Safeguard Properties

American Banker Article “For Lenders, New Costs to Foreclose”

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As discussed in the following article from American Banker,whether litigation, ordinances or increased violations cities throughout the country are increasingly looking at avenues to address increasing foreclosures.

For Lenders, New Costs to Foreclose

Local governments eye fees to offset foreclosure effects

For some time rising foreclosures have led cities and states to consider ways to slow things down.

Now more municipalities are taking a different tack: ramping up the costs associated with holding on to a foreclosed property.

The response, which has emerged largely in Southern California and the Midwest, often takes the form of steep fines or other sanctions for code violations on foreclosed homes that have been sitting vacant. Where once the focus was primarly on keeping people in their homes, more recently efforts have been aimed at mitigating the effects of foreclosures on neighborhoods, especially when they happen in clusters.

Last week St. Paul became one of the latest cities to take such action. Mayor Chris Coleman gave 19 companies ? most of them big lenders and servicers ? 30 days to come up with a plan to rehabilitate foreclosed homes or face legal action.

“What we’re trying to do is have the lenders and banks come and work with us on an abatement or mitigation plan,” City Attorney John Choi said Friday. Many homes have become “a public safety hazard,” because people are breaking in to steal copper pipes or to take drugs.

Mr. Choi mailed warnings last week to Wells Fargo & Co., Deutsche Bank AG, U.S. Bancorp, HSBC Holdings PLC, JPMorgan Chase & Co., and Merscorp Inc., which runs an electronic mortgage registration system. He said these companies own or service about a third of the 1,700 foreclosed homes in St. Paul.

However, Ted Meyer, a spokesman for Deutsche Bank, said in an e-mail that even though its DB National Trust Co. acts as a securitization trustee on many properties, it does not “own or control any of the properties referenced in the letter” from Mr. Choi. “The trustee is not responsible for maintenance nor any other foreclosure-related issues,” Mr. Meyer said.

Similarly, Teri Charest, a spokeswoman for U.S. Bancorp, said it acts as a trustee on most of the St. Paul properties cited in the letter it received. As such, it is not responsible for repairs, she said.

Each letter came with a spreadsheet listing the vacant properties that Mr. Choi said the recipient company controlled, along with a list of claims the city could pursue if the company did not cooperate. Another 13 companies were sent letters Friday.

Susan Davis, an executive vice president at Wells Fargo Home Mortgage’s Minneapolis office, said the lender started a toll-free hot line in January that cities and counties can call when they are concerned about a property.

“Whatever the time frame, we will work closely with the city,” Ms. Davis said. “Everybody benefits when the home is maintained and reoccupied.”

R.K. Arnold, the president and chief executive of Merscorp, said in a written response to questions from American Banker that he had received the letter, and that his Vienna, Va., company “takes it very seriously.”

Merscorp will meet with St. Paul officials, Mr. Arnold said. “It is our responsibility, and we will fix the problem.”

HSBC and JPMorgan Chase did not return calls seeking comment.

An ordinance that took effect last month in Palmdale, Calif., requires lenders to pay a $100 fee to register vacant or abandoned homes that are in foreclosure, as well as up to $2,500 for code violations.

That ordinance was modeled on one that took effect in October in Chula Vista, near San Diego, and instituted a $70 fee to register vacant properties as part of an effort to keep home values from dropping further.

Several other California cities, including Calimesa, Fresno, and Oakland, are drafting similar proposals.

Officials in Buffalo, Cleveland, and Detroit ? cities with some of the highest foreclosure rates in the country ? passed strict code-enforcement measures last year and are taking steps to demolish structures that are deemed not worth saving.

Asset managers say violation fines have skyrocketed in some cities and are reaching as high as $1,000 a day.

“The cities are being so proactive in attacking the lender, thinking we’re the deep pockets,” said Shelley Kaye, an asset manager at First Option Asset Management Services LLC in Irvine, Calif., and the president of REOMac, a trade group for such outfits.

One problem is that cities often send code violation notices to the wrong address, so by the time it gets to an asset manager, the fines can be steep, she said. (Some of Mr. Choi’s letters were addressed to high-ranking executives like Josef Ackermann, Deutsche Bank’s chairman in Frankfurt.)

With servicing costs soaring, many companies do not want to make costly repairs, Ms. Kaye said.

Jonathan Engman, an lawyer with the Detroit firm of Fabrizio & Brook PC, who represents lenders, said cities are fining lenders anywhere from $200 to $2,500, even though taxes are being paid on foreclosed properties.

This month, he said, he appeared before the Detroit City Council and was given 24 hours to clean up a property before it went on a demolition list, even though city residents who owned abandoned properties were given deferments.

“There is no fair treatment of the industry,” he said. “Cities are using the citations as a tax.”

Robert Klein, the CEO of Safeguard Properties, a privately held Brooklyn Heights, Ohio, mortgage field services company, said lenders and servicers are trying to take “a proactive approach” to empty buildings but do not always have the legal authority to do so.

“Some of these properties are in default and have not gone to foreclosure sale yet, so lenders are limited as to what they can do,” he said. Some lenders have been sued for trespassing ? by borrowers who have defaulted

To view the online article, please click here. (subscription required)

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 500 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.

USA Today “Mortgage lenders see more borrowers give up “

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A recent article in USA Today? discusses the challenges facing the loan servicing industry, including including increasing borrower contact with the goal if increased home retention.

Mortgage lenders see more borrowers give up?

On the front lines in the mortgage foreclosure crisis, lender and loan servicer Dennis Lauria says his deepest losses are from borrowers who owe more than their homes are worth and simply mail in the keys, rather than try to work out a new payment plan.

“I can’t get you to pay if you’ve got no skin in the game,” says Lauria, senior vice president of Popular Mortgage Servicing in Cherry Hill, N.J., who says 14% of his customers with subprime loans ? high-interest loans given to people with poor credit ratings ? are in default.

Nearly 3 million homeowners were behind on their mortgages at the end of last year, the Mortgage Bankers Association (MBA) said last week. An additional 1 million-plus borrowers were at risk of imminent foreclosure. The number of foreclosures is likely to set records throughout the year and poses an increasing risk to the housing market, the financial markets and the economy.

Federal Reserve Chairman Ben Bernanke says the mortgage industry needs a “vigorous” response to help beleaguered homeowners. But what about the response ? or lack of one ? from borrowers?

In California, Florida and Nevada, particularly, where prices are falling the steepest, rising numbers of borrowers are giving up and abandoning their homes despite the significant damage a foreclosure can have on the credit ratings that determine their ability to get future loans.

Nationwide, more than half the borrowers who lose their homes through foreclosure never answered their lenders’ calls or letters, according to Freddie Mac. And an MBA analysis found that 23% of loans in foreclosure last fall were to homeowners who had no contact with their lenders, and that an additional 18% were to absentee owners.

The numbers help explain why it’s so difficult to reverse the trends of rising foreclosures and falling property values. Even some homeowners who can afford to pay their mortgages are defaulting, Lauria says, because their house might have lost 30% of its value, and they figure it will be a long time before it’s worth what they paid for it.

“They say, ‘If I play my cards right, I can live here free for 12 months, maybe longer’ ” before the lender can foreclose, Lauria says. “Our challenge isn’t contacting the borrower. I can talk to them, but they stick their tongue out at me.”

Hundreds of thousands of distressed homeowners are reaching out for help. The Homeownership Preservation Foundation, part of the Hope Now Alliance, fields more than 4,000 calls daily to its toll-free hotline (888-995-HOPE). But about 1 in 4 callers don’t want credit counseling, the foundation says. Many simply want financial relief.

Thary Yin, 26, who works at Wells Fargo’s call center in South Carolina, talks with 10 to 20 borrowers a day.

“A lot of the stories I hear from mortgagors are situations that are very, very extreme,” she says. “I talked to a cancer patient, and after Katrina hit New Orleans, the stories I hear. ? Wells Fargo offers solutions on the mortgage side, but on the personal side, you can only cover so much on a phone call. Not being able to do more personally is the most difficult thing for me.”

Getting more aggressive

With home prices sliding and politicians calling for government and the mortgage industry to do more to help troubled homeowners, lenders and loan servicers such as Lauria are becoming more aggressive in contacting delinquent borrowers and modifying loans to make payments a bit easier.

Such tactics make sense for the loan industry: The last thing a lender wants is another vacant property to fix up and sell.

“We’re becoming more realistic about where the market’s going to go,” said David Sunlin, senior vice president for foreclosures and bankruptcy at Countrywide Financial, which is the nation’s largest mortgage lender and the focus of several government investigations into aggressive lending practices that made the company financially vulnerable.

With an inventory of nearly 40,000 foreclosed properties nationwide, Sunlin says, he will work with a borrower to try to sell a property, even with a sizable loss, up to the date it’s scheduled to be auctioned at a foreclosure sale.

At JPMorgan Chase, which has seen foreclosures jump 38% in the past two years, cases now go from collections to the “loss mitigation” department just five days after a borrower misses a payment, so the company can try to find a faster solution to keep the homeowner in the property. Not so long ago, the loss mitigation department didn’t get involved until 90 days after a missed payment.

As soon as a lender takes control of a property, the value begins to drop while the maintenance costs mount.

Safeguard Properties, a company many lenders use to change the locks, cut the grass and board up windows on foreclosed homes, has seen business rise more than 15% during the past year. A lender will pay $600 to $1,200, and more in some cases, for Safeguard to care for each property.

The largest surges in new foreclosures in the fourth quarter of 2007 were in California, Arizona, Nevada and Florida, where the frenzied real estate boom in the past several years attracted buyers who put little money down and got risky loans with virtually no proof of income.

Avoiding lenders

There are many reasons homeowners behind on their mortgages fail to contact their lenders, mortgage specialists say. Some don’t believe their lenders can help them. Others fear it will only speed the foreclosure process. And some don’t call because they simply don’t have money to give the lender, according to surveys by Wells Fargo and Freddie Mac.

“It’s (lenders’) own fault that borrowers won’t answer their calls,” says Todd Buckner, CEO of National Housing Solutions, a for-profit mediator between borrowers and lenders to stop foreclosures. “Their collections departments have beat (delinquent homeowners) over the head for months. It’s no wonder borrowers won’t answer the phone.”

To reverse public perception that they don’t want to work with troubled borrowers, lenders are hiring and training hundreds of employees to answer calls and help borrowers restructure their mortgages. They also are turning to more creative ways to try to reach at-risk homeowners.

The Hope Now Alliance, a coalition of 28 lenders and loan servicers supported by the Bush administration, has mailed more than 1 million letters since December to borrowers with subprime, adjustable-rate mortgages (ARMs). In many cases, the lenders are offering to freeze the borrower’s interest rate for five years. In other cases, borrowers may qualify for a 30-year, fixed-rate loan. Even so, the response rate has been less than 20%, on average.

To find homeowners who have stopped paying their mortgages and moved out, lenders use companies known in the trade as “skip tracers.” One of them, Players National Locator, for example, is receiving 7,000 cases a month from lenders looking to track down delinquent homeowners, up 20% since September.

Martin Goodman, president of Residential Capital in San Diego, sends his delinquent borrowers a $5 Starbucks gift certificate, along with documents that explain how his company can help them restructure their loans and avoid foreclosure. His response rate is only 10%.

But Goodman says making contact is only one challenge. The other is persuading delinquent borrowers to tell the truth about their financial condition. He suspects at least 90% of borrowers don’t explain the real reason they are falling behind on their payments out of fear it might accelerate their foreclosure.

“Everybody’s grandmother is dying. Everybody’s kid is having surgery,” Goodman says. “I’d rather somebody say, ‘We mismanaged our debt. This is what we make, and this is what we can afford.’ “

A ‘sense of entitlement’

As home prices fall from coast to coast, 8.8 million homeowners will have mortgage balances equal to or greater than the value of their property by the end of the month, Moody’s Economy.com. predicts.

That could come as a shock to consumers who thought property values would always rise, and it helps explain the attitudes lenders are seeing among their troubled customers, Goodman says.

“If you buy a car and it depreciates,” Goodman says, “you don’t expect the automobile dealer to write off your loan. There’s a sense of entitlement (among homeowners) that is just unbelievable.”

Goodman, whose firm specializes in home equity credit lines, says the main reasons people took out the loans were for home improvement, debt consolidation and medical expenses. But he estimates that about 20% used the cash to go on vacation or buy a new car.

Stories like his are fuel for the opposition in Washington against a government bailout for homeowners facing foreclosure. On the other side, consumer advocates such as the National Community Reinvestment Coalition (NCRC) can cite a litany of abusive lending practices that hurt homeowners.

“The government ought to get involved because there’s been a market failure,” said John Taylor, CEO of NCRC. “Our proposal is for the government to act as a cash-flow agent, to temporarily acquire the mortgages creating these problems long enough to refinance them into sensible terms and conditions. There would be no bailout because the government gets paid back.”

So far, the Bush administration has backed two initiatives from the Hope Now Alliance to help some homeowners avoid foreclosure. But their restrictions severely limit their effectiveness.

In December, for example, the alliance said it would freeze interest rates or refinance an estimated 1.2 million homeowners with subprime ARMs. To qualify for the interest-rate freeze, borrowers would have to be facing a 10% increase in their mortgage payment once their interest rate reset. But many subprime ARMs are tied to an international index that has fallen 2 percentage points since Christmas.

“In our portfolio, 60% of the borrowers who would have gotten fast-tracked (under the Hope Now plan) would not get that now that the rates have changed so much,” said Melissa Lucas, director of loss mitigation for Home Loan Services.

Instead of a payment increase of $450 a month, on average, her customers will see their payments rise by only $135. They may still qualify for other loan modification programs, she said, but not for the Hope Now plan.

FHA can help, sometimes

In a separate push, the administration backed this year’s temporary increase in the maximum loan limits of the Federal Housing Administration, which caters to first-time and low-income borrowers.

The FHA also has created a new loan program, called FHASecure, to help subprime borrowers refinance out of risky ARMs. Since it was announced in fall, the FHA has received about 277,000 applications and approved fewer than half of them.

In New Jersey, Lauria said he sent the FHA about 3,000 of his company’s delinquent loans to see how many could be refinanced under the FHASecure program. The answer: 61.

Even for the borrowers who contact their loan servicers, the options the companies can offer are tightly constrained by their contracts with investors who buy and sell pools of loans that are packaged as bonds.

But Lauria doesn’t believe every homeowner who can’t pay their mortgage can or should be saved.

“One-third of people who are delinquent should be in foreclosure. It’s the best alternative,” he says. “They don’t have the money. They shouldn’t have (gotten the loan) to begin with.”

And that’s why, he says, he doesn’t blame some of them for walking away from their homes.

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 450 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.

Effective Communication-Code Enforcement and the Servicing Industry

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Published in March/April 2008 REOMAC Update Magazine

By Robert Klein

Statistics abound about how much property values drop when defaulted and REO properties fall into disrepair. This is why the mortgage servicing industry and other investors spend millions of dollars annually keeping properties in their portfolios up to code and in good repair. In many instances, even actively managed REO properties experience code violations resulting from weather damage, vandalism and other unexpected events.

One of the greatest challenges in effectively dealing with code violations has been the inability to create an effective communication channel between local code enforcement officials and the servicing industry.

Typically, when code enforcement personnel issue a violation, the violation is sent to the owner of record on file with local recorders’ offices. It is too common that this information is either out of date, or lacks accurate contact information so that violations can be brought to the attention of the right person and addressed in a timely manner. Even when the right entity is on record, the contact information may be incomplete or inaccurate. As a result, code violation notices can wind up in the wrong city, with the wrong department, and even worse, in a waste basket with piles of junk mail.

Over the past few years, the field services industry has worked diligently to address this issue on behalf of its clients. Prompt notification of code violations and timely remediation is essential in addressing property damage to prevent further deterioration and community blight. At Safeguard, we have actively developed a working partnership with thousands of code enforcement officials in cities across the country to eliminate this communication gap. Rather than sending notices to the entity on record when code violations occur on vacant properties, we have asked them to notify us, and in turn, we have identified the right contact, whether the property was in our client portfolio or not.

This approach has provided two advantages. First, it has given us an early alert about code violations on our clients’ properties, allowing us to address issues in a timely manner to prevent further property damage. Second, it has allowed us to help our colleagues in the industry, with a courtesy contact to the responsible party to make them aware of violations so they can engage their own inspection and maintenance process.

It is one example of how the mortgage field services industry works cooperatively to raise the level of service we all provide to our clients, and maintain the integrity of properties and neighborhoods across the country.

Recently, the Mortgage Bankers Association (MBA) added a Property Preservation Resource Center to its web site (www.mortgagebankers.org/propertypreservation). Through this site, code enforcement officials nationally can obtain property preservation contact information for mortgage service companies to facilitate the process when code violations come to their attention. It also provides a link to the MERS Servicer Identification System to identify parties responsible for specific properties. This service is an invaluable resource for code enforcement officials and mortgage servicers nationally to further open the lines of communication.

By working together to identify and address property violations quickly and effectively, we can all be more effective in maintaining the quality and integrity of vacant properties, helping our clients achieve faster and more valuable sales, and preserving neighborhoods for homeowners and their families.

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Robert Klein, a long time REOMACTM member and supporter, is CEO of Safeguard Properties, Cleveland, OH, the largest privately held mortgage field services company in the U.S.

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Cleveland Plain Dealer “Mortgage field service firms doing well in Cleveland amid foreclosures”

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Recently, the Cleveland Plain Dealer featured an in-depth look at the efforts of? the loan servicing industry to?mitigate the potential consequences of?the increasing number of vacant and abandoned properties. With the initial condition of these properties deteriorating (as increasing reports of “property stripping” surface), superior maintenance of these properties is vital to?protect them from ?further damages and return the properties to productive use.

Mortgage field service firms doing well in Cleveland amid foreclosures

Foreclosures mean plenty of work for firms that maintain and manage vacant homes

Who wants to buy a house that has been sitting empty for months?

Its copper pipes have been ripped out by vandals, the cast iron pipes have burst in freezing weather, and it’s full of junk left behind by people who don’t care about its condition.

After all, they’ve just lost their home. It doesn’t matter to them whether it sits on the market forever, its value deteriorating.

But to the new owners of properties like these — banks or other mortgage lenders — it’s starting to matter a lot.

In the past few years, lenders have lost many millions of dollars on properties that they’ve taken ownership of after mortgages have gone into foreclosure.

In 2007, there were more than 2 million foreclosure filings nationwide, nearly 14,000 in Cuyahoga County alone.

Five or 10 years ago, some lenders would have unloaded the properties as quickly as possible, accepting the loss and moving on.

But these days, because of the sheer number of properties to deal with, that approach has become extremely costly, said Robert Klein, chief executive of Safeguard Properties Inc. in Brooklyn Heights.

That’s where mortgage field service companies like his come in. Lenders hire them to change the locks, mow the lawn, drain the pipes, clean up the place, maybe even do some remodeling — whatever it takes to get the property sold at a price the lender can swallow.

This little-known industry, like the foreclosure crisis, has grown tremendously over the past few years.

“Anytime a bank takes a property to foreclosure, they’re losing heavy-duty money,” Klein said.

Safeguard’s job is to lessen the bleeding.

“Right now, there’s a tremendous, tremendous emphasis on protecting the collateral, in making sure property doesn’t get damaged,” he said. That means deterring vandals and preventing vulnerabilities like a weak roof or bad pipes from creating more expensive problems.

He said Safeguard clients also aim to maintain neighborhood property values and attract buyers who will actually live in the houses, rather than try to turn them over for a quick buck.

That means making the house look occupied and keeping it in a condition that’s more desirable to families.

“For a bank, securing and maintaining homes is not their main business,” Klein said. “This is a very small part of their world. Our clients have come to rely on us.”

The mortgage field services industry isn’t new, though.

Tim Doehner, executive director of the National Association Mortgage Field Services, said banks have hired contractors to keep up bank-owned properties for as long as he can remember.

But before foreclosures were so widespread, banks typically hired contractors themselves, or hired real estate brokerages to handle it, he said.

“In the past 10 to 15 years, it’s become an industry in itself,” Doehner said.

NAMFS is a trade group that was founded in the 1980s. It has around 350 members, which range from local construction companies to big players like Safeguard and FIS Field Services in Solon.

Those national companies have emerged in order to service today’s large banks and mortgage companies that own properties all over the country, Doehner said.

Safeguard was founded in 1990 and started out in Ohio, Michigan and Pennsylvania. Today the company does business in every part of the country and employs nearly 500 people, not including more than 5,000 contractors it hires to do work on the homes.

Jeff Tortorea, president of Lost Pond Construction Inc. in Chardon, said he gets at least 80 percent of his business from Safeguard. He has four construction crews that do work in Northeast Ohio, taking on an average of 20 jobs a day.

The most common job is simple: An exterior inspection to make sure someone is still living in the house after the owner starts missing mortgage payments. If the owner is still there, the contractor does nothing more. Safeguard commissioned 4.8 million of those inspections last year – about 12,000 in Northeast Ohio just during September and October, the latest months for which local numbers are available.

In the fraction of cases where the home goes into the foreclosure process, a contractor like Lost Pond is sent by Safeguard to make sure the house is secure by doing things like changing the locks and boarding up any broken windows.

Once the foreclosure process is complete and the lender takes ownership of the house, Safeguard offers a range of services to the lender – including remodeling, repair and cleaning services. Safeguard did about 2,000 of those jobs in Northeast Ohio in September and October.

John Caputo, of Fowler and Sons Construction Services in Lyndhurst, says a lot of properties are in less than good shape when a bank gets them.

“If somebody doesn’t have the money to pay their mortgage, chances are they also don’t have the money to keep up the property,” he said.

In Cleveland’s Glenville neighborhood, an out-of-town bank that Safeguard asked not be named is spending more than $20,000 to spruce up the exterior of a property and to repair interior damage apparently caused by vandals.

The job includes replacing a missing water heater and furnace, fixing the porch, replacing storm windows and doors and exterior painting.

Boni Dellarose, director of home sale services at Real Living Realty One, said many of the lenders that list their properties with her agency work with large field service firms like Safeguard. But some of the smaller banks don’t, and they expect the real estate agency to do the basics.

Dellarose said she will hire contractors to winterize houses and to maintain the exteriors. She said keeping the properties maintained is important for the community and the real estate market.

Ten years ago, Safeguard’s Klein said, “banks and even cities weren’t paying as much attention to a vacant home on their block.”

But now, it’s too big a problem to ignore.

He said the interests of his clients and municipalities should be the same: to reduce the number of houses that go into foreclosure and to take care of the ones that do.

He admits, though, that the increase in vacant homes has been a boon to Safeguard.

“As delinquencies continue to grow, we’re going to have more business,” Klein said. “We try to give something back by doing the job right.”

So what happens when the foreclosure crisis comes to an end?

Klein said an improved housing market would be good for everyone, including Safeguard.

“We’re diversified,” he said, coyly. “Right now we have our hands full, but I think there’s plenty of work out there outside of the foreclosure business. We are looking ahead.”

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 450 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.

Buffalo News “Salvaging Foreclosed Homes”

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A recent article in The Buffalo News chronicles efforts by the servicing industry to return abandoned properties to productive use.

Salvaging foreclosed houses

Crews clean, repair, monitor homes for eventual resale

Paul Dinehart gripped the railing and tested the faded wood steps before mounting them to the porch and striding to the front door of the East Side home. Unlocking it, he pushed it open slowly, calling out ?Hello? Hello?? in a booming voice.

Not receiving or expecting an answer, he stepped gingerly inside the foyer, past a broom and an exercise bike, and onto the dirty brown carpet, which was littered with papers, books, bags and other garbage. A white plastic chair and a blue AB Lounge Sport fitness machine stood along the wall.

?Careful, the floor is buckled here,? he cautioned his colleagues and a reporter behind him, as he moved farther into the house and felt the floor move beneath his shoes.

The three-story, blue-gray house has been recently abandoned by its owner, driven away by the threat of foreclosure initiated by his or her mortgage company.

Left behind in what seems like a hurry is the debris-filled, neglected property, covered in muck and filth, with a host of belongings haphazardly strewn around in various states of disrepair. A burst pipe on the second floor had caused water to cascade down as far as the basement, but that?s now receded, leaving dust, mildew and destruction in its wake.

But Dinehart and his colleagues don?t care about what happened before, or even whether the devastation they see was deliberate or just careless. Their job is just to clean it up, repair any critical damage, and get the house ready for a new owner. In this case, they estimate that means $20,000 of work.

?Most of the time, we never find out what happens. It?s not our place,? said Dinehart. ?We need to preserve and protect the property. We need to make sure it?s not a house that?s contributing to blight.?

Dinehart is a quality control field representative for Safeguard Properties, an 18-year-old Cleveland- based firm that inspects, monitors, repairs and maintains abandoned and foreclosed homes nationwide for mortgage servicing companies. The company uses a network of 4,000 contractors in all 50 states to inspect or maintain about 450,000 properties at any given time, including about 1,800 in Western New York in the last two months.

He and his co-workers are part of a little-known $1 billion industry whose essential job is to make sure the houses backing defaulted mortgages don?t lose value and can be quickly put back on the market. Otherwise, lenders can?t recoup losses, and are stuck holding real estate.

?The immediate goal is to make sure the value of the property does not deteriorate. We do whatever we can to maintain that condition,? said Safeguard spokeswoman Diane Roman Fusco.

With the nation engulfed in a mortgage crisis that threatens to send up to 2.2 million homes into foreclosure, most of the attention has focused on the impact on borrowers, lenders, and investors, and how to prevent foreclosure. There?s been little discussion of what happens afterwards, though.

The mortgage industry today is highly complex, with loans originated by brokers, sold to Wall Street, and packaged into investment pools whose income stream is sold in pieces to investors. But behind every investment security is a loan, and behind each loan is still a house, on a block, in a neighborhood where other people live.

Western New York has not been hit as hard as many parts of the country, largely because the region never saw the housing and mortgage boom found in California, Florida, and Arizona. But even with a significantly lower subprime foreclosure rate here ? 5.6 percent versus 9.7 percent statewide ? there are nearly 200 homes in foreclosure just in the city of Buffalo, and 509 in the eight-county area, all because of subprime loans.

Besides causing a loss to the lender, foreclosed, vacant and derelict homes can devastate the communities around them. Neighboring property values fall by at least several thousand dollars, municipal tax revenues drop, and cities and towns must spend thousands of dollars just to inspect each abandoned home, let alone maintain or fix them. Demolishing houses can total hundreds of thousands of dollars or even millions of dollars a year for large cities.

?It?s a crisis. Communities are reeling,? said Joe Schilling, director of research and policy for the Washington, D.C.-based National Vacant Properties Campaign, a collaboration between Smart Growth America, Local Initiatives Support Corp., and the Metropolitan Institute at Virginia Tech. ?It?s going to be the local governments and the neighbors that are going to be left holding the bag.?

The mission of companies like Safeguard is to prevent that. Much of their work involves just inspecting a home after a borrower has defaulted, to make sure the house is still occupied, determine its condition, and report back to the client.

The companies only turn to active preservation when the homeowner abandons the home or the foreclosure is completed. At that point, the lender takes possession, and the property is considered ?Real Estate Owned? ? or REO in industry terms ? on its books.

Comprehensive repairs

In the past, the companies did just basic work for their clients, literally taking out the trash and cleaning the houses of any debris, food and belongings left behind. But as the mortgage industry has exploded in size and its needs have evolved, so have the services they provide.

They still secure the properties with locks, board up broken windows, and repair any significant structural damage ? such as roof leaks or burst pipes ? as soon as they take possession of a house for a lender.

But now they also ?refresh? the properties, providing maid service, mopping floors, wiping up dust, vacuuming carpets, and arranging for the grass to be cut, hedges to be trimmed and snow to be removed. They also ?winterize? the plumbing, shutting off water, draining lines, and taking any other steps to ensure pipes don?t burst and houses don?t flood.

?The services used to be basic, but now it?s becoming more refined,? Fusco said.

They even put air fresheners inside the houses so potential buyers aren?t turned off by any odors.

?The majority of properties . . . are usually left with tremendous amounts of debris and varying levels of filth and scum,? said George Correa, a real estate agent with Western New York REO Specialists, a division of Hunt Real Estate ERA that offers the same services as Safeguard, but also markets and sells the homes as a broker.

?If a property has a lot of garbage in it, it creates a negative atmosphere and the offers you get reflect that. If you clean it up, hopefully you can get a little bit of a better offer.?

Take the East Side home that Safeguard just secured. The kitchen sink was full of water, while a pair of scissors and a tampon package sat in the bathroom sink next to a stick of Secret deodorant and a flattened roll of toilet paper. A carton of eggs and a box of Minute Rice stood on the kitchen counter.

Ceiling tiles and cracked porcelain shards littered the bathroom floor near a dirty toilet. A torn mattress lay on the floor of the nearby bedroom, with scattered clothes, papers, and a black-and-purple wig alongside, and a music CD, phone book and large fan in the next room. In the basement were cans of paint and paint thinner, a bookcase with warped shelves, and a computer monitor.

?We don?t know the situation with the people, but obviously they?ve left stuff,? Fusco said. ?These are desperate situations for these people. They?re losing their properties. Chances are they have other issues as well.?

15%-20% are trashed

And that?s not uncommon. Correa said 15 percent to 20 percent of the 70 to 80 properties

his team handles at any given time are trashed. ?And the amazing thing is people were living there,? said Correa, who handles about 300 homes every year and works for about 20 clients. ?They made an even bigger mess when they didn?t care anymore [but] these people actually lived like this.?

Sometimes homes are vandalized, either by the former owner or someone who saw they were vacant. The rising price of scrap copper has made theft of copper pipes commonplace in the last 10 months, with vandals ripping through walls and causing several thousand dollars in damages to get less than $100 worth of copper.

Kitchen counters, bathroom toilets, lights, hot-water tanks, and even furnaces have been stolen. Correa has even found windows and doors missing, only to look across the street to see a neighbor installing new ones that didn?t quite fit.

?You look at that, and you can?t do anything,? he said. ?You just avoid a confrontation.?

But while much of the mess has to be cleaned up, crews don?t throw everything out and don?t repair everything. Some belongings get taken to storage in case the owner reclaims them. And once the home is secured, many decisions about large repair projects or enhancements are up to the mortgage company, which will only do what is necessary and appropriate for the neighborhood, but won?t spend more than the house is worth. So the basic guideline is simply to address ?anything that would deter a sale,? Dinehart said.

Most homes don?t require too much work.

Safeguard in mid-November secured a yellow duplex with red doors and shutters and tanpainted bricks on the Upper West Side following an eviction. The company removed debris, addressed a minor roof leak that had caused water damage, and provided maid service.

But several walls still have picture hooks, colored pins and nails in them, and one bedroom has fluorescent yellow stars of various sizes stuck on the wall. The carpeting lining the front stairs is torn in several places. And there are holes carved into the wall above two closets.

?Something like that wouldn?t deter a sale,? Dinehart said.

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,?OH? 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 450 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

HUD Property and Preservation Guidelines Revised with Issuance of Mortgagee Letter 2007-03

Posted on by Safeguard

Industry collaboration leads to adoption of Best Practices

published in Servicing Management, June 2007

By?Robert Klein, CEO, Safeguard Properties Inc.

The Department of Housing and Urban Development (HUD) recently issued HUD Mortgagee Letter 2007-03 (ML 2007-03).?The Mortgagee Letter provided a revision to the Preservation and Protection Requirements and Cost Reimbursements for properties that serve as collateral for mortgages insured by the Federal Housing Administration (FHA). These requirements entitled, “General Requirements for Preservation and Protection of Properties Securing FHA Insured Mortgages”. This guidance supersedes the policy requirements of ML 2002-10, ML 2003-05, ML 2004-07, and ML 2005-22, and parts of ML 2002-19. The revisions went into effect on April 30, 2007.

The issuance of ML 2007-03 was a culmination of a cross industry collaborative effort between HUD, Loan Servicer’s and Field Service organizations. Building on the momentum created during the National Property and Preservation Conference in November 2006, HUD was extremely proactive in reaching out to the industry to discuss “best practices”. The Conference Theme “Its About Time” provided the initial forum and framework for the Industry to discuss these best practices with a focus on creating an environment of efficiency and collaboration.

Many of the guideline revisions were as a result of a number of industry conference calls, issues raised at Industry conferences, and working groups formed to address guidelines that were in place. Within HUD ML 2007-03 , there are several changes that affect the way that the Industry is now expected to preserve and protect FHA properties. Highlights include:

  • An overall increase in cost reimbursements for many P&P services and standard pricing for securing, boarding, and inspections;
  • A definition of five different types of inspections;
  • Triggering events that necessitate an inspection have expanded to include property conditions that may signal a non-monetary default;
  • An increase in the maximum allowable securing fee to allow for the re-securing of a property without prior approval and a differentiation of the securing timeframes for pre and post-sale properties;
  • Clarification of the distinction between temporary and permanent roof repairs, clear guidance when each is appropriate and an increased emergency roof allowable;
  • Simplification of the winterization requirements
  • Clarification of securing timing requirements for pre (15 days) and post-foreclosure (5 days) sale properties;
  • Clarification of conditions under which HUD will accept conveyance of a property with mold;
  • A new requirement for the use of digital photographs and a new flat-fee reimbursement;
  • Revisions of the requirements surrounding initial grass cuts and an update allowing a Mortgagee to submit one bid per growing season for recurring lawn maintenance on an oversized lot rather than submitting new over-allowable requests each time the yard is mowed;
  • Specific language that excludes normal household cleaning products from the definition of hazardous waste;
  • Removal of the requirement for installation of the Reduced Pressure Zone (RPZ) device, except in areas where it is a state or local requirement;
  • Instruction to immediatelyaddress damages upon discovery, such as flowing water and collapsed roof andapproval to submit an O/A request after the work has been completed;

?

Inspections

The Property Inspection and Servicing Requirements within HUD ML 2007-03 provided a definition of five (5) inspection types. ?These include Occupancy Inspections, Initial Vacant Property Inspections, Vacant Property Inspections, Voluntary Pre – Conveyance Inspections, and Eviction Inspections.? The guidelines provide a succinct definition and requirement for each of these inspection types. The revised inspection guidelines also provided some additional requirements and clarifications.? In this regard:

  • All inspections are now photo required;
  • the Initial Vacant Property Inspection fee is now charged at the time of the initial secure;
  • Interior inspections on vacant properties are now required on all visits following the initial secure;
  • HUD now provides reimbursement for a total of 15 inspections within a calendar year;
  • All inspections must be completed within 35 days of the completion of the last inspection;
  • Reimbursement for Inspection Fees are now determined by the type of inspection (interior vs. exterior or gained access vs. did not gain access)
  • The previously identified Hot Zones have been updated to include 13 zip codes in Chicago and 5 zips in Los Angeles.
  • Properties deemed to be “Vacant but obviously being maintained” will no longer be secured

For years, the industry has lobbied for mandatory interior inspections to ensure early detection of issues that if not detected and mitigated, could lead to a material loss to the value of the property. Issues identified during these inspections often represent high risk matters that can, if not detected early, escalate and lead to a major loss to the property value. Common examples of issues identified during these interior inspections include new damage, worsening of previously reported damage, and the presence of a sump pump not properly maintained.? With the issuance of HUD ML 2007-03, Interior Inspections are now definitively required.

It has always been imperative that property condition be reported and documented with photos at the time of the initial secure.? The new Guidelines provided further clarification or requirements when an imminent source of property damage or a health and safety hazard is identified during an inspection. The following examples were provided by HUD but were not meant to be all inclusive:?

  • Flowing water
  • Collapsed roof
  • Gas leak

In these (or similar) circumstances, the Mortgagee is required to take immediate action to remediate the damage or hazard following the receipt of emergency permission.? In instances where emergency permission cannot be obtained in advance, the mortgagee is instructed to submit and over allowable request immediately following the remediation action and must substantiate the emergency nature of repairs.

Winterizations

The Guideline revision clarified that wet/radiant heating systems are no longer required be up and running allowing for a material cost and time savings for the Industry.? Specific guidance was provided to define the requirements for each system type when performing winterizations.? New allowables were established for:

  • Replacement/installation of electric and gas water heaters.
  • Installation of an RPZ valve if required by local code
  • Repair/installation of heating equipment if required to properly winterize the system.

A number of guideline revisions were addressed as well.? These include

  • Mortgagees are no longer permitted to disconnect water meters
  • Winterization steps have been clarified by system type; and
  • Winterization season has been changed in several states

Debris and Hazard Waste Removal

HUD ML 2007-03 included a number of revisions and clarifications as to the requirements for the removal of debris and hazard waste. Interior debris removal is no longer permitted in Florida and Oregon.? Allowables were also established for large appliance removal, tire removal, and bug/pest infestation removal in order to improve efficiencies and eliminate bids. Importantly, debris removal allowables have changed. and a debris removal cost schedule by state has been provided.

HUD has also clarified the definition of hazard waste to eliminate “normal household” items. Specifically, the guidelines established that the following products, if found in quantities consistent with normal household use, are not considered hazardous waste for purposes of debris removal under this section.

  • Non-flammable materials including reasonable quantities of paper and fabrics (unless stored near flammable chemicals),
  • Common cleaning products and household chemicals such as insect repellent,
  • Up to five gallons of paint and paint products,
  • Lawn and garden products and fertilizers,
  • Pool chemicals.

Bids to remove these items are not necessary but it is still required to report the presence of these items on updates submitted.

The issuance of HUD Mortgagee Letter 2007-03 provided evidence that Industry collaboration and cooperation is working.

Quality Assurance – A Coordinated Approach to Risk Management in the Default Industry

Posted on by Safeguard

Published in Servicing Management, February 2007

By Robert Klein

Quality Assurance can be defined as a planned and systematic pattern of actions necessary to provide adequate confidence that a product or service optimally fulfills customers’ expectations. As the Default Services industry has matured, we have seen a diligent focus on the completeness and comprehensiveness of quality assurance processes and procedures.? Compliance with investor guidelines has been the main driver of these quality initiatives however the industry has made great strides in utilizing quality control techniques to safeguard their client interests.? Increasingly, we have seen a collaborative approach to quality processes and procedures as field servicer’s, loan servicer’s, and investors (HUD, VA, FNMA, and Freddie Mac) have coordinated their approaches to ensure consistent quality of efforts.?

This spirit of cooperation was never more evident than at the Third Annual Property Preservation Conference held in Washington D.C. in November 2006.?? The Conference theme, “It’s About Time!”? highlighted the renewed partnerships within the industry as the attendees focused on long term goals and opportunities in streamlining the conveyance process, thus saving investors, servicers, and M&M contractor’s time and money.? This collaboration led to proposed resolutions and the establishment of focus groups to cooperatively work with the investors on reducing the inefficiencies in the current processes and improving the quality of work efforts.

Field Service companies are typically the first line of defense for the default service industries quality assurance efforts.? The primary goal is to assure that all contractors working with Field Service companies are thoroughly educated about and compliant with the industry and client requirements, and that their quality of work is consistent and sound.? Contractors are the eyes and ears of the Field Service companies.? Therefore, it is imperative that contractors deploy quality assurance techniques to ensure that work is performed competently, comprehensively, and proper supporting documentation is available.? From a contractor standpoint, quality assurance efforts include:

  • Field quality efforts include maintaining adequate equipment (ladders, air compressors, generators, etc.) to accurately and comprehensively complete the duties they are contracted to perform.
  • Use of digital cameras to provide photo documentation of the before, during, and after status of the work performed.
  • Utilization of office quality assurance efforts to ensure work order updates are timely and thorough and are adequately supported by documentation
  • Increased utilization of GPS and handheld inspection tools to ensure that not only are their employees physically visiting the property,? but are comprehensively completing and gathering the proper inspection data

Field Service companies conduct comprehensive quality assurance efforts as well. In addition to investor guidelines,? Field Service companies must also deploy quality assurance techniques to ensure they are meeting client and service level agreement requirements.? Quality Assurance efforts common to experienced field service companies include, but are not limited to:

  • Comprehensive vendor recruiting and training policies and procedures designed to ensure that recruitment is properly managed and resultant work products are consistent and in accordance with client requirements
  • Increasing use of technology allowing for process “scripting” that provides a roadmap for the contractor in the field to gather sufficient and complete evidential matter including photo documentation
  • The use of Contractor Report Cards and follow up procedures to ensure remediation of quality deficiencies
  • Comprehensive review procedures designed to ensure the adequacy and reasonableness of submitted bids
  • Comprehensive in house industry training to ensure that the in house personnel are properly trained and have access to the latest investor guidelines
  • Completion of random quality control inspections.? These inspections are typically performed after the inspector has completed their inspection and are deigned to determine whether or not the inspection was a true representation of the physical condition of the property at the time the inspection took place.
  • Assignment of “phantom” inspections to ensure that field inspectors are actually visiting properties and reporting accurate information.
  • The completion of interior inspections to ensure early detection of issues that if not detected and mitigated, could lead to a material loss to the value of the property.?
  • Critical path timelines and exception reporting established and consistently monitored to ensure timely completion of activities
  • Internal quality control audits designed to ensure that adequate photo documentation is available to evidence the work performed and an audit trail is maintained that evidences all work performed
  • Use of non-performance and demand letter issues to identify quality deficiencies and implement timely corrective action to prevent future occurrence
  • Pre Conveyance inspections designed to document issues at the time of conveyance in order to ensure the minimization of reconveyances.

Loan servicers have also implemented quality assurance measures designed to assure compliance with investors and the mortgagee’s own origination or servicing requirements.? These activities are designed to protect the mortgagee and investors from unacceptable risk, guard against errors, omissions and fraud, and assure swift and appropriate corrective action is implemented.? In this regard, the servicers have implemented quality assurance activities such as:

  • Utilization of Vendor Report Cards based on a representative sample of work orders performed designed to quality review work activities.
  • The assignment of High Risk Field Officers to work proactively with field service vendors and municipalities to ensure compliance and timely remediation of code issues
  • The increasing use of Service Level Agreements (SLA’s) that provide for financial disincentives for breakdowns in quality service
  • Utilization of automated invoicing applications to properly ensure that claims for insurance benefits are accurately prepared, properly calculated, fully supported, and submitted in a timely manner on a loan level detail

Investors have also renewed their focus on quality assurance and have proactively worked with servicers and field service companies in a collaborative manner.? At the Property Preservation Conference in November 2006, HUD identified their “top ten” ways to save time and improve efficiencies.? As an illustration of their focus on quality assurance, these included:

  • A recommendation that the industry take advantage of voluntary pre conveyance property inspections to minimize reconveyance risk
  • Ensure that quality efforts include the submission of a timely HUD-27011 form, and that all non surchargeable damage is properly documented
  • Their representation that “It’s all about Quality Control” when providing a comprehensive mortgagee/servicer audit trail.? HUD commented that servicers must perform periodic quality control audits to ensure that preservation and protection requirements are consistently met.

The Veterans Administration also announced strategies to improve efficiencies and quality at the Conference.? VA stated that they are now taking actions to address the servicers’ concerns of consolidation of cost schedules, streamlining and automation of claim payments, making information available online, instituting incentive plans for servicers, and implementing post-claim audits. Fannie Mae and Freddie Mac have also stepped up their quality assurance activities in accordance with the new industry focus. Both agencies have recently created a central office and email address for processing P&P requests nationwide.? These central offices track all bid requests by type and amount, making the reporting and auditing of data more efficient. Additionally, Fannie Mae has developed a servicing guide intended to assist the servicer to make quality decisions on their behalf.

In summary, the Default Industry has made tremendous strides in improving the quality of their work effort and has been working collaboratively to coordinate efforts.? A comprehensive quality assurance plan and process means cost savings to loan servicers, field service companies and ultimately the investors.? It should be apparent that if you cannot measure the quality of your efforts, you cannot improve it.? Industry quality assurance efforts need to focus on continuous business process improvement in an ongoing effort to enhance our products, services and processes.? However, these efforts cannot be undertaken in a vacuum and the industry must continue to collaborate on quality measures if we are to be successful.? The establishment of solid Quality Assurance plans will reinforce the investors confidence in loan servicing and result in renewed cooperation for all involved in the Industry.

Initial Delinquency through REO Disposition, A Cradle to Grave Servicing Approach

Posted on by Safeguard

published in Managing REO Magazine, January 10, 2007 Volume 1, Issue 21

By Robert Klein, CEO
Safeguard Properties?

In recent years, the mortgage default industry has experienced many changes. A critical change that we, and many of our colleagues have seen materialize is the inter relationship between the foreclosure process and REO disposition. Today, we are observing senior and executive servicing managers throughout the industry coming to the reality that final disposition of non-performing real estate assets truly begins with the first delinquency. Best practices have demonstrated that the entire default process is in reality, a continuous flow of interrelated business processes, which allows for continuous and efficient inventory tracking capabilities designed to cost effectively manage the portfolio from initial delinquency to final disposition.? Advances in technology now provide practitioners with the data and reporting capabilities to manage their portfolio proactively.? Today, ?Executives, REO managers, and their staff are able to ?access historical property information that enable them to make decisions timely and efficiently based on relevant and real time data;? even prior to a foreclosure sale.?

For years within many loan-servicing organizations, a virtual and sometimes actual barrier existed between the Foreclosure and REO departments.?This barrier not only impeded cooperation, it also wasted valuable time and contributed to higher losses for the organizations. Foreclosure specialists work closely with their property preservation (P&P) vendors to ensure that their institution’s non-performing real estate assets are being maintained and protected against deferred maintenance, vandalism, adverse weather conditions, and so forth.? When these properties become vacant and/or abandoned, the P&P vendors are also charged with the responsibility of securing them.?Since the P&P vendors inspect these properties on a regular basis throughout the collection and foreclosure stages of default, they become very familiar with property condition, the surrounding market, and property value. The foreclosure specialists also develop an internal information base and familiarity with these properties.? In the past, this knowledge sometimes stopped at the door (or barrier), between the Foreclosure and REO departments.? REO specialists received properties without the benefit of having complete access to information about loan/property history, or even the services that were provided during the foreclosure process.? As a result, many preservation services, like lock changes, winterizations, damage reports, repairs, etc., were actually performed two or more times on many properties.

As the industry has changed, opening the interdepartmental communication channels have led to a direct benefit to loan servicers bottom line.? It’s hard to believe, but in some institutions the staff members from one department didn’t even know how what they did impacted other departments, and vice versa. Today, nearly all default managers agree that communication, cooperation and a collective singleness of purpose is what is needed to improve efficiencies and lower costs in default management.

Field Service Companies have stepped to the plate to provide these institutions with a “one stop shop”; from initial delinquency to final disposition.? With vastly expanded contractor networks, national field service providers, with their specialized P&P personnel, have dramatically improved their ability to complete REO services in timely, consistent and quality manner. These expanded networks enable national property preservation service providers to comprehensively service the lenders’, servicers’, and investors’ properties from urban inner cities, to ultra-rural localities, and virtually everywhere in-between, all across the country;? form initial delinquency through final disposition.

This nationwide service capability is further enhanced by the improved quality control and reporting technologies that these national service providers have developed over the years. Providing repair and maintenance estimates, filing insurance claims (on damaged properties) and so on, are also streamlined in this process. Couple these factors with standardized flat fee pricing structures, greatly simplified bulk billing capabilities, and most importantly, the inherent, magnified accountability that a national service provider must have, and one can easily begin to recognize the myriad of measurable benefits for lenders, servicers and investors alike from this “cradle-to-grave” concept. Over the past several years, several leading P&P service providers came to the realization that overall field services and property preservation should not end with a successful foreclosure sale, but rather could (and should) be carried through all the way to settlement or the close of escrow on REO properties. In a perfect world, one vendor for pre- and post-sale services could be relied upon to ensure “cradle-to-grave” continuity in the preservation of each asset. The cradle to grave concept is designed to maximize efficiency of service, minimize administrative costs and eliminate costly duplication of work. To provide for more effective management of costs, a fixed price “cradle to grave” concept allows the mortgage servicer to more efficiently project costs over the lifecycle of a property. The Industry has realized a number of benefits from this pricing model including, but not limited to:

  • A fixed fee approach to managing and budgeting for initial and ongoing maintenance costs.
  • Improvement in efficiency that dramatically decrease the internal labor costs necessary to order, review and approve bids, and processing invoices.
  • Centralization of responsibility for all property services greatly enhancing communication with realtors, marketing officers, and other vendors.

The major benefit of this approach for mortgage loan servicing organizations is the ability to eliminate duplicative work and associated costs, improved reporting and tracking capabilities, and the acceleration of the entire default process, thereby increasing efficiencies and lowering expenditures.? By centralizing all P&P work, including REO-related services with a national P&P vendor, quality control is improved and efficiency in providing services is increased.? An additional benefit is the direct relationship and continuity of properties maintenance throughout the lifecycle of the foreclosed property.

Many mortgage loan servicing organizations have enthusiastically embraced this all-encompassing approach to property preservation, al?though not everyone in the industry has immediately welcomed the change with open arms.? For example, some real estate brokers, who have traditionally been called upon by REO specialists to provide field services as well as listing, selling, and helping to close sales on REO properties, are sometimes resistant to relinquish control over these services.?

An approach that allows work performed by national field service provider to continue in a seamless fashion throughout the entire life of a defaulted loan, can only serve to benefit America’s lenders, servicers, and investors. Implementing a consistent and properly channeled business process and service workflow from initial delinquency through final disposition will result in decreased property holding times, lower costs, and most importantly, higher recovery on aggregate portfolios of non-performing real estate assets.

Hurricane Relief: Update on Homeowner Aid after Katrina

Posted on by Safeguard

published in USFN Hurricane Article January e-Update

by Robert Klein, CEO
Safeguard Properties

The trio of hurricanes in 2005 brought devastation and despair to many residents of the Gulf Region. Non-insured and under-insured homeowners experienced a financial shortfall severely impacting their ability to rebuild both their homes and their lives. To assist with the rebuilding efforts, a number of federal, state, and local initiatives were created and funded to ensure that resources are available for those in need.?

In?Louisiana, ?The Road Home??program was designed to help residents get back into their homes as quickly as possible. Funded by the Department of Housing and Urban Development (HUD), this groundbreaking program represents the largest single housing recovery program in U.S. history. The program affords eligible homeowners up to $150,000 in compensation for their losses to get back into their homes. The?Louisiana Recovery Authority (LRA) is responsible for administering the funds earmarked for the program. LRA is utilizing an escrow system to distribute approved funds in a similar manner that loan servicers utilize in the handling of insurance loss-draft proceeds.?

In Mississippi, the ?Hurricane Katrina Homeowner?s Grant? program was designed to provide financial assistance to those homeowners outside the flood plain whose homeowners insurance did not cover structural flood damage. The?Mississippi Development Authority?(MDA) is responsible for administering the funds earmarked for the program, and it issues grants directly to the affected?homeowners.??

Over the course of recent months, the Mortgage Bankers Association has been diligently working with the LRA to ensure servicer and investor concerns are addressed. A number of investors have issued recent releases providing guidance regarding the programs and their approval to participate. Participation commences with the submission of the?Memorandum of Understanding, and participants are required to abide by all covenants, including the subordination of the mortgage holder?s lien position to the program.

For more information and to view the latest releases from HUD, the VA, and Fannie Mae, please click on the following links:?HUD ML 2006-29;?VA Circular 26-06-08;?Fannie Mae LL 06-06

Outsourcing Maximizes Resources

Posted on by Safeguard

Published in Aug?2006 Managing REO Magazine

By Robert Klein, CEO
Safeguard Properties

Management personnel continually struggle to efficiently deploy resources to accomplish organizational goals and objectives.?? In order to compete most efficiently in today?s business environment, many organizations are now utilizing third parties to outsource ?non? core business activities thereby allowing management to focus on the core activities that drive the growth and revenue of an organization.?

Outsourcing ?non? core business activities eliminates the necessity for investing in hiring, training, equipping, and providing space and benefits for new employees. It provides management the flexibility to focus on core operations and new service offerings that generate revenue. There are a number of benefits to outsourcing in the mortgage loan servicing industry that deserve careful consideration, specifically in the mortgage field services function that is the focus of this article.? Potential benefits include insulation from liability, efficiencies provided through the streamlining and customization of business processes, and the ability to outsource services through the entire lifecycle of a loan to a single source provider.

Avoiding Liability

Mortgage field service companies will typically assume the liability for incidents related to activities they perform.? When cleaning out debris for instance, proper handling and disposal of the mortgagor personal property can avoid potential costly litigation.??? Importantly,? the mortgage field services provider will also insulate their clients from liability incurred for the failure to adhere to rules and regulations of investors such as HUD, FHA,? and the VA. Reputable field service providers will insulate their clients from such liability saving the mortgagee the from such legal entanglements.?

When selecting a mortgage field services partner to outsource their field services function, the mortgage services company must take great care to select an organization with adequate insurance, extensive business process management capabilities, and comprehensive policies and procedures that provide adequate documentation and evidence to ensure adherence to applicable rules and regulations. Comprehensive supporting documentation that includes digital photographs and electronic field reports, adequately maintained in accordance with applicable records retention policies will ensure that risks are mitigated and liabilities minimized.

Streamlining and Customizing Processes

The mortgage industry as a whole is extremely process-oriented, making it among the most paperwork-intensive industries.? Even in today?s business environment where the use of paper is minimized through electronic content management applications, comprehensive file and business process management activities can be extensive. In order to ensure adherence to applicable rules and regulations, the potential field services outsourcing partner must demonstrate the ability to automate business activities to ensure the efficient and effective compliance with an organizations policies.? When selecting a field services partner, it is important to validate the potential partner?s ability and commitment to customize their processes to meet organizational needs. This includes:

  • Business process flexibility in accepting and processing orders
  • Efficiency of pricing, bid, and invoicing procedures
  • The level of automation provided to facilitate real time service updates and supporting documentation

Industry practice has traditionally allowed for Orders to be placed in bulk using spreadsheets or individually via email or uploaded through a secure web site.? All orders should be acknowledged within one business day.? To maximize efficiencies, the mortgage industry has seen a material increase in the automation of business processes between Field Servicer systems and Loan Servicer systems. This greatly improves the efficiency of activities by eliminating duplicate data entry and minimizing error rates inherent in manual processes.

Likewise, receiving, reviewing, and approving invoices can be automated and streamlined for the loan servicer when the field service outsourcer? has the flexibility to? customize its billing process to integrate? with the client?s accounts payable processes.? This reduces the asset managers? work load related to invoicing, allowing them to focus more on property care quality and marketing effectiveness.?

Expanding Services

The leading field service providers are increasingly working with their clients to expand the service offerings available to meet outsourcing needs when, where, and how required.? Examples include creative pricing structures and expanding responsibility to include servicing of the Real Estate Owned (REO) portfolio, Many times the field service provider can provide all the necessary services for a portfolio of properties more cost effectively that can be accomplished in house or through multiple service providers.

The industry has seen a marked increase in pre-established fixed fee pricing that allows for a one time fee to cover a flat-fee bundles of regular services.? These fixed fee prices can typically be negotiated based on quantity of order and/or the number of services contracted for.? Such a contractual arrangement allows the mortgagee to eliminate a repetitive and time consuming bidding process.? Exceptional cases can still call for a bid, as needed.? Opportunities exist to establish contracting formats that provide for this fixed fee? ?cradle to grave? package of services? from pre-sale to re-sale.

Many national mortgage lenders and servicers deal with thousands of properties in default.? Typically, they also manage an extensive Real Estate Owned (REO) portfolio as well. When outsourcing these activities to a third party, the field services partner is engaged early in the process to safeguard the value of the collateral before and after foreclosure until disposition. This includes maid services, cleaning, and maintaining the ?curb appeal? of the property for marketing and sale.?

As the mortgage services industry looks to the future, it is in their best interest to look closely at potential outsourcing relationships, either by evaluating the cost effectiveness of the services they currently perform in house, or by expanding the role of their current partners.? Management will do well to evaluate these potential outsourcing opportunities to ensure ongoing cost containment and revenue maximization.

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CEO

Alan Jaffa

Alan Jaffa is the Chief Executive Officer for Safeguard Properties, steering the company as the mortgage field services industry leader. He also serves on the board of advisors for SCG Partners, a middle-market private equity fund focused on diversifying and expanding Safeguard Properties’ business model into complimentary markets.

Alan joined Safeguard in 1995, learning the business from the ground up. He was promoted to Chief Operating Officer in 2002, and was named CEO in May 2010. His hands-on experience has given him unique insights as a leader to innovate, improve and strengthen Safeguard’s processes to assure that the company adheres to the highest standards of quality and customer service.

Under Alan’s leadership, Safeguard has grown significantly with strategies that have included new and expanded services, technology investments that deliver higher quality and greater efficiency to clients, and strategic acquisitions. He takes a team approach to process improvement, involving staff at all levels of the organization to address issues, brainstorm solutions, and identify new and better ways to serve clients.

In 2008, Alan was recognized by Crain’s Cleveland Business in its annual “40-Under-40” profile of young leaders. He also was named a NEO Ernst & Young Entrepreneur Of The Year® Award finalist in 2013.

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Esq., General Counsel and EVP

Linda Erkkila

Linda Erkkila is the General Counsel and Executive Vice President for Safeguard Properties, with oversight of legal, human resources, training, and compliance. Linda’s broad scope of oversight covers regulatory issues that impact Safeguard’s operations, risk mitigation, strategic planning, human resources and training initiatives, compliance, insurance, litigation and claims management, and counsel related to mergers, acquisition and joint ventures.

Linda assures that Safeguard’s strategic initiatives align with its resources, leverage opportunities across the company, and contemplate compliance mandates. She has practiced law for 25 years and her experience, both as outside and in-house counsel, covers a wide range of corporate matters, including regulatory disclosure, corporate governance compliance, risk assessment, compensation and benefits, litigation management, and mergers and acquisitions.

Linda earned her JD at Cleveland-Marshall College of Law. She holds a degree in economics from Miami University and an MBA. Linda was previously named as both a “Woman of Influence” by HousingWire and as a “Leading Lady” by MReport.

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COO

Michael Greenbaum

Michael Greenbaum is the Chief Operating Officer of Safeguard Properties, where he has played a pivotal role since joining the company in July 2010. Initially brought on as Vice President of REO, Mike’s exceptional leadership and strategic vision quickly propelled him to Vice President of Operations in 2013, and ultimately to COO in 2015. Over his 14-year tenure at Safeguard, Mike has been instrumental in driving change and fostering innovation within the Property Preservation sector, consistently delivering excellence and becoming a trusted partner to clients and investors.

A distinguished graduate of the United States Military Academy at West Point, Mike earned a degree in Quantitative Economics. Following his graduation, he served in the U.S. Army’s Ordnance Branch, where he specialized in supply chain management. Before his tenure at Safeguard, Mike honed his expertise by managing global supply chains for 13 years, leveraging his military and civilian experience to lead with precision and efficacy.

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CFO

Joe Iafigliola

Joe Iafigliola is the Chief Financial Officer for Safeguard Properties. Joe is responsible for the Control, Quality Assurance, Business Development, Marketing, Accounting, and Information Security departments. At the core of his responsibilities is the drive to ensure that Safeguard’s focus remains rooted in Customer Service = Resolution. Through his executive leadership role, he actively supports SGPNOW.com, an on-demand service geared towards real estate and property management professionals as well as individual home owners in need of inspection and property preservation services. Joe is also an integral force behind Compliance Connections, a branch of Safeguard Properties that allows code enforcement professionals to report violations at properties that can then be addressed by the Safeguard vendor network. Compliance Connections also researches and shares vacant property ordinance information with Safeguard clients.

Joe has an MBA from The Weatherhead School of Management at Case Western Reserve University, is a Certified Management Accountant (CMA), and holds a bachelor’s degree from The Ohio State University’s Honors Accounting program.

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Business Development

Carrie Tackett

Business Development Safeguard Properties