An article in Crain’s Cleveland Business News talked about the effects of the foreclosure crisis and Safeguard’s involvement.?A slideshow of photos from the article is also available for viewing.

It’s a dirty job …
In wake of foreclosure mess, the business of maintaining abandoned homes booms

By ARIELLE KASS
4:30 am, September 15, 2008

Paul Carlozzi is a former Marine, a man with tattoos, a quick smile and piercing blue eyes.

Still, he can’t help but shake his head at what he sees people doing to the homes they once lived in, and to their neighbors.

Everywhere, windows are broken. Doors are ripped from their hinges. Aluminum siding and downspouts have been removed. So has copper piping.

Mr. Carlozzi, a field quality control supervisor with Safeguard Properties, said none of that is unusual. But as more homes enter foreclosure, he’s struck by how often people trash their houses on the way out, and by the prevalence of thieves.

“That’s a shame,” he says at one East Cleveland home, ready to be shown to potential buyers until someone broke a basement window and removed copper pipe. “We had the property ready to be occupied.”

Safeguard, based in Brooklyn Heights, is the country’s largest home preservation company. Working with mortgage companies and contractors nationwide, the 550-employee company inspects homes where the owner is behind on mortgage payments to make sure the houses are still occupied. They board up smashed windows at homes that have been abandoned and lock the doors. They fix broken stairs and railings, remove shattered glass, replace stolen fixtures and mow the lawns. They empty the houses of any possessions families have left behind.

With foreclosures coming at a steady pace, business has been booming. Safeguard CEO Robert Klein said the company was doing 450,000 inspections a month two years ago, before the housing crisis hit full force. Last month, that number was 780,000.

“In the last eight months, there’s been an absolute explosion, a tremendous, tremendous increase,” Mr. Klein said. “I truly don’t know when it’s going to stop.”

Safeguard often goes to a home more than once a month to keep it safe and secure. The company, after seeing more vandalism, starts distributing door hangers to neighbors, asking that they call Safeguard if they see suspicious activity at an empty home. New boards will be painted to look like windows, in the hope that people simply driving down the street won’t notice that houses are unoccupied.

Most properties Safeguard deals with don’t reach that point, company spokeswoman Diane Roman Fusco said. Between 80% and 90% of the homeowners that go into default work out their issues and are able to save their homes. But it’s on the rest that Safeguard spends the most energy, winterizing pipes, removing bug infestations and cleaning out flooded basements.

Sometimes, Mr. Carlozzi said, abandoned houses look like their owners just left for work. Other times, said Ms. Fusco, the former occupants’ frustration is taken out on the floors and walls.

“It’s happening more. They’re causing thousands of dollars worth of damage,” she said.

Flooding and mice feces

Whenever Mr. Carlozzi enters a house, he is cautious. He checks to make sure the door is still locked, glances around for windows that are broken. He shouts, “Contractor! Anybody in here?” as he opens a door, letting anyone who may be squatting there know that he isn’t a police officer.

At a house on Westropp Avenue in Cleveland, the back door has been removed. A fan is in pieces on the floor and all precious metal has been stripped from the house. In the basement, there is a foot-deep pool of standing water. There are mice feces scattered throughout the house.

“This is the typical debris you find,” Mr. Carlozzi said. “Our goal is to not let the condition deteriorate. We want to maintain its value.”

Before the housing crisis struck, houses that had been foreclosed upon sold pretty quickly, Ms. Fusco said. Now, those homes are competing with others that are in better shape, that don’t have neighbors with boarded-up windows. That glut leads to longer sales times and more visits from Safeguard.

Mr. Klein said the mortgage companies that are his clients want to protect the properties. The companies have requested more information about code enforcement officers in particular areas, asking them to continue checking up on homes that have been abandoned. And a vacant property registry is being established, so those officers will know who to contact when there’s a problem at a house.

It’s particularly hard, Mr. Klein said, to watch as Cleveland is ravaged by the deluge of foreclosures. After all, his family lives here, too.

Still, his company is prospering. Business is projected to rise by about 30% in 2008, double the amount the company normally sees each year, and Safeguard is moving from a 33,000-square-foot building in Brooklyn Heights into one in Valley View that’s more than twice the size. The company is exploring offering other services that would allow it to grow, even after the housing market stabilizes.

While Mr. Klein said there always will be a need for Safeguard’s business, he doesn’t take any pleasure from the reason for the increase. Now, Safeguard must struggle to keep enough contractors, who do the home inspections and repair work, trained to its standards.

“Every one of our projections was blown out of the water. We’re in a crisis mode. We’re grappling,” Mr. Klein said in discussing the company’s manpower needs. “Everyone’s still trying to get a handle on it.”

Safeguard Properties was mentioned in an article in the Chicago Tribune in connection to recent changes to municipal codes in the Chicago area.

The growing charge of the blight brigade

Tired of vacant, foreclosed properties dotting their streets, more municipalities are cracking down with ordinances, fines

By Janice Neumann | Special to the Chicago Tribune

First there were the vacant homes, one with its utilities cut off, overgrown grass and weeds and garbage piling up outside. Then there was the former car wash that sat vacant for three years, windows boarded up.

Weary of making multiple calls to find owners of the neglected properties, Oak Forest Ald. Diane Wolf researched what other Illinois municipalities were doing to monitor the problem and found vacant building ordinances in Chicago, Evanston and Normal, Ill.

At the urging of Oak Forest Mayor JoAnn Kelly, who was equally upset about the patches of blight, the city council in July passed a vacant building ordinance, joining other communities wrestling with ways to combat a rise in vacancies brought on by foreclosures and a dismal economy.

“We should not have to let it turn into a blighted neighborhood,” said Wolf. “It brings down property values, and there are safety concerns.”

The Oak Forest ordinance, which was modeled after Evanston’s and Chicago’s, uses a Web-based registry, Publicrecords.com, to list vacant buildings, when they went into foreclosure and the owner’s contact information.

Each vacant building must be inspected by the city’s code enforcement officer for a $500 fee and register annually for another $200 fee. Owners must have insurance ranging from $500,000 to $2 million. Infractions cost owners $100 to $750 daily. Buildings may not be boarded up for more than three months. Each owner must submit a plan for fixing up the building, demolishing it or selling it.

The city also hired a full-time code-enforcement officer and shortened the time owners have to cut grass and weeds from 10 days to five. After five days, the city does the work and bills the owner.

“You may have one vacant home on a street that actually reflects on everyone’s house on a street,” said Mayor Kelly. “There are some streets with multiple foreclosures.”

Oak Forest, which has a population of about 28,000, had 72 foreclosures in the first half of 2008, including 30 REO (real-estate owned) buildings, according to the Woodstock Institute, a Chicago non-profit that promotes community reinvestment in lower-income and minority areas and tracks foreclosures. REOs, buildings that go to auction but do not sell and revert back to banks or mortgage companies, are the properties most likely to become vacant, according to the Woodstock Institute.

Fears about the ripple effect of vacant buildings, diminished property values and increased crime are echoed by experts.

Julie Tappendorf, an attorney who wrote the vacant building ordinances for Oak Forest and Gilberts, said vacant buildings create a host of problems for communities.

“The ripple effect from the housing crisis has been devastating, as municipalities find that vacant buildings mean less revenue because of lower property values and unpaid taxes and utility bills. Unfortunately, at the same time that municipalities see a decrease in their revenue, they must deal with an increase in costs from enforcing property maintenance codes, securing vacant buildings, and policing neighborhoods that have seen a spike in crime as a result,” said Tappendorf.

Municipalities sometimes spend up to $34,000 per foreclosed property on increased policing and fire suppression, inspections, demolition and legal fees, unpaid water and sewer and trash removal, according to the Homeownership Preservation Foundation, which helps those at risk of losing their homes.

Each foreclosure within one-eighth of a mile can reduce a home’s value by 0.9 percent, according to a 2005 study of Chicago homes by the Woodstock Institute.

Though not all vacancies are foreclosures and not all foreclosures neglected, “there’s definitely a strong relationship where areas that have high levels of foreclosures are also going to have high levels of vacant properties,” said Geoff Smith, vice president of the Woodstock Institute.

“We know homeowners lose and banks lose, but what is a little less visible is how much cities lose and how much equity disappears in people’s properties,” said Colleen Hernandez, executive director and president of the Minneapolis-based Homeownership Preservation Foundation.

Even municipalities such as Aurora, which has a property-maintenance code that clamps down on neglected buildings, are finding they need to step up their enforcement.

Aurora has had a registry for rentals and former rentals since 1982, which allowed officials to keep track of properties when they became vacant. The city now has a database of foreclosures and is starting to inspect the exteriors of the properties on it. Officials are also sending the database to 70 banks and Illinois realty agents, making them aware of the property-maintenance requirements.

“We think providing them with this information will allow them to better maintain these properties on their own without the necessity of the city’s direct involvement,” said Mark B. Anderson, assistant director of the city’s Department of Neighborhood Standards.

Aurora has a population of nearly 165,000 and had 805 foreclosures, with 247 of those REOs, in the first half of 2008, according to Woodstock data.

Robert Klein, CEO for Safeguard Properties, which maintains a number of Chicagoland properties, said the company has stepped up its efforts in recent months to talk to cities about the problem.

Northbrook enacted a vacant-building ordinance in 2007 that focuses on board-ups or other unsightly properties.

“I think people really need to be patient,” said Carolyn Brzezinski, director of Northbrook’s Department of Building and Development. “It’s very difficult when there are so many people going through this, the banks are inundated and it’s tough for them to keep up with all the demands.” Northbrook, with a population of 33,407, had 69 foreclosures in the first half of 2008, including 21 REOs.

Oak Park is planning to vote on a vacant building ordinance to help clean up neglected buildings and prod owners of vacant commercial properties. The city of 52,524 had 91 foreclosures and 48 REOs in the first six months of this year.

“This new ordinance has fairly aggressive inspection and maintenance requirements that will create some appropriate tools and incentives for landlords to actively market and modernize the properties,” said Oak Park Village Manager Tom Barwin.

In Oak Forest, Marge Carlson, a resident for 18 years, said she was fed up with abandoned homes in her neighborhood before the ordinance was passed. One home had overstuffed furniture in its front yard and a rotting pool deck in back.

“Basically I think the city should certainly have more control over what goes on within the limits of the city,” said Carlson.

Safeguard was recognized in the summer issue of USFN Report for their $150,000 donation to the Foreclosure Prevention Program of Cuyahoga County.

USFN Report “Granting Support”

Summer 2008

Earlier this summer, USFN Associate Member Safeguard Properties and its CEO Robert Klein were recognized at a special reception for their efforts to locally combat the foreclosure crisis. The firm contributed a $150,000 grant($50,000 annually for three years) to the Foreclosure Prevention Program of Cuyahoga County, the home county of the Cleveland based firm. Among those in attendance was County Treasurer Jim Rokakis, who expressed his gratitude for Safeguard’s grant, saying that it “… will go a long way towards helping to protect at-risk homeowners from foreclosure.” Information on the prevention program is at www.dontborrowtroublecc.org

Safeguard is mentioned in a Time Magazine photo essay about the tough economic times in Cleveland. The subject in two of the photos is Paul Carlozzi, Safeguard’s Field Services and QC Supervisor.

In an article in the Cleveland Plain Dealer, it is noted that Safeguard was recognized for Best Practices in Data Storage Management at the Infrastructure Management World meeting in Washington, D.C.

An article posted to DSnews.com noted that Robert Klein, CEO of Safeguard Properties, has been named as a finalst for the?2008 Ernst & Young Entrepreneur of the Year award.

Robert Klein named Ernst & Young Entrepreneur of the Year Finalist

Robert Klein, CEO of Safeguard Properties, a privately held field services company, was among 27 other Northeast Ohio entrepreneurs honored as finalists for the 2008 Ernst & Young Entrepreneur of the Year Award.

Today Safeguard, which Klein founded in 1990, is responsible for nearly 700,000 work orders monthly on defaulted and foreclosed properties.

Robert Klein, CEO of Safeguard Properties, was recently interviewed by Managing REO Magazine regarding the initiatives of property preservation companies to lower the impact of vacant blight.

Initiatives to Combat Vacant Blight

Field service companies and property preservation teams are making a difference in local communities by forming new initiatives to care for vacant real estate owned assets.

By Jennifer Harmon

The industry is dealing with increasing amounts of vacant REO properties. As their values drop, mortgage companies are being hurt as much as the next-door neighbors.
Robert Klein, the founder and CEO of Safeguard Properties, believes lenders today are focused on doing a better job on the basics to maintain a property.

Beginning in September, Safeguard will launch its “Good Neighbor” door hanger contact procedure where at the initial secure of a vacant property, the company will leave door hangers at neighboring properties with an 800 number to contact the company 24/7 if they notice any questionable activity or maintenance issues that need attention.

This approach, which comes at no cost to clients, has received enthusiastic endorsement from code enforcement and city officials, says Mr. Klein. The privately held field service company, located in Cleveland now has over 500 employees nationwide.

“It’s very positive when you make contact,” he says. “The neighbor knows someone is paying attention to the home , to this vacant property. They know it is being maintained on a regular basis. It’s not just in limbo and no one is paying attention to it.”

It is critical to understand these properties. The industry spent well over $1 billion last year to secure and maintain safety and health issues of these homes, according to Mr. Klein. “I think we have a great responsibility. Vacant properties impact me and where I live. As an agency, I think it’s something we should be doing. We can’t solve the entire housing problem, but in our little world, we do what we can. We make the best out of a bad situation.”

Safeguard is focused on proactively partnering with cities and municipalities in dealing with issues that lead to vacant blight. Servicers and local govemments are partners in fighting blight, maintaining safe neighborhoods and ensuring properties are maintained.

Mr. Klein says the correlation between vacant properties and criminal activity is also well documented in communities nationwide.”As foreclosures and vacancies mount, we have seen a material increase in the number of copper pipe thefts, arsons and related crimes at these vacant properties. This ripple effect drastically reduces the servicer’s collateral in their assets and wreaks havoc on the communities where the properties exist.”

During extensive communication with code enforcement officials around the country, Safeguard found that it is common practice that all complaints regardless of type (tall grass, theft, vandalism, etc.) must be acted on appropriately to resolution. Typically, the city will issue a citation, complete the required maintenance, declare the property a nuisance and/or place the property on the local fast track for demolition.

“We’ve been in touch with code enforcement officials for the past five years,”he says.”The biggest concern is that they can’t handle the calls coming in from the neighbors to respond to these complaints. It puts the burden on the city to send someone out.”

A lot of times the neighbor does not know who to contact at the lender or servicer they have an issue with a property. “We work with the cities. The MBA (Mortgage Bankers Association) has created point of contact on their web site with code enforcement to help resolve these issues.”

The company is supported by a nationwide network of subcontractors able to perform any requested superintendence, preservation and maintenance functions. With this door hanger initiative, it takes the burden off of the city officials to get to these complaints.

Vacant blights are a national issue. Mr. Klein says neighbors are the best eyes and ears to detect problems.Sometimes after a company like Safeguard does an inspection of a vacant REO, the day after the company leaves, something terrible can happen. “These programs add more security to the property to make sure it is better maintained.”

The biggest goal is to make sure the property is not an eyesore. Safeguard makes sure the grass is cut, that there are no broken windows and if there is a leak inside the home, the company addresses those types of problems.

Safeguard now does the maid service. After the mortgage company has taken title and the property is vacant, Safeguard goes out and cleans the property and removes the cobwebs.

“You have no idea what we find in some of these properties. We will wash the counters down, clean the fridge, put in air fresheners so it doesn’t smell like an REO,” says Mr. Klein.

“The lender wants to sell it as soon as possible to a homeowner who will live in the property. You want to make it as attractive as possible. But also sometimes it doesn’t make sense to make repairs. You have to make it look and smell good. We try to do the best we can. We do as much as we can so the neighbors don’t have a run down home with 50 tires in the front yard.”

Properties are becoming more seriously damaged as well. Some homeowners in foreclosure are so frustrated they will do serious damage to the property. They take out appliances, put holes in the walls and holes in the floor. “There is no rhyme or reason. They are taking their frustration out on the system or the process. We are seeing that more and more.”

By the time the mortgage company gets a hold of one of these properties, it is problematic. Safeguard will hire different contractors to do different repairs such as re-roof a home. In today’s market the industry is seeing an increase in the amount of repairs being done to vacant REOs.

“The goal of the mortgage company is to sell it as quickly as possible. Every day they hold on to it is costing them money, in addition to the foreclosure process. It’s a bigger financial loss. We want to make the house as inviting and attractive to the possible homeowner. This depends on the value of the property and how much the lender can get. The things you do to a $500,000 home are different than a home that is $30,000.”

Even for a home that is around $250,000, lenders are doing more for repairs. The objective is to get the highest return because the lender has already lost money. “It’s worth it to put in $10,000 to a home if you can get additional value on the home,” he says.

“Regardless of whether the repair is done or not,there is a heightened awareness to make sure the property compares with the neighborhood.”

Years ago, REOs competed against other REO properties, Mr. Klein recalls. “In today’s environment that is no longer the case. REO are competing with the homeowner trying to sell their property. You have to compete. If the neighbor has a nice front lawn with grass trim, you have to do the same thing. II’s a business decision.”

The bottom line is that vacant properties should conform to the rest of the neighborhood. In addressing the blight issue, it will take different means for different areas of the county, he said.

The Long Island Business News ran an article in which Robert Klein, CEO of Safeguard Properties, was quoted.

Vandals move in

By Michael H. Samuels
Friday, August 8, 2008
?
Property preservation companies on Long Island and nationwide are so overwhelmed by the high number of foreclosures that an increased number of abandoned homes are falling victim to vandalism, burglaries and raucous spring break parties that cause tens of thousands of dollars in damage.

“Sometimes, initially, when we go out there the first time, we are finding that these homes have already been vandalized,” said Robert Klein, chief executive of Safeguard Properties, a national property preservation firm. “We are taking a very, very active approach. But with the volume of foreclosures, we need to stay on top of it.”

He said mortgage lending and property preservation firms saw the increase coming and hired additional contractors to inspect and maintain homes.

Banks and other mortgage lenders hire firms such as Safeguard to inspect and maintain homes after they reach foreclosure, said Tom Kelly, a spokesman for JPMorgan Chase and Co.

Kelly added that banks do not want homeowners to foreclose and would prefer to help owners keep or sell their homes. The preservation companies, Kelly said, protect the value of the property while it?s vacant.

But some homes fall prey.

Georgia Westcott, a Babylon-based Realtor, said a spring break party — the empty beer bottles were a dead giveaway — damaged a long-vacant West Babylon home. The wreckage, estimated at $20,000, included damaged sheetrock.

It was obvious the house was chosen because it had been left empty for a long time, she added.

“There was obviously malicious damage,” she said. “In the case of these homes, no one is going in to fix it. That makes it harder to sell and it just sits in the neighborhood.”

She said at many homes, break-ins lead to ruined heating systems, making the property nearly impossible to sell.

Most lenders won?t approve a loan on a home without heat, she said.

Property preservation firms are supposed to prevent the break-ins. Typical maintenance performed by such companies includes boarding up broken windows, placing a tarp on leaky roofs, changing the locks and mowing the lawn twice a month, Klein said.

Safeguard, with 6,000 contractors and 500 employees nationwide, performs 800,000 inspections and work orders on a monthly basis.

He estimated that the lending services industry spent more than $1 billion since the beginning of 2007 securing and maintaining foreclosed homes.

But Realtors on Long Island said not enough is being done.

Instead, they are finding squatters in some homes, copper wiring missing, granite countertops removed and heating systems destroyed.

It?s especially a problem in Suffolk County, which boasts the highest number of foreclosed homes in the state. Nassau County is No. 2.

Recent numbers show that there are more than 8,055 subprime loans in foreclosure in Suffolk, and more than 4,881 in Nassau.

Estimates are that as a result of the foreclosures, Suffolk?s property values could decrease by between $1.2 billion to $2.9 billion, said Suffolk County Legis. Wayne Horsley, D-Lindenhurst.

In addition, property values of homes within an eighth of a mile of a foreclosed home typically dip between 0.9 and 1.136 percent, he said.

As a result, real estate agents here are buddying up, afraid to enter foreclosed homes alone after a number of them found homes burglarized or damaged.

“We are seeing whole communities near the state of foreclosure,” Horsley said. “These houses are boarded up. Banks have walked away from them. The former owners have walked away from them. Grass is growing over 3 feet tall. (Agents) are walking into a situation that may be very dangerous.”

Denver TV Station Fox 31 recently ran a story about abandoned properties, and the efforts of field service companies like Safeguard Properties to return them to productive use.?

Video here