage Electronic Registration System (MERS) in which the MERS database, which contains current information on more than 60 million properties, will be made available to city code enforcement officials across the country.

Mortgage servicer companies that participate in the MERS system will be considered compliant with vacant property registration requirements of cities and will not have to file additional paperwork for their vacant properties.

Since December, this pilot has been under way in the cities of Boston; St. Paul, Minn.; Chula Vista, Calif.; Stockton, Calif.; and St. Louis County. Due to the promising results of the initial pilot, in March, the program expanded to 50 additional cities.

Enhancing marketability
Protecting and preserving vacant properties is one thing; returning them to viable family ownership is another. One only has to drive down virtually any street in the country to know that the real estate market is soft.

According to the National Association of Realtors, existing-home sales in January fell 5.53% from the previous month and 8.6% dropped compared to January 2008.

With traditional home sales languishing and sale prices falling to levels not seen in years, REO properties face stiffer competition to sell. Long gone are the days when an REO was simply cleaned out and sold at a reduced market price. Today, REO properties have to stand up to traditional market homes and offer the same level of curb and nesting appeal in order to attract a desirable family-home buyer.

Property preservation specialists are increasingly being asked to perform higher levels of maintenance and repairs on REO properties. These services include landscaping, interior and exterior painting, new carpeting, updated lighting and other cosmetic upgrades rarely done in years past.

Even with lower-value properties, low-cost maintenance services are important to make an REO property more inviting. On the outside, a neatly manicured lawn and yard cleanup can help REO homes move more quickly and at a more favorable price.

On the interior, cleanliness doesn’t cost much, but it can have a significant payoff if a family-home buyer can envision living in the home. They key is for the house to look and smell as fresh and clean as possible. At a minimum, floors, carpets, windows and walls should be scrubbed, and counters, plumbing fixtures, cupboards and closets should be wiped clean. Finally, investing a few dollars in light bulbs can make a world of difference in the perception that a home is bright and well maintained.

Creative disposition
Despite all efforts to enhance a property’s aesthetics, the reality in some neighborhoods is that, from the mortgage servicer’s perspective, many REO properties have limited or no residual market value when carrying costs are considered. These properties are often located in neighborhoods with an abundance of vacant homes and in areas where changing market conditions have significantly reduced their marketability.

Yet, from a community standpoint, these REO properties offer tremendous potential. They can become homes for lower-income families and first-time buyers. As part of larger land parcels, properties can be repurposed into neighborhood green spaces or made available to businesses to spur economic growth.

Although land banks have been around for decades, they haven’t always been used to their full potential. Recently, many cities have begun to revitalize their land bank efforts to acquire and repurpose vacant properties. The goal is to prevent vacant properties from blighting neighborhoods and to instead use them to facilitate the rebirth of communities.

Genesee County, Mich., created a model land bank in 2003. More recently, the state of Ohio, under an initiative led by Cuyahoga County Treasurer Jim Rokakis, passed legislation permitting the creation of land banks involving numerous municipalities. The Ohio legislation allows governmental bodies such as Cuyahoga County – which includes the city of Cleveland, one of the cities hit hardest by the foreclosure crisis – to create self-sustaining entities that accept foreclosed homes in both the city and suburbs.

While land banks offer mutual rewards for cities and servicers, they can only be successful if both sides have an effective and efficient way of finding one another. Most servicers manage national portfolios of REO properties and find it difficult to connect with hundreds of individual municipalities around the country. At the same time, cities and community development agencies interested in acquiring surplus properties do not know where to start in reaching out to servicers.

Imagine the potential if the industry could somehow come together to create a “one-stop” resource where servicers could post their surplus properties, allowing cities and community agencies to access them.

By pooling large amounts of data on many servicers, municipal and community development groups would be able to identify individual homes that could be offered to lower-income and first-time buyers. They also would be able to identify and assemble larger tracts of properties with the potential to attract retail and housing developments, or be transformed into recreation areas, public gardens and other green space.

The nation’s mortgage and housing crisis is likely to be with us for some time. At the moment, our greatest challenge is to work together to protect properties and to ensure that they do not contribute to crime or neighborhood deterioration.

Looking ahead, the crisis offers communities across the country the opportunity to retool and repurpose their land spaces based on shifting populations and housing preferences. Studies show that home buyers today, especially the coveted Generation Y, prefer walkable, environmentally friendly neighborhoods close to their workplaces, with nearby parks and green spaces.

Every city has the potential to breathe new life into their communities with the help of the mortgage and mortgage servicing industries. By working together, REO properties could help to spell a new American Dream.

Robert Klein is founder and CEO of Safeguard Properties Inc., a Brooklyn Heights, Ohio-based company specializing in property preservation and REO services. He can be contacted at robert.klein@safeguardproperties.com.

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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 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.

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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.