Safeguard’s Alan Jaffa contributed an article to Servicing Management’s March 2012 edition entitled A New Servicing Battlefront: How to Avoid SCRA Errors.

A New Servicing Battlefront: How to Avoid SCRA Errors

Last December, thousands of military families received the best holiday gifts they could ever have: the news that their loved ones serving in Iraq were returning home. Unfortunately, many family members of those serving in Iraq, Afghanistan and other parts of the world also face severe financial hardships while they make a great sacrifice for their country.

For this reason, the Servicemembers Civil Relief Act of 2003 (SCRA) suspends certain obligations for servicemembers in order to free them from financial concerns and allow them to focus on their military duties. Among other provisions, SCRA offers protections for active duty military personnel and their dependents against the loss of their homes, either through foreclosure or eviction.

However, many military families are not aware of their rights under SCRA. As a result, when active-duty military families default on their loans, they may not know to inform their mortgage company about their status. If they live in properties they do not own that go into default, they may not know to inform their landlords. As well, landlords of defaulted properties either may not be aware of their tenants’ military status or of the protections afforded under SCRA.

SCRA requires that a mortgage company attempt to identify properties occupied by active-duty military families, and prevents the company from certain actions to remove family members from their homes while servicemembers are on active duty. Servicers are required to maintain documentation of their attempts. Most make great efforts to identify servicemembers through a variety of online databases, public records searches, and even inquiries directly to each branch of the military, although the military inquiries may take many months to process.

Complicating search attempts are the “gray areas” in which a military family may occupy a defaulted property that is not in title to the active duty servicemember. It may be titled to a spouse or other family member. The active-duty servicemember may be a tenant in a defaulted property.

There have even been instances in which a military family lives in a mobile home and either the land or the mobile home is in title to someone other than the military member. Even under these types of scenarios, it is important for mortgage companies to attempt to identify properties where active military personnel may live.

The challenge for mortgage companies is finding effective ways to identify defaulted properties that are occupied by military families so that proper steps can be taken to help them remain in their homes and halt any foreclosure proceedings, as well as provide assistance with loan modifications, financial counseling referrals or other services.

To help with this effort, mortgage servicers have begun to engage their field service partners to conduct borrower outreach after properties go into default. During their default inspections, field service inspectors will leave door hangers encouraging borrowers to contact their mortgage company to discuss alternatives to help keep the borrowers in their home. In a similar way, field service companies can help mortgage companies reach out to help identify and verify the military status of defaulted borrowers or occupants of defaulted properties.

Dealing with delinquencies
Routinely, when loans are delinquent more than 45 days, mortgage companies will provide a list of those properties to their field service company to begin monthly inspections to verify occupancy. If the property is found to be vacant – which, on average, is about 15% to 20% of all defaulted properties – that information is reported to the mortgage company.

Inspectors determine whether a property is vacant in many ways, including its general appearance and apparent lack of maintenance, whether utilities have been turned off, or whether neighbors have seen activity at the house. Under normal circumstances, if a property is determined to be vacant, field service companies will send a contractor to secure the property and proceed with monthly inspections and routine property preservation services on behalf of the mortgage company.

This is done not only to protect the integrity and value of properties when homeowners abandon them, but also to ensure that abandoned properties do not become a nuisance to the neighborhood and impact surrounding property values.

In instances where a defaulted home is owned by a military member on active duty, what appears to be an abandoned property may not be so. It may be that the spouse has left for an extended period to stay with other family members, or that the servicemember simply has left the property unattended while on deployment. For this reason, mortgage companies must take extra precautions.

To check on military status, it is vital to include an extra step in the inspections and property preservation process. Before any actions are taken to secure any properties found to be vacant, the mortgage company should check the entire list of properties identified as vacant and
search various database sources to attempt to identify any that may be owned by active-duty military.

If it is determined that an active-duty military member owns the property, then the residence will not be secured. Instead, the servicer will attempt to make contact with the owner to offer loan modification assistance, counseling referrals or other help. Prior to securing any property found to be vacant, an inspector will leave a notification called a “vacancy letter” or “eight-day letter.” This letter informs the occupant that the property is believed to be vacant and that it will be secured in eight days if no contact is made with the servicer. A paragraph may be added to the letter alerting occupants that active-duty military personnel have certain rights under SCRA and asking them to notify the servicer immediately if an occupant has active-duty military status.

Foreclosed properties
Under SCRA, active-duty military personnel and their families may be protected from eviction from a foreclosed property, whether or not the property is owned by the servicemember. To identify properties where this may be the case, a field service contractor or inspector will leave three documents discreetly at the door of the property.

These documents explain that the property has either been foreclosed upon or a deed has been accepted in lieu of foreclosure. They describe the assistance that may be available to help the occupant remain in the property or relocate by choice, and clarify that these documents are not a notice to vacate the property. The documents also include forms to identify occupants who may have active-duty military status and notifies them of their rights under SCRA to protect against eviction.

On behalf of the mortgage company, contractors or inspectors should make at least five attempts over a 10-day period in order to make personal contact with an occupant to assist in filling out the forms. If attempts to reach an occupant fail, contractors and inspectors may also make inquiries of neighbors to learn if an active-duty military member is occupying the property. All communication attempts are carefully detailed in written reports, supported with photo documentation and submitted to the mortgage company prior to conveying the property or taking any further action with occupants.

While mortgage companies need documentation to demonstrate their good-faith efforts to comply with SCRA, many go beyond the requirements of the law to identify active-duty military personnel and ensure that the servicemembers receive the protections to which they are entitled.

To view the online article, please click here.

About Safeguard
Safeguard Properties is the largest privately held field services company in the country. Located in Cleveland, Ohio and founded in 1990 by Robert Klein, Safeguard has grown from a regional preservation company with a few employees  and a handful of contractors performing services in the Midwest, to a national company with over 800 employees. Safeguard is supported by a nationwide network of subcontractors able to perform any requested superintendence, preservation, and maintenance functions, as well as numerous ancillary services in the U.S., the Virgin Islands, and Puerto Rico.

Robert Klein contributes an article entitled A Better Alternative to Vacant Property Ordinances to the February 2012 issue of HousingWire magazine.

A better alternative to vacant property ordinances

States should accelerate foreclosures on abandoned property to address blight

KEY CONCEPTS

Chicago and Las Vegas passed ordinances to require lien holders to maintain and secure vacants.

Only ownership and possession gives lien holders the legal authority to completely accept that responsibility.

Vacant property registration ordinances aren’t new. Many cities have had property ordinances in some form on the books for years. But they were rarely enforced until the housing crisis took hold a few years ago.

With the collapse of the housing market came a slew of vacant and abandoned properties. Out of frustration, when cities couldn’t find a party to hold responsible for the deteriorating condition of properties, vacant property ordinances came into vogue. Thus, when homeowners abandon their properties, cities attempt to make the lien holder accountable for the upkeep of the property.

On the face of it, vacant property registration ordinances make sense. Initially, their purpose was to help cities collect current and accurate contact information about the lien holder of record when public information is lacking, which allowed cities to issue prompt notification when a code issue occurs.

But as cities have continued to struggle with the growing burden of foreclosed properties, their approach to vacant property ordinances has become much stronger. Chicago and Las Vegas are two prime examples, both of which passed aggressive ordinances in 2011.

As originally proposed, the Chicago ordinance attempted to define the lien holder as the homeowner prior to the foreclosure sale. To the city’s great credit, it listened to the concerns of mortgage servicers and investors, and ultimately passed a version last summer removing the homeowner definition, but still requiring that servicers maintain and secure properties prior to the foreclosure sale.

The Las Vegas ordinance passed in December is similar to the one Chicago ultimately passed. Both require lien holders take responsibility for maintaining vacant properties prior to foreclosure and impose stiff fines and penalties for failure to do so.

It is understandable that in the absence of a homeowner, cities would like lien holders to step in and assume the homeowner’s role to care for properties. The problem is, prior to foreclosure, the lien holder’s rights to protect a vacant property are limited, even when the homeowner abandons the property.

Legally, a lien holder can only take steps to avoid code violations and protect the collateral value of the property. In other words, they can mow the lawn, remove yard debris and potentially hazardous materials inside and outside the home, winterize plumbing, remediate roof leaks and secure windows and doors. They must, however, leave the house accessible to the homeowner prior to foreclosure — even if the homeowner has abandoned the property and is no longer maintaining it.

Meanwhile, as properties await foreclosure, even with the billions of dollars the industry spends each year to inspect, maintain
and secure vacant properties, they will deteriorate. A large percentage are vandalized, with the properties stripped of copper pipe, aluminum siding and other materials that can be sold for scrap. Prior to foreclosure, the lien holder has limited standing to make repairs. In many cases, by the time a property moves through foreclosure, its value is virtually gone.

In Illinois, for example, the foreclosure process can take a year or longer. In Nevada, it is six months or more. In some states, foreclosures can take up to two years.

Safeguard Properties currently tracks the existence of nearly 700 ordinances, each with its unique requirements, fees, fines and penalties. In all, the goal of the ordinances is the same — to find a way to protect vacant properties and the neighborhoods that surround them. However, by enacting vacant property ordinances as the only way to accomplish that, cities in states with lengthy foreclosure timelines are shining their flashlights in only one corner of a dark room.

If municipalities really want lien holders to take full responsibility for vacant and abandoned properties, they need to compel their state legislatures to adopt laws that would accelerate foreclosure proceedings for vacant properties that have been abandoned by homeowners.

Only ownership and possession gives lien holders the legal authority to completely accept that responsibility.

With the ability to take possession of vacant properties while they are still in reasonably good condition, lien holders can do what is necessary to make them viable family homes once again.

Cities will have fewer code and nuisance issues to concern themselves with. Vacant properties will be less vulnerable to damage. And the value of surrounding properties and the integrity of neighborhoods will be protected.

Isn’t this really what all of us want?

To view the online article, please click here.

About Safeguard
Safeguard Properties is the largest privately held field services company in the country. Located in Cleveland, Ohio and founded in 1990 by Robert Klein, Safeguard has grown from a regional preservation company with a few employees  and a handful of contractors performing services in the Midwest, to a national company with over 800 employees. Safeguard is supported by a nationwide network of subcontractors able to perform any requested superintendence, preservation, and maintenance functions, as well as numerous ancillary services in the U.S., the Virgin Islands, and Puerto Rico.

Safeguard Properties contributed a feature article in the February 2012 Mortgage Banking Magazine entitled Vendor-Management Best Practices.

U.S. Census Bureau date released in October 2011 show that between 2000 and 2010, vacant propertied nationally increased 43.8 percent. The number climbed from 10.5 million to 15 million. Many industry experts believe those numbers won’t change much in the foreseeable future. Craig Nickerson, president of the National Community Stabilization Trust, Washington, D.C., speaking at the Five Star MPact Conference in Dallas in December, estimated that 850,000 foreclosures occurred in 2011. He predicted that 1.5 million foreclosures will occur in 2013, and foresees a return to 2011 levels by 2015. As foreclosure rates continue to rise, recruiting and retaining the highest-quality vendors and contractors to protect high volumes of vacant and abandoned properties must be one of the highest priorities for field service companies. Field  service companies hire vendors to inspect, maintain and repair properties on behalf of mortgage servicers and investors. Vendors perform such services as securing properties, maintaining landscaping, winterizing plumbing, removing debris, remediating roof damage, cleaning, painting and providing various levels of repairs. As the field service industry advances, so must vendor-management  best practices to ensure vendors have the training, tools and resources to perform their jobs effectively. Like other national companies, Safeguard Properties maintains a large network of vendors across the country- close to 10,000. On a monthly basis, the company utilizes these vendors to inspect and maintain more than 1 million properties. Effectively managing a large vendor network to service historically high property volumes requires a significant commitment to train and recruit qualified vendors, ensure quality, promote diversity and invest in technology to support field operations.

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

About Safeguard
Safeguard Properties is the largest privately held field services company in the country. Located in Cleveland, Ohio and founded in 1990 by Robert Klein, Safeguard has grown from a regional preservation company with a few employees  and a handful of contractors performing services in the Midwest, to a national company with over 900 employees. Safeguard is supported by a nationwide network of subcontractors able to perform any requested superintendence, preservation, and maintenance functions, as well as numerous ancillary services in the U.S., the Virgin Islands, and Puerto Rico.

On January 4, Mortgage Servicing News released Robert Kleins blog entitled What Will it Take to Stabilize Communities.

When we turn the calendar to 2012, the U.S presidential race will heat up. America’s housing crisis is certain to be a hot campaign issue, and we will have no shortage of suggestions to stabilize communities—from expanded programs to purchase and redevelop vacant and foreclosed properties, to assistance to either buy a home or prevent foreclosure.

It seems counter-intuitive, but demolishing non-viable properties is critical to the solution. It’s expensive. In Cleveland, Ohio alone, the cost to demolish unsalvageable properties is estimated to be $150 million.  In Detroit, Chicago and other urban cities, it is probably higher. 

But until the properties are demolished, neighborhoods hardest hit by the crisis won’t recover. Property values will continue to decline. Prospective buyers won’t invest until troubled properties, and the nuisances they bring, are gone.
An innovative pilot is currently in development in Cuyahoga County, which includes Cleveland. Business and community leaders are working on a model to focus on entire neighborhoods, to demolish hopeless properties and repair salvageable ones to create affordable housing and protect property values.

The big question is whether this idea can work, and if so, can it be expanded across the country to help with the nation’s current housing crisis?

To view the online blog, please click here.

About Safeguard
Safeguard Properties is the largest privately held field services company in the country. Located in Cleveland, Ohio and founded in 1990 by Robert Klein, Safeguard has grown from a regional preservation company with a few employees  and a handful of contractors performing services in the Midwest, to a national company with over 800 employees. Safeguard is supported by a nationwide network of subcontractors able to perform any requested superintendence, preservation, and maintenance functions, as well as numerous ancillary services in the U.S., the Virgin Islands, and Puerto Rico.

Worth the Risk?? Managing the Challenges of Vacant, Low-Value Properties in Your Portfolio?

The stories of how vacant properties wind up vacant are almost as varied as the properties themselves. Two years ago, so-called bank walkaways began to make headlines as part of the housing crisis. Since then, the public perception has come to be that mortgage companies are the reason why most vacant and abandoned properties exist.

The fact is, far more vacant properties exist because of homeowner abandonment, not bank walkaways. Homeowners in default often abandon their properties without making contact with their mortgage companies. When this happens, field service companies are tasked with conducting default inspections for mortgage servicers. These inspections have one goal: to verify occupancy on a home in default.

Industry data indicates that 20 percent of the properties inspected are eventually found vacant?abandoned by the homeowner. Once a home is determined vacant, a property preservation team will take steps to secure the property and will continue to inspect and maintain it as long as it remains in the servicer?s portfolio.

In many cases of homeowner abandonment, no lienholder even exists. Vacancies often result when an aging parent with no mortgage moves into a nursing home or passes away and leaves the home to children who may not be in a financial position to keep up with utilities, taxes, and maintenance. The home is simply abandoned.

Regardless of how properties become vacant, the result is that they are at high risk to lose value because of vandalism and deteriorating conditions. They are more likely to create a nuisance and safety risk to the neighborhood, straining already cash-strapped municipal budgets. Beyond that, they also negatively impact the value of surrounding properties.

Ideal World vs. Real World
In an ideal world, if a homeowner defaulted on a loan, the mortgage company would make contact with the owner and discuss his or her financial situation. The mortgage company would talk about the possibility of a loan modification, short sale, or a deed-in-lieu of foreclosure. If those options were not viable, a foreclosure proceeding would begin. The homeowner would remain in the home through the foreclosure and vacate after the foreclosure sale concluded. During that time, the home would be occupied and thus protected. It would not create a nuisance; its value would be maintained; and its condition would not deteriorate. As an REO, the property would be placed on the market for sale.

Unfortunately, the real world presents a much different scenario. More homeowners with underwater mortgages are abandoning properties, leaving the responsibility to mortgage companies to keep them maintained and secured.

The mortgage industry spends billions of dollars a year on field servicing to perform ongoing inspections and maintenance services on vacant properties in its portfolios. This is done not only to protect collateral interests in these properties, but also to uphold property values and protect the well-being of the neighborhoods in which they are located.

However, even a vacant property that receives the highest level of property preservation services will deteriorate because there is simply no better substitute than occupancy for keeping a property in prime condition.

To address today?s real-world housing challenges, the mortgage industry focuses on four key strategies to reduce the numbers of vacant properties, maintain the value and condition of properties that do become vacant, and return vacant properties to viable occupancy as quickly as possible.

1 Reducing Lengthy Foreclosure Processes
Depending on the state, the foreclosure process can take several months?or even years?to complete. The rationale behind a protracted foreclosure process is to protect the homeowner and allow more time for the mortgage company and the borrower to explore alternatives to foreclosure.

That said, when a property is vacant and is without a homeowner to protect it, a drawn-out foreclosure process can be counterproductive. Vacant properties must follow the same foreclosure process as occupied properties. Government moratoriums on foreclosure sales and the recent voluntary halts in foreclosures by mortgage servicers in response to robo-signing controversies only extend the time vacant properties remain in limbo.

Meanwhile, the vacant property is at greater risk despite ongoing field service attention. Squatters may move in, or the property could become a haven for illegal drug activity. Thieves will remove copper pipes, furnaces, ductwork, aluminum siding, and other metals to sell for a few hundred dollars. The resulting damages often render the home valueless. In fact, the property may actually end up with negative value because demoli-tion costs can exceed the market value.

For this reason, the mortgage industry advocated for change in state laws to allow vacant properties to move through the foreclosure process as quickly as possible. This is critical to protect property values and their condition and to prevent them from contributing to neighborhood blight.

Once a property is certified as vacant, it should be treated differently from an occupied property and accelerated to foreclosure. This change helps maintain the safety of neighborhoods, stabilize housing values, reduce the strain on municipal budgets, and uphold a community?s tax base.

2 Code Enforcement Outreach and Collaboration
The mortgage industry and code enforcement officials across the country share a common goal to address code violations and other vacant property issues as quickly as possible. For years, mortgage servicers and enforcement officials have worked to overcome myriad challenges that stand in the way of sending and receiving timely notification when property issues occur.

When many cities enacted vacant property ordinances as a means to identify a current contact for notification of property issues, the mortgage servicing industry offered alternatives to help cities achieve that goal without the administrative burden and at lower cost. By engaging in dialogue at conferences and code enforcement summits, both sides learned to understand each other?s organizational challenges and identify ways to overcome them and connect more effectively.

Today, code enforcement officials in major cities and smaller municipalities alike have access to new resources that provide instant communication with property preservation contacts who have authority to act immediately to address code violations and other property issues.

Field service companies also collaborated with city code enforcement departments to share best practices, such as the most effective ways to secure properties and winterize plumbing to prevent burst pipes.

While it is impossible to calculate the value of such collaboration, the savings to servicers in reduced fines, penalties, and property damages can add up to millions of dollars. At the same time, protecting housing stock and the safety of neighborhoods is invaluable to code enforcement officials and municipalities.

3 Reaching Out to Help Borrowers
Another perception that persists in the minds of the public is that mortgage companies are eager to foreclose on defaulted borrowers. The data tells a different story. RealtyTrac reported that in 2010, 1 million homes were foreclosed. At the same time, the Mortgage Bankers Association (MBA) reported that 1.5 million borrowers received loan modifications.

Why were there 50 percent more loan modifications than foreclosures? It simply makes more sense for everyone concerned. Loan modifications help borrowers keep their homes and stabilize their lives. They help communities by reducing the potential inventory of vacant properties. Lastly, it is more cost effective for servicers to keep bor-rowers in their homes than to foreclose and sell the properties.

Yet efforts such as loan modifications and short sales are not without their challenges. Many borrowers who pursue modification are overwhelmed by the paperwork necessary to qualify for government programs and fail to complete the process. To overcome this, servicers are offering assistance. The long time frames to complete short sales often result in missed sales opportunities, and right now, the industry is discussing ways to reduce the wait.

Among the best practices discussed in the industry is providing a ?one-stop? contact for borrowers to help them understand all of their options?loan modifications, short sales, and deeds-in-lieu. Servicers also contribute financially to nonprofit organizations that provide counseling and assistance to troubled borrowers.

Mortgage servicers recognize that borrowers facing foreclosure are under tremendous stress and are working to help them find the right solution to regain their financial footing.

4 Pursuing New Alternatives for Property Disposition
Unfortunately, in many cities, there are far fewer homebuyers than homes available for sale. In these cities, legislative efforts are influencing urban planners and the mortgage industry to collaborate on new ways to dispose of surplus properties.

For many years, mortgage servicers donated properties on an individual basis to land banks, land trusts, and neighborhood development agencies.

One such market taking advantage of these programs is Cuyahoga County, Ohio, which includes Cleveland. A land bank was established in 2010 that demonstrated early success. Now other cities are studying it as a model for their own programs.

The Cuyahoga County Land Bank already took in hundreds of low-value and distressed properties from large servicers, HUD, and Fannie Mae. These homes will be evaluated and either assembled into parcels for new use, demolished, renovated, or sold. The city of Chicago is in the process of establishing a not-for-profit entity that can function in a similar way as a land bank.

Private investors also are considering ways to purchase portfolios of surplus properties from lenders and servicers prior to foreclosure and allowing borrowers to remain in the homes as tenants.

No one solution will help the country move out of the housing crisis, just as no one factor led to its creation. One element common among the strategies showing the most promise, however, is a willingness and a commitment to address the challenges in a spirit of collaboration. And teaming up to work together toward a common goal is an approach that?s anything but risky.

Robert Klein is founder and chairman of Safeguard Properties, the largest mortgage field services company in the U.S.

About Safeguard
Safeguard Properties is the largest privately held field services company in the country. Located in Cleveland, Ohio and founded in 1990 by Robert Klein, Safeguard has grown from a regional preservation company with a few employees and a handful of contractors performing services in the Midwest, to a national company with over 800 employees. Safeguard is supported by a nationwide network of subcontractors able to perform any requested superintendence, preservation, and maintenance functions, as well as numerous ancillary services in the U.S., the Virgin Islands, and Puerto Rico.

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