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Steve Meyer Discusses Hurricane Sandy Impact and Lessons Learned from Katrina

Posted on September 13, 2018October 4, 2018 by Safeguard

In its Spring 2013 edition, USFN Report published an article authored by Steve Meyer, Safeguard’s assistant vice president of high risk and hazard claims, titled Hurricane Sandy Impact Lessons Learned from Hurricane Katrina.

Hurricane Sandy Impact Lessons Learned from Hurricane Katrina
By Steve Meyer

When Hurricane Sandy hit the Northeast Coast in October 2012, the mortgage servicing industry felt a sense of déjà vu. Less than eight years before Sandy, the U.S. was starting to rebuild from Hurricane Katrina, arguably one of the most devastating natural disasters in the country’s recent history. In 2005, Hurricane Katrina left $81 billion in damage, 1.2 million evacuees, and 1,833 storm-related deaths according to The Weather Channel. Early estimates show that Sandy caused 147 deaths and $50 billion in damage to 650,000 properties.

Because the majority of properties damaged and destroyed by Hurricane Sandy have mortgage loans, the mortgage industry has a vested interest in assisting homeowners to mitigate losses. Applying lessons learned from Hurricane Katrina can help both homeowners and mortgage servicers understand and address insurance and property preservation issues.

Insurance-related Issues
A big challenge servicers face after major disasters like Hurricanes Katrina and Sandy is that most homeowners do not fully understand their insurance policies and often find that they have insufficient policies to cover the damage. They also fall prey to unscrupulous contractors and adjusters.

Flood vs. Wind-driven Rain Damage — Determining the cause of the damage establishes whether it is covered under a standard homeowner’s policy or under a separate flood policy. Many homeowners do not have flood insurance policies because they are not required unless properties are located near a flood plain. Flood damage typically is not covered under a standard policy, although wind-driven rain damage is covered, and establishing the cause of the damage is usually dependent on the discretion of adjusters.
Adjuster and contractor fraud — Predatory practices by insurance adjusters and contractors were so prevalent after Hurricane Katrina that it spawned legislation requiring adjusters to become licensed or obtain temporary catastrophe licenses that are valid for up to 180 days. Even with such legislation, vulnerable homeowners fall prey to unscrupulous insurance adjusters and repair contractors who receive insurance money and then fail to complete repairs or assessments or perform shoddy work. The risk for mortgage servicers is that the value and condition of the property may be negatively impacted as a result.
Limited coverage — Insurance policies may not fully cover the costs of repairs and clean-up after a storm or hurricane. For example, a policy might cover the cost to remove a downed tree that has fallen onto a home, but it may not cover the cost to remove sticks and limbs from the yard.
State rulings — After major storms, states make declarations to categorize the event. This is important to servicers because specific insurance policies must be used to cover damage costs depending on what type of storm has been declared. For example, if the storm is declared a hurricane, the amount of money homeowners must pay out of pocket for deductibles differs from what they would pay using a standard homeowner’s policy. Hurricane insurance policies carry “percentage deductibles.” When a homeowner purchases a hurricane policy, the carrier determines the deductible based on a percentage of the total appraised value of the home. As an example, a homeowner with a home appraised at $250,000 and a policy that carries a five percent deductible for hurricane damage would have to pay $12,500 out of pocket.
Servicers omitted from claim checks — On current loans, insurance carriers issue two-party checks that need to be endorsed by both the servicer and the borrower. In an effort to expedite payment for minor damage or cost-of-living expenses, some insurance companies set up temporary locations and write checks directly to the homeowners. As an additional insured on the policy, the carrier has an obligation to include the servicer on any payment for damage to the dwelling regardless of the amount.
Recoverable depreciation — Understanding the policy requirements related to recoverable depreciation is important to ensure full reimbursement. Policies will only make full reimbursement for damage once repairs are completed. Until then, reimbursements are made based on the depreciated value of the property. The typical time frame for recoverable depreciation is 180 days after the date of loss. Insurers may extend the timeline to 24 months after major storms or disasters.
Property Preservation Issues
Major storms and disasters present new challenges for servicers and their field service partners in assessing damage and making repairs. Some of those challenges include increased materials costs, accessibility of properties, mitigating further damage, and identifying vacancies.
Increased cost of materials — Increased demand and short supplies of building materials often cause a spike in costs after major storms. As a result, the cost-estimating software that the industry uses to determine the cost of repairs may not be accurate under the circumstances. It is important to review current material costs and pursue supplemental claims with the insurance carriers when necessary.
Property accessibility — Inspectors often have difficulty reaching properties in severely impacted areas, and shortages of fuel may limit the number of properties they can inspect. Inspection delays can hinder damage reporting, property securing, as well as emergency work needed to mitigate the damage.
Mitigating further damage — Servicers must take action to mitigate existing damage to prevent further damage. It is a requirement of investors and insurance companies. If servicers fail to properly mitigate losses, investors will not reimburse for the additional damage, and insurance companies will not reimburse to remediate resulting mold damage.
Identifying vacancies — After a severe storm, it is difficult for field servicers’ inspectors to determine vacancy when homeowners are forced to evacuate. Reporting a property as vacant when it is not can result in the denial of a homeowner’s insurance claims if force-placed coverage has been initiated by the servicer. Further, when borrowers evacuate, field service companies must decide whether to secure a property as well as determine other preservation measures that must be taken to protect the servicer’s collateral interests.

Solutions
The aftermath of a storm is a chaotic time for borrowers whose homes have been damaged or destroyed. Servicers must take immediate action to communicate to homeowners and offer assistance through the rebuilding process.

Utilizing field service contractors, servicers can reach out to borrowers and provide contact information when borrowers have questions or need help to address issues. Servicers also should train customer service personnel to assure that borrowers receive accurate and timely responses and information regarding insurance coverage and other storm-related updates.

Additionally, servicers must emphasize to borrowers the importance of documenting all property damage before filing an insurance claim. Homeowners should take multiple photos and videos that are time-stamped. Some homeowners have used the daily newspaper to verify dates in their damage photos and videos.

Often homeowners do not know what to do or where to turn for help after a major storm event. By identifying key issues from previous storms and applying the lessons learned, servicers can better manage issues, reduce potential losses, and offer much-needed relief to homeowners impacted by the devastation.

To view the online article, please click here.

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.

Safeguard Performed Work on Vacant Properties in Sussex County

Posted on September 13, 2018October 29, 2018 by Safeguard

On April 23, The Sparta Independent published an article titled Vacant Homes Linger in Sussex. In it, Safeguard is mentioned as one of the property management companies taking care of Sussex properties.

Vacant homes linger in Sussex

Hundreds of empty homes, potential boons and threats to neighborhoods

SUSSEX COUNTY — Rain-soaked newspapers wait at the door. There’s a mini forest growing from the gutters. Lichens are attacking the lawn furniture. The doorbell is dead.

Five years after the financial collapse that seized the housing market in the U.S., hundreds of vacant properties remain scattered across Sussex County, the lingering byproducts of the mortgage crisis.

As spring brings the start of the 2013 construction season, there are tepid hopes this year the housing market turn itself around. Standing in its way, however, are vacant properties like the ones in Newton, Sparta and Byram, which present distinct problems — and unusual opportunities — for homeowners.

Newton resident John Ragsdale has lived in his whitewashed Victorian home on Halstead St. for nearly 20 years.

Over the last three years a handful of homes just a few hundred feet away from his have stood empty as their former owners faced foreclosure.

“That one’s been empty for about a year and a half,” Ragsdale said of the house at 42 Halstead St..

Ragsdale is one of hundreds of homeowners living near foreclosed and vacant properties who worry about the decline of their neighborhoods.

“Now you can see that it’s an eyesore. It’s getting decrepit. It’s not being maintained physically, so I am worried about that and what it does for the property values here. Is this thing going to sit another year, another two years? There is one right behind me that’s been sitting vacant for two-and-a-half years.”

Empty and unknown

The house at 42 Halstead is currently owned by a bank, which has contracted with an independent property management company to keep the home in line with local codes.

“The banks won’t put much money into them other than paying taxes and other minor maintenance, like cutting grass, so they don’t get fined by the town,” Ragsdale said.

In the month of February, the property management firm Safeguard performed approximately 800 work orders on properties in just two zip codes, Newton’s 07860 and Sparta’s 07871.

Though that number reflects only the work orders and not individual properties, Safeguard was the only property management service that reported data. Other major companies, including CoreLogic, and LPS Field Services refused to give numbers on the properties they maintain.

The Sparta Independent found several homes in both Sparta and Newton that carried labels from those two companies by crossing-checking public data on homes with zero water usage. There were also many that had no indication any property manager was looking after them.

In Byram Township, vacant properties have prompted dozens of calls to the town from neighbors complaining about overgrowth, vermin infestations and other problems.

“We do the best we can to get the banks to maintain them,” said Byram Zoning Officer John Gutwerk. “They pretty much haven’t changed. We may have even more that have gone empty over the winter that we just don’t know about yet.” Gutwerk said that the two to four years it takes to foreclose on a property means that there are many more vacant homes than the township’s records reflect. “Complaints always go up this time of year. In another month, when things start to really get green we’ll see a lot of the same problems we had last year,” he said.

Tipping the scales

Economists estimate that vacant, delinquent and foreclosed homes hold leverage over the prices of surrounding properties.

A 2011 study conducted by the Federal Reserve Bank of Cleveland found that vacant or delinquent homes have a negative impact between 1.5 and 3 percent for each distressed property within 500 feet of standard sale.

Although that may seem like threat to a neighborhood, it also represents an opportunity for a purchasers looking to quickly regain value in a home.

But the longer the property stays vacant, the more unlikely it is for a buyer to pick it up.

“Properties that have been vacant for longer than two years are much more likely to have severe problems, such as cracked floors or walls, broken or boarded up windows, and a roof or foundation in disrepair, that make these properties harder to rehabilitate and less appealing to prospective buyers,” said Federal Reserve Governor Elizabeth A. Duke.

Still, Ragsdale is hopeful.

“It’s a nice town. It’s affordable, and there’s never been a better time to buy a house,” he said.

The Sussex County Association of Realtors declined to comment on this story.

To view the online article, please click here.

Safeguard Expands Bringing Over 200 Jobs to Richardson, TX

Posted on September 13, 2018October 4, 2018 by Safeguard

On April 4, Safeguard Properties announced the opening of its new operation in Richardson, Texas, bringing more than 200 jobs to the community. The announcement was published by several media sources.

Please follow the links to read the full articles from Housingwire, Dallas Business Journal, DSNews, and National Mortgage News, respectively:

Safeguard Properties Brings 200 Jobs to Dallas Area

Safeguard Properties Expands, Brings 200 Jobs into Richardson

Safeguard Properties Brings More than 200 Jobs to Dallas Area

Field Service Provider Opens Texas Office

Following is a link to the official press release from Safeguard:

Safeguard Properties Expands Operations And Brings More Than 200 Jobs to Richardson, Texas

Robert Klein Counters on Foreclosure Timeline

Posted on September 13, 2018October 4, 2018 by Safeguard

In the March issue of DSNews, a Point-Counterpoint article was published, titled Only Time Will Tell. In it, Safeguard’s Robert Klein, founder and chairman, counters to Thomas J. Fritzlen, Jr., president of Martin, Leigh, Laws & Fritzlen, P.C., regarding the foreclosure timeline.

Only Time Will Tell
Foreclosure timelines vary from state to state leaving mixed results in the world of completed foreclosures. Are judicial timelines hurting the industry or helping it?

Foreclosure is a fear that every homeowner hopes to avoid; however, during the economic collapse it became an all too apparent reality for many Americans, but not in the same manner as one would expect because the laws in certain states differ from the laws in other states. Judicial states prolong the foreclosure timelines in certain states allowing some homeowners to stay in their homes for longer periods of time and in other states forcing others out immediately, putting more vacant homes on the market and changing the face of entire communities. How are these laws impacting the recovery? Thomas J. Fritzlen and Robert Klein weigh in.

According to Thomas J. Fritzlen
There are differing perspectives on both sides of this issue. For example, FHFA has recently criticized states for increasing the time in which it takes to foreclose. The Center for American Progress, while recognizing some benefits of timely foreclosures has complained that any potential plans to charge higher guarantee fees in states where laws have contributed to extended foreclosure timelines would unfairly punish borrowers. From the practitioner’s point of view, there is little doubt that in some instances, state laws have added to the costs and contributed to unnecessary delays. Higher costs and longer delays hurt the industry and aggravate an already mind-numbing gauntlet of requirements through which lenders and servicers must run daily. However, there may be a “silver lining.” To the extent such laws can help restore lenders’ credibility and to the extent such laws can help restore public confidence in the foreclosure process, the industry will be strengthened.

The economic crisis revealed isolated as well as systemic problems and abuses, including robo-signing, inadequate, defective (or worse) documentation, questionable or non-existent proof of ownership, and difficulties in providing the courts with adequate evidentiary support. No doubt these problems were aggravated by the high volume of defaulted loans.

The states’ (and courts’) reaction to these problems was swift and reflected an unprecedented erosion of credibility and confidence, which our industry has long enjoyed. Gone are the days of routinely accepting the averments of lenders and counsel as true–even the most routine processes and documents are now subject to higher standards of proof and skeptical scrutiny. In the past, lenders could count on courts generally accepting, without questioning, the accuracy and veracity of their representations. However, in a few short years, such deference has vanished. Public confidence in our industry is at an all-time low. As a result, the industry has been required by various states’ laws to go to extremes (some would say) in order to process even routine foreclosure cases.

This is the new order. Where is the “silver lining”? These may present additional hurdles and burdens, but they also present us with an opportunity to reestablish credibility and confidence. As we work through the foreclosure inventory, the new rules will encourage lenders and servicers to re-establish credibility one case at a time.

This will demonstrate to borrowers, the courts, and the public that our industry is willing to meet the challenges we face–that we will provide accurate affidavits and documentation and complete and unassailable assignments, and that we have exhausted all alternatives prior to foreclosure. While the mistrust may be ebbing, it will take time to restore complete confidence. With daily, consistent attention to detail, we will begin to restore confidence in the mortgage industry.

Another benefit of these more stringent requirements may be to enhance the perception that the process is fair. This may deter the endless legal challenges, which only add to delays.

We need to embrace these new laws and welcome the opportunity that they present to restore public confidence and to re-balance the equities in the process. If we do so, we will realize their “silver lining.”

According to Robert Klein
The discussion surrounding foreclosure timelines in judicial states is far-reaching and multi-faceted because each state operates as its own jurisdiction with absolute authority over its individual procedures and governing protocols. What can be effectively argued is that increased foreclosure timelines leave properties vacant for longer periods of time, which has a lasting impact on local communities–and, in particular, on the neighbors of the vacated properties that sit empty and dark, inviting blight, crime, and vandalism.

I think everyone agrees that when a property is vacant, everybody–from the family next door to local businesses across town–suffers from the vulnerabilities that abandoned properties inherently bring. An unoccupied property in general, especially if it is boarded with plywood, will drive down the property values of the surrounding neighbors, which, in turn, has an obvious and damaging impact on the local community as a whole. It’s a natural progression for this type of scenario to play out on any one of our streets, in any corner of our country.

There’s no argument against the realization that vacated properties are not helping anybody, but the effects of elongated timelines are certainly more pronounced in judicial than non-judicial states. Texas, a non-judicial state, does not have an extended foreclosure timeline; after three missed payments foreclosure is initiated on the home. Illinois, a judicial state, recently passed a law that says if a property is vacant it will fast-track it to foreclosure instead of the foreclosure process taking two years on average. In New York, the foreclosure dockets are backlogged for three years, leaving vacant properties vulnerable to vandalism, crime, and deterioration no matter how well they are being maintained by mortgage servicers and their field service partners.

There is hope for an acceptable resolution to this issue and I think the solution is already happening. While foreclosure timelines are, by and large, decided by state law, it’s a complicated matter, with more and more states taking a step back to examine their own processes because too many times homes are left unattended and unoccupied as homeowners cut ties and set out to find alternative housing solutions.

The conversation surrounding these very diverse and distinct laws is a necessary discussion because, in almost every case, there are neighbors–good, respectable, creditworthy neighbors–who are making their payments on time each and every month and living within their means in the homes that they’ve purchased. Yet these neighbors are made vulnerable because of the unfortunate circumstances that may have fallen on the neighbor who lost their home. It is a loss for everyone when a property sits vacant for a long time–the servicer, the investor, the home’s next buyer, the neighbors, the community, and the municipality.

A swift resolution that makes it possible for the next buyer to see the potential within the empty, lifeless rooms of a vacant foreclosed home . . . that is the fuel that can ignite the spark that we once called the American Dream.

Thomas J. Fritzlen, Jr., is the president of Martin, Leigh, Laws & Fritzlen, P.C., a leading Midwest litigation and creditors’ rights firm serving Missouri, Kansas, and southern Illinois. He serves on the inaugural Advisory Board to the Legal League 100, is a managing member of the Default Attorney Group (“DAG”), and frequently speaks at educational training for servicers and lenders, and at national industry events such as the MBA and USFN. Fritzlen has been recognized as a Missouri-Kansas “Super Lawyer” for each of the last five years, and has 25 years of trial and appellate experience in general civil and complex litigation, including numerous bench and jury cases in state and federal courts.

Robert Klein is founder and chairman of Safeguard Properties. Since founding Safeguard in 1990, he has grown it into the largest mortgage field service company in the country, providing services in all 50 states, the Virgin Islands, and Puerto Rico. He has been an industry advocate to advance best practices and has led key initiatives to build relationships between government officials and the mortgage industry and to find workable solutions to improve neighborhoods and communities. He currently serves as chair of the National Vacant Properties Registration Committee of the Mortgage Bankers Association.

To view the article in PDF., please click here.

Michael Greenbaum and Travis Anderson Quoted in Diverse Opportunities Article

Posted on September 13, 2018October 4, 2018 by Safeguard

In the March edition of DSNews Industry Insight, Safeguard’s Michael Greenbaum, VP of operations, and Travis Anderson, director of vendor management, are quoted in an article titled Capturing Today’s Diverse Opportunities.

Capturing Today’s Diverse Opportunities

Enterprising women- and minorityled groups are transforming markets across the country in their efforts to advance recovery.

An old proverb says: “It’s an ill wind that blows no one any good.” This could certainly be true of the housing crisis of the past several years. Recognizing opportunities hidden in the fallout, women’s groups and minority organizations operating in the default servicing industry have developed and delivered a plethora of creative solutions. From helping consumers regain homeownership to unearthing untapped business avenues, these intrepid alliances are infusing new energy into the default industry.

To view the article in its entirety, please click here.

Kellie Chambers Opines about Managing Transition

Posted on September 13, 2018October 4, 2018 by Safeguard

On April 23, HousingWire published an article titled Property Preservationists Talk about Managing Transition. In it, Safeguard’s Kellie Chambers, AVP of property preservation is quoted.

Property preservationists talk about managing transition

Changes in property preservations happen often, causing firms in the asset management space to continuously overhaul their operations.

At the SourceMedia Mortgage Servicing Conference, panelists discuss how to keep up with the changes in the session “Pressue Points: Managing Transitions in Property Preservations from the Top Down.”

“The auditor is driving much of the change, but it really needs to be driven by the business owner. It is really important that during the action-planning phase that the business owner has as much say as the auditor,” said Kellie Chambers, assistant vice president of property preservation at Safeguard Properties.

Rob Hicks, first vice president, industry relations for LPS Field Services, expanded saying, “Take the time to sit down with the auditors to help them truly understand the business.” It will take extra time, but it will be more efficient in the long run.

To view the online article, please click here.

George Mehok Discusses Data Mining to Solve Business Puzzles

Posted on September 13, 2018October 4, 2018 by Safeguard

In its April edition, Mortgage Banking published an article authored by George Mehok, Safeguard’s chief information officer, titled Solving Business Puzzles with Data Mining.

Solving Business Puzzles with Data Mining
By George Mehok

Every piece in a puzzle is an important part of the big picture. Each piece fits in a certain way, and puzzle solvers must apply strategic thinking to make it all come together. Depending on the size and number of pieces, some may start with the edges and work their way toward the middle. Others identify similar pieces and begin working on specific sections of the puzzle. Each person chooses the best method to analyze and solve the puzzle.

The same applies to mining data to support business planning and decision making. Each piece of data that a company collects is a puzzle piece that fits into the big picture. Developing a strategic approach to put it all together is the challenge.

National field service companies working on behalf of the mortgage industry collect billions of points of data in the process of inspecting and maintaining millions of properties in neighborhoods, cities and states across the country.

We collect detailed information about the condition of each vacant and abandoned property, instances of damages and vandalism, and the numbers of vacancies, defaults and foreclosures we encounter in each ZIP code.

Our database tracks the numbers of work orders each vendor completes and each employee processes, and the photos that accompany each order. We track outcomes related to specific procedures, training and other activities. If the information is in our system, we can track it.

And just as the tiny pieces in a jigsaw puzzle form a picture, each piece of data builds a picture that can help improve operational performance and the quality of vendor performance, and support the decision-making process of mortgage servicers regarding their property portfolios.

Improving field performance

Over the past two years, Safeguard Properties has made a significant investment to enhance our data-mining capabilities to create new and improved analytics and reporting mechanisms to improve our own performance and share critical data with our clients. Our goal is to create internal business intelligence strategies and use analytics to predict trends to proactively improve performance and help clients make evidence-based business decisions.

Safeguard’s enterprise data warehouse collects information from all of our systems to provide a timely and accurate view of the work we perform in the field and help us make important resourcing decisions. For example, by evaluating contractor performance and property condition trends, we can more accurately forecast resource levels and types of vendors we will need in particular markets.

Analytics also help Safeguard build stronger relationships with our vendors and a more effective vendor workforce. Scorecards allow us to track and measure the performance of each contractor so that we can address issues such as timeliness, accuracy and other quality indicators.

Safeguard also has developed “dashboards”–easy-to-read charts and graphs–so that our vendor-management team can easily view reporting results to evaluate the performance of individual vendors. When deficiencies are identified, field quality-control representatives work with vendors to improve their performance and outcomes.

Supporting client needs and requirements

Field service companies must maintain scorecards to measure their performance against client service-level agreements. By building analytics to track and monitor performance levels in near real time, we can proactively identify issues and take more immediate corrective actions to minimize property risks and ensure that service levels remain at or above our clients’ standards and requirements.

By evolving analytic capabilities to proactively identify trends, we can also help our clients make more informed decisions about their portfolios of defaulted and foreclosed properties, as well as their property disposition strategies.

For example, we can evaluate crime, vandalism, severe weather and property damage trends in particular areas to help clients predict maintenance costs associated with these issues.

Clients can utilize the data we provide to determine optimal property investments to maximize the return on their real estate-owned (REO) portfolios or to make decisions to donate properties to land banks, community development corporations or other agencies.

We can work with clients to determine alternative securing procedures, changes in inspection frequency or other services that may be needed to comply with investor guidelines.

Planning for the future

Safeguard relies heavily on operational reporting, metrics, analytics and dashboards to make business decisions to improve our financial and operational performance as well. We make information available in our internal systems so that each department and manager can pull the data they need to evaluate employee performance, cost information, profit margins and other results, and take measures to either improve deficiencies or share successes and best practices with other departments.

As more of Safeguard’s field inspectors utilize mobile devices, we are in the process of comparing results of those who use such devices and those who do not to determine whether we find a difference in the quality of work. This will help us evolve our processes to help our inspectors improve the efficiency and quality of their work.

Another strategic initiative for Safeguard is the use of Geographic information systems (GIS) tools and techniques. GIS captures locations to ensure that vendors identify and visit the correct properties. The data, enabled by the use of mobile devices, also collects location-based data that will help us assign work orders more efficiently.

By taking advantage of the information treasures in our data mines, companies like Safeguard can fit billions of pieces of information together to solve their most challenging business puzzles and those of their clients. We haven’t completely solved the puzzle, but we are laying the groundwork to continuously improve our own performance, the performance of our vendors, and help clients make better and more-informed business decisions as well.

George Mehok is chief information officer of Valley View, Ohio-based Safeguard Properties, the nation’s largest mortgage field service company. He can be reached at george.mehok@s.safeguardproperties.com.

To view the article in PDF, please click here.

George Mehok Comments on Technology in Disaster-Affected Areas

Posted on September 13, 2018October 29, 2018 by Safeguard

On January 28, National Mortgage News published an article titled Even with Few Quakes, Servicers Shaking. In it, Safeguard’s George Meehok, chief information officer, comments on the role of technology used by field services companies in areas affected by natural disasters.

Even with Few Quakes, Servicers Shaking

WE’RE HEARING that the housing bust isn’t the only thing driving an increase in demand for “field services” like home inspections and maintenance in recent years. Natural disasters, including Hurricane Sandy, also have mortgage servicers scrambling to check on the status of their collateral.

Natural disasters caused more than $60 billion in property damage during 2012, according to CoreLogic. Some estimates have put the property damage from Hurricane Sandy alone at more than $50 billion. (EQECAT, a provider of catastrophe loss modeling services, pegs insured losses from Sandy at between $10 billion and $20 billion.)

Just before Sandy struck, CoreLogic estimated that the Category 1 hurricane would put 284,000 residential properties on the East Coast at risk of damage. But getting a handle on either the number of properties damaged is difficult. New Jersey Gov. Chris Christie said that 346,000 homes in his state were damaged to one extent or another, while 41,000 New Jersey residents remained displaced from their damaged or destroyed homes in mid-January, nearly three months after the storm hit. That’s a big servicing portfolio, or actually a big chunk of a bunch of servicing portfolios.

And it’s not just hurricanes that pose a risk for loan collateral. A record nine million acres were consumed by wildfires during 2012 across the U.S., mostly in Western and Southern states. And a widespread drought in the West and Midwest is estimated to diminish economic growth by $75 billion to $150 billion, shaving between .5% and 1% off of GDP growth. While the drought doesn’t damage property value, a prolonged drought could depress values for farm and ranch land in affected areas.

All that during a year when the country was spared the severity of tornadoes seen in 2011 and did not suffer as much inland, fresh-water flooding as in some recent years. There were also few domestic earthquakes that affected heavily populated areas.

Bad news, of course, sometimes turns into big business for companies that help mortgage servicers manage and monitor collateral and real estate owned assets. So where do servicers turn to find out how much of their collateral has been damaged by a natural disaster and how severe is the damage? The same people they rely on when a borrower defaults on a loan, it turns out: field services companies. And advances in geo-coding technology are making it easier for lenders and their service providers to pinpoint what collateral might be affected when Mother Nature turns mean.

George Mehok, chief information officer at Safeguard Properties, said identifying what properties a client has in areas affected by a disaster and assessing the damage for them is a cornerstone of Safeguard’s business. In many cases, borrowers are still current on their mortgage in the immediate aftermath of a disaster, but the servicer still wants to know what the condition of the collateral is.

“We are the boots on the ground for our clients,” he said.

He said technology from companies such as Google to identify the geographical location of properties is improving, but at this point it isn’t always reliable enough to ensure that inspectors or maintenance crews are at the right home. As a result, Safeguard has employed its own technology and logic in its quality control processes to identify the location of properties.

When a disaster occurs, he said Safeguard can quickly and accurately inform the servicer of what assets may have been damaged. The client can then decide if they want to order inspections or other field services related to those homes. In many cases, servicers want a “FEMA inspection” so they have a better understanding of how their portfolio is affected. While big national disasters like Sandy won’t escape a servicer’s attention, smaller disasters like a local tornado or localized flooding may not even be on a lender’s radar until a field services provider alerts them to the fact that they have collateral in an area affected by a local disaster.

“We can actually tell them where the affected areas are, and we give them a list of all their properties that are in that area,” Mehok said.

But defaults remain the largest source of the field services visits. Marc Hinkle, an SVP at Mortgage Contracting Services, told me that more than 90% of the company’s business is related to loan defaults. Still, when a disaster strikes he said servicing clients want to know what REO or foreclosed property they have in the affected area.

And he said field inspectors can play an important role in helping servicers make sure that insurable claims are handled correctly. In the wake of a hurricane, for instance, there are often questions about whether damage was caused by wind or water, which affects what insurance covers the damage. Real-time photos or video delivered from tablet devices can help servicers manage insurance claims in those cases, he said.

Evaluating damage in the immediate aftermath of a disaster is the first concern of servicers, but in assessing the health of their portfolio, they also need to think about the long-term ramifications as well. A major storm, flood or earthquake can sometimes not only put pending home sales in limbo, but it can depress property values in areas suddenly deemed risky for years to come.

The degree to which a disaster dampens values depends on a long-term basis depends upon the nature of the disaster and how it affects people’s perception of risk. For servicers, a disaster on the scale of Hurricane Sandy may be a factor affecting their delinquency rates for years to come. In the aftermath of Hurricane Katrina, the real estate market in lower elevation parts of New Orleans and the surrounding area remained depressed for years.

Ted Cornwell has covered the mortgage markets since 1990. He is a former editor of both Mortgage Servicing News and Mortgage Technology.

To view the online article, please click here.

George Mehok Awarded “CIO of the Year” by Crain’s

Posted on September 13, 2018October 29, 2018 by Safeguard

On April 18, Crain’s Cleveland Business names George Mehok, CIO of the Year in the large, private company category. Mehok is Safeguard’s chief information officer.

CIO of the Year George Mehok

A company that nearly doubles in size in less than a year and is the largest mortgage field services firm in the United States relies heavily on its information technology.

Just ask George Mehok, CIO of Safeguard Properties — the Valley View firm that grew from 1,000 employees in August 2012 to 1,700 by February 2013.

The company manages properties that are held by a mortgage holder, usually because of foreclosure. It must inspect and maintain the properties of its clients until they are resold.

Since August 2011, keeping Safeguard’s IT systems running has been the responsibility of Mr. Mehok. In that time, he has helped to devise and deploy a strategy that both accommodates the growth and allows Safeguard to seamlessly scale the business as it expands and diversifies.

“With the growth that Safeguard has experienced, it is also imperative to help foster an environment of trust and respect in the IT organization,” the nomination said. “By working diligently to help make an ever-expanding team gel into a cohesive unit, he has, in turn, helped build trust in the IT organization with the other leaders and users of key business groups in the organization.”

Much of Safeguard’s growth came with its purchase of the mortgage field services business of Bank of America, a deal that closed before the end of 2012. One of Mr. Mehok’s notable accomplishments was migrating the Bank of America operations into Safeguard’s, limiting the cost of using Bank of America’s legacy system.

Over the next year, Mr. Mehok will be developing a smart phone application to improve productivity in the field, since the company uses vendors and contractors across the country to maintain the properties.

In the wake of Superstorm Sandy last year, Mr. Mehok was quoted by National Mortgage News on the role Safeguard’s technology played in areas affected by natural disasters. He described how Safeguard uses technology to locate properties and assess the damage.

“We are the boots on the ground for our clients,” he told the newspaper. “We can actually tell them where the affected areas are, and we give them a list of all their properties that are in that area.”

In addition, Mr. Mehok is involved with Junior Achievement, teaches management information systems at the University of Akron and serves on the board of the Center of E-Business Technology there, advising the center on curriculum and student recruitment.

“Over his 20 years of experience in IT leadership, George has played a senior role in assisting multiple high-growth companies aspire and achieve greater productivity and efficiency through better IT processes,” the nomination said. “From helping to lead the integration efforts of the companies and technologies that power today’s smart phones, to helping to build a VC-backed wireless startup from nothing to a regional power, George has made a habit out of taking businesses from humble beginnings to pillars of operational excellence.”

To view the online article, please click here.
To view Safeguard’s official press release, please click here.

On April 18, DSNews published:
Safeguard Properties Exec Earns ‘CIO of the Year’ Award

Alan Jaffa Comments on Assets Exiting Bank Books

Posted on September 13, 2018October 29, 2018 by Safeguard

On February 18, Crain’s Cleveland Business published an article titled More Problem Assets Exit Bank Books. In it, Safeguard’s Alan Jaffa, CEO, is quoted explaining how assets may be off the bank’s books but in another entity’s portfolio.

More problem assets exit bank books

Number of foreclosed properties owned by most local financial institutions is falling

The volume of foreclosed properties owned by most local banks fell last year by double-digit percentages, in some cases by the steepest rates since the foreclosure crisis struck — a corner bankers say was turned thanks to an improving real estate market and fewer properties going into foreclosure.

Institutions big and small reported that they carried as of Dec. 31 the lowest level of foreclosed property since at least 2010, which observers say should mean fewer vacant homes in neighborhoods and more lending by banks less burdened by foreclosed assets.

“Some of the problems banks have been wrestling with for four or five years are being resolved,” said Charlie Crowley, an investment banker who works primarily with financial institutions. “It’s good for profitability, and also a sign … that more (consumers) are probably getting their debts under control.”

KeyCorp’s foreclosed assets were valued at $22 million as of Dec. 31, down 66% from $65 million at Dec. 31, 2011, and down 83% from $129 million at Dec. 31, 2010, according to public filings.

Others shedding problem assets include regional giant Columbus-based Huntington Bancshares Inc., which reduced its portfolio by 27% in 2012 and by 42% in 2011, and tiny Middlefield Banc Corp., which trimmed its foreclosed assets by 16% last year.

Similar improvement during 2012 was reported by LNB Bancorp Inc. and Cincinnati-based Fifth Third Bancorp, according to data from SNL Financial.

“Overall, the (real estate) market has stabilized,” said Dale Clayton, senior vice president and national manager of the asset recovery group for KeyBank. “We still have consumer mortgages (in foreclosure) … that will continue to be higher than average until employment rates improve, (but) our bank is pretty much through the real estate crisis.”

One exception is PNC Financial Services Group Inc., which acquired Cleveland-based National City Corp. in 2008: Its line item for “other real estate owned” — or OREO, the term for foreclosures in bank filings — has increased every year since 2007 and stood at $920 million at Dec. 31, 2012, up 5% from $876 million as of Dec. 31, 2011, and up 10% from $835 million as of Dec. 31, 2010, SNL reported.

Industrywide, aggregate OREO stood at $38.5 billion as of Dec. 31, 2012, down 16% from $46 billion the year before and down 27% from $52.6 billion as of Dec. 31, 2010, according to SNL.

Investors pounce

The industrywide decline in OREO portfolios largely is the result of the improving housing market, which observers say is firming up housing prices and increasing sales.

“This has been mostly a real estate-led recovery as opposed to a jobs-based recovery,” said Tim O’Dell, CEO of Central Federal Corp., the Fairlawn parent company of CFBank.

Although the company hasn’t reported its year-end numbers for 2012, Central Federal’s foreclosed assets fell 47% to $2.4 million on Dec. 31, 2011, from $4.5 million as of Dec. 31, 2010.

When banks foreclose on properties, they write them down to appraised levels, said Mr. Crowley, a Cleveland managing director for Philadelphia-based Boenning & Scattergood Inc. In recent years, there were not always buyers of the properties even at those levels, and banks “were reluctant in many cases to recognize steeper losses than they had already taken,” which would have happened had they sold properties below their appraised values, Mr. Crowley said.

And if the banks’ capital levels were stretched, they were even less inclined to take bigger hits by selling properties, he noted.

“Now that the real estate market has recovered somewhat, it is much easier for these banks to sell OREO properties without significant additional losses,” Mr. Crowley said. “Also, as the banks have boosted their capital levels over the last couple of years, they are able to tolerate additional losses in some cases just to get rid of problems.”

Mr. O’Dell agreed that buyers had been scarce.

“There were times that, even if you were willing to sell a property at a significant discount, there just weren’t many buyers out there,” he said. “We have seen the return of interested buyers in these properties. It gives us confidence to go out and make new loans.”

KeyBank’s Mr. Clayton said there is “significant capital in the market that continues to chase distressed real estate assets.” When investors are buying up more distressed loans and commercial notes, fewer of those distressed assets end up in foreclosure, Mr. Clayton said.

“Lenders, not developers’

Fewer foreclosed assets on their books saves banks money, as foreclosed properties are expensive to own, Mr. Clayton said. The average lifetime cost to hold and sell such assets, Mr. Clayton estimated, is 10% to 12% of their value.

A bank’s costs include the hiring of property managers and the engagement of brokers to sell properties; all the while, the foreclosed assets aren’t earning the interest they were supposed to glean.

A number of institutions noted in their earnings releases last month that their noninterest income increased, in part, because their costs associated with “other real estate owned” had decreased.

“We’re not really good owners of real estate,” Mr. Clayton said. “We’re lenders, not developers.”

KeyCorp’s other real estate owned portfolio now is at a normalized level, Mr. Clayton said, and that returns capital to the bank for other uses, such as lending.

It also means a cut to the related work force: KeyCorp’s full-time-equivalent workout employees — or those who modify and manage nonperforming assets — are down two-thirds from the staff’s height in 2009 and 2010, Mr. Clayton said. Some of those employees are commercial lenders who now have returned to making loans.

“The struggle now is how do you reduce staff as quickly as you reduce assets and be as efficient as possible,” he said.

The decline in foreclosed properties on bank books is a very positive development, said Kevin T. Jacques, who for 14 years worked for the U.S. Department of the Treasury and now is the Boynton D. Murch Chair in Finance at Baldwin Wallace University.

“It should mean the worst of that should be over, and we can begin to start to see fewer vacant properties and a stabilization of our neighborhoods,” Dr. Jacques said.

“Is this sustainable? Depends on two things,” Dr. Jacques added. “One, how large is banks’ remaining inventory of OREO, and two, what happens to the national and regional economy in 2013?”

Off the books

Contrary to many banks’ balance sheet numbers, Safeguard Properties, a Valley View company that maintains defaulted and foreclosed properties for mortgage servicers, is not experiencing a decline in the total number of foreclosed properties and expects volumes to remain consistent for the next couple years, CEO Alan Jaffa said.

A decrease in the number of foreclosed properties on a bank’s balance sheet does not necessarily mean the property is no longer an unsold foreclosure, he wrote in an email. That’s because some properties — particularly those with government-sponsored investors and those with government-backed loans — are conveyed to those investors after a foreclosure is completed.

“The property may no longer be on the bank’s books, but may be an (OREO) in a different entity’s portfolio,” Mr. Jaffa said.

He also noted that Safeguard Properties is not seeing a decrease in default rates and in the number of properties in default 120 days or older, which Mr. Jaffa said often are “predictors of future foreclosure filings.”

To view the online article, please click here.