Safeguard was mentioned in an article on American Banker regarding REO properties.

A Side Effect of Foreclosure Wave: Real Estate on Books

American Banker? |? Wednesday, January 21, 2009

By Emily Flitter

As Washington continues to debate policy options for reducing foreclosures, banks and servicers are struggling to deal with the glut of homes they are taking over when homeowners cannot make their mortgage payments.

By some estimates, lenders now own 900,000 homes, and the Federal Deposit Insurance Corp. said “real estate owned” at insured institutions rose 21% from a quarter earlier and 134% from a year earlier, to $23 billion at Sept. 30.

Foreclosures now make up a huge chunk of the homes available for sale. The National Association of Realtors said 45% of sales involve foreclosed homes, compared with roughly 10% a year ago.

And lenders have yet to shift the bulk of their supply to the sale market. Rick Sharga, a spokesman for RealtyTrac Inc. said nearly 70% of the foreclosed homes in the firm’s database have not been listed for sale.

“There’s too many foreclosures right now for anybody — including us,” Mr. Sharga said. “The foreclosure problem has dragged the housing market down, which has led to an economic meltdown, and this has affected everybody. If the problem continues to worsen, none of us are going to be in business.”

Alan White, an assistant law professor at Valparaiso University, agreed that the pipeline is huge and “clogged at every step of the way.”

Observers say lenders are so preoccupied with other effects of the housing crisis that they are not focused on preparing homes for resale.

“Banks can’t and don’t have the time or willpower, and it’s hard fixing up homes when you’re managing them from a distance,” said Paul Miller, an analyst at Friedman, Billings, Ramsey & Co. Inc. “The system is not built to deal with this number of foreclosed properties. Even the people they’ve hired to deal don’t have the capacity.”

Potential buyers face a Catch-22 for REO properties, he said — an existing servicer will not perform the necessary repair work, and a new lender will not agree to pay for something that is as uncertain as a house in disrepair.

Ironically, according to Mr. Miller, given the size and complexity of banking operations today, the same bank could be working on both sides of a failing deal. “It could be B of A on both sides of the equation, and the complaints are coming from two different departments.”

Observers said that despite the extensive resources being spent on upkeep, the sheer volume of foreclosed homes is creating holes in property management. Borrowers forced to move have left behind houses in various states of disarray. Problems range from unwashed floors to holes in the wall where appliances once stood. In some neighborhoods, vandals have broken into unwatched houses to steal copper piping, and basements are flooded.

Also, homeless families have moved into abandoned homes, sometimes by design. News reports have described housing advocates breaking into foreclosed homes to let in squatters.

Kenneth Thomas, a Miami banking consultant, said that in some cases families who foreclosed homes from banks move in to discover someone else living there.

“In one case,” a new buyer “went to go inspect the property, met with a person living there, and the person living there had a bat,” Mr. Thomas said.

Others say institutions are being stingy in rehabilitating homes to attract buyers.

Dick Esposito, a Maryland developer who repairs and flips REO properties for Chevy Chase Bank, said it rarely approves work he deems necessary. In one instance, Mr. Esposito said, he argued for a $3,500 kitchen renovation to make a house saleable, but the bank’s strategy was to reduce the price of the home by $5,000 every month until it sold. (The bank did not respond to requests for comment.)

“When the basement floods, there’s mold. We rip out drywall, dry it out, spray it with mold retardant,” and the bank does not “want us to put the drywall back,” said Mr. Esposito. “They become unfinished basements.

Also, foreclosed homes in his area demand 24-hour surveillance, he said.

“I could see them putting a minimal amount of money in and…making more money,” Mr. Esposito said.

Lenders providing credit to buyers of foreclosed homes say banks that own the real estate are shirking their responsibility to make repairs in time for moving day.

Mark Savitt, the president of the National Association of Mortgage Brokers, said his members have encountered situations where servicers will not pay for repairs.

“If they really want to unload these properties, and I’m sure they do, what they need to do is move more quickly,” Mr. Savitt said. “When they get an offer, and if there are repairs, they need to work with real estate agents to facilitate that repair.”

Prof. White said foreclosures are eating up a lot of cash. “Right now the mortgage servicers have made a lot of advances. They’re paying legal fees, maintenance fees — they’re just unwilling to put another nickel into the house when they’re not sure if they’re going to get it back or not.”

Those defending the industry’s practices say servicers are not skimping on resources.

“A lot of banks get a bad rap,” said Alan Jaffa, the chief financial office of Safeguard Properties Inc., a Cleveland firm that lenders hire to manage foreclosed properties. “They’re spending hundreds of millions of dollars — if not billions — protecting homes.”

Ben Windust, the senior vice president of default and retention operations for Wells Fargo Home Mortgage, said REO resales get tricky when more than one firm is involved in any step in the process.

“If you’re servicing for others, like if you’re working on a short sale and the loan is with Fannie Mae or Freddie Mac, we have a certain amount of delegated authority to accept offers, and sometimes we don’t,” Mr. Windust said. “If there’s mortgage insurance, then you have to get approval from the mortgage insurance company. The approval process can sometimes delay a response.”

Federal efforts to respond to the crisis have made a dent in the supply. Housing advocacy groups and municipalities working to utilize the $4 billion of block grant money authorized by the Housing and Economic Recovery Act to help communities buy, rehabilitate, and flip foreclosed homes.

Several large banking companies also have undertaken voluntary modification programs. Those efforts may be mandated by Congress soon. The FDIC has been pushing a plan to use some of the Treasury Department’s $700 billion bailout to subsidize wide-scale modification efforts by servicers, and the Obama administration has said it supports the plan.

This month regulators unveiled guidelines instructing banks on how they could receive Community Reinvestment Act credit for preventing foreclosures through voluntary programs, reducing the blight of vacant homes on neighborhoods.

Robert Davis, the American Bankers Association’s executive vice president for government relations, called the guidelines “a very welcome recognition of activities that banks are already undertaking, that they should get CRA credit for.”

But not everyone says the institutions should be rewarded.

“We think it’s the responsibility of the banks to fix these loans, the bad loans that they made — they shouldn’t get extra credit for rectifying a predatory loan, for keeping the neighborhoods that they want to lend to intact,” said Alan Fisher, the executive director of the California Reinvestment Coalition.

Advocates touted other programs designed to keep homes occupied. For instance, Fannie, realizing that maintaining vacant homes poses challenges, is implementing allowing tenants in foreclosed properties to remain there and pay rent to the government-sponsored enterprise.

“Given that we’re trying to find a bottom” to the housing market, “that can’t really happen, given that you’ve got an excess level of supply,” Prof. White said. “We need to continue improving on ways of finding foreclosure alternatives, so if there’s any possibility that you’ve got a warm body in a house with any kind of cash flow, it’s worth working something out.”

An article in Managing REO magazine mentioned that Safeguard Properties was recognized as a Weatherhead 100 Centurion company.

Safeguard Properties Recognized

Cleveland, Ohio – December 4, 2008 – Safeguard Properties was recognized as a Weatherhead 100 Centurion Company at a ceremony held on December 2.

The Weatherhead 100 recognizes the best and fastest growing companies in Northeast Ohio. It was founded under the Weatherhead School of Management at Case Western Reserve University. Centurion companies are those with annual revenues over $100 million. This was the 12th year that Safeguard received this recognition.

Safeguard is the largest privately held mortgage field services company in the U.S. The company was founded in 1990 by Robert Klein and is based in Brooklyn Heights, Ohio.

Safeguard was featured in an ITN News report (Great Britain) on the foreclosure and overall economic crisis affectingareas in the United States such as Cleveland, Ohio.

To view the report, please click on the following video link: {mosviewer2 2 “ITN News at Ten – Safeguard Properties” “6907112785489275511” 1500 266}

An article in?DSnews.com mentioned that Safeguard Properties was recognized as a Weatherhead 100 Centurion company.

Safeguard Properties Recognized as Weatherhead 100 Centurion Company

Carrie Bay | 12.04.08

Safeguard Properties was recognized as a Weatherhead 100 Centurion Company at a ceremony held on December 2.

The Weatherhead 100 recognizes the best and fastest growing companies in Northeast Ohio. It was founded under the Weatherhead School of Management at Case Western Reserve University. Centurion companies are those with annual revenues over $100 million. This was the 12th year that Safeguard received this recognition.

Safeguard is the largest privately held mortgage field services company in the U.S. The company was founded in 1990 by Robert Klein and is based in Brooklyn Heights, Ohio.

A recent article in the San Diego Union Tribune talks about recent changes in Chula Vista’s property ordinances.

Chula Vista forces lenders to maintain foreclosures

By Emmet Pierce
UNION-TRIBUNE STAFF WRITER

October 12, 2008

Some lenders think there must have been a mistake when they see the hefty fines they have received for violating Chula Vista’s blight-prevention ordinance for foreclosed homes.

“I had one lender call and say, ‘I got a $13,000 bill and I want to know what you did for $13,000,’ ” said Doug Leeper, the city’s code-enforcement manager. “I said, ‘I didn’t do anything. We’re not property managers. We fined you because you didn’t do anything.’ ”

Over the past year, the ordinance written by Leeper has become a national model for communities overwhelmed by spikes in foreclosures, analysts say. Hit hard by the mortgage market meltdown, Chula Vista has taken a strong stance against lenders and loan servicers who allow abandoned houses to become neighborhood eyesores.

Under regulations enacted last October, the city makes lenders responsible for upkeep as soon as a notice of mortgage default has been filed on a vacant dwelling, even if ownership of the home hasn’t formally been returned to the lender.

The city is able to do so because the lender retains the right and responsibility to secure and repair vacant properties, Leeper said.

“That is the cutting-edge part of our ordinance,” he said.

Lenders have registered about 1,100 vacant homes in loan default or foreclosure with the city. Failure to comply with the blight ordinance can result in fines of up to $1,000 per day.

So far, the city has levied $850,000 in fines and penalties and collected a little more than $200,000. In addition, Chula Vista has brought in about $77,000 through vacant-home registration fees imposed by the ordinance. Uncollected fines become liens against foreclosed properties, payable at resale.

Notices of default launch the foreclosure process. Traditionally, lenders wait several months after a notice is filed before they take on maintenance responsibilities for vacant homes, Leeper said.

That lag often forces cities to address blight issues on their own, removing tall weeds, draining dirty swimming pools and securing open structures. Typically they seek reimbursement later, but Chula Vista has used its blight ordinance to shift that burden back to lenders.

“Lenders will respond when it costs them less to maintain the property than to ignore local agency requirements,” said Jolie Houston, a San Jose land-use attorney who has studied the issue for the California League of Cities.

Ordinances that address blight are common, but typically they don’t target lenders so directly, said Jim Brooks, director of the Community and Economic Development Committee for the National League of Cities.

Some critics say Chula Vista is playing rough with an industry that already is struggling to cope with billions of dollars in losses from failing subprime loans.

“That kind of measure will add additional costs to banks that have been hit really hard already and ultimately the cost will be transferred down to consumers and investors,” said Marc Carpenter, a San Diego real estate agent who specializes in foreclosures.

Such criticism hasn’t stopped other communities from following Chula Vista’s example. Leeper said more than 300 jurisdictions nationwide have contacted him to learn more about the ordinance over the past year. Although most are in California, inquiries have come from such distant cities as Boston, Milwaukee and Dallas.

“This is where a lot of cities are starting, with a Chula Vista-type ordinance,” Houston said. “The more vacant foreclosed homes you have, the more city council members feel compelled to do something. They can’t fix the lending problem, but they can try to prevent neighborhoods from becoming blighted.”

So far, no cities that have adopted such measures have been successfully challenged in court, Houston said. Stockton, which had the nation’s highest foreclosure rate in August, has modeled its anti-blight measure after Chula Vista’s. Coral Springs, a community in south Florida, recently did the same. Closer to home, Santee, Riverside County and Murrieta have followed the Chula Vista blueprint, tailoring it to their needs.

Wednesday, Escondido City Council members voted to tighten property-maintenance regulations to hold lenders more accountable.

Like Chula Vista, Los Angeles and San Jose require registration of abandoned homes, but only after code violations are reported, Leeper said. San Diego also tracks abandoned, foreclosed homes, said Tony Khalil, senior code-enforcement engineer. The program is less aggressive than Chula Vista’s.

“We don’t focus on trying to penalize or collect fines,” Khalil said. “We focus on returning homes to productive use.”

San Diego County, which oversees unincorporated areas, hasn’t experienced the same level of foreclosures as urban areas, but it’s examining Chula Vista’s measure to determine whether any of its elements would be useful, said Pam Elias, division chief of county code enforcement.

Although approaches to the blight problem vary, American cities have been forced to pay close attention to vacant homes as the mortgage meltdown has progressed. Some community activists have described concentrations of abandoned homes as “dead zones” that attract vandals and drain the vitality from neighborhoods.

One of the biggest challenges that cities face in dealing with such homes is determining who is legally responsible for them. That’s because lending institutions typically don’t hold onto loans. They are quickly sold to generate income to finance additional mortgages.

“We get this house,” Leeper said. “We pull the title documents. We say, ‘Look, it’s ABC Mortgage.’ We call them and they say, ‘Are you kidding, we sold that loan two months ago.’ ”

In that case, Leeper and his staff return to the title documents and send out notices to everyone whose name and address is listed. Sometimes the only way to find out who holds the mortgage on a home is to place a lien against the property. That way, the dwelling can’t be sold until the lien is paid.

During the recent housing boom, billions of dollars in home loans nationwide were bundled into securities and sold to Wall Street investors. When mortgage-backed securities were in demand, lenders lowered underwriting standards to keep home buyers in the market after real estate prices soared.

“We had people buying more house than they could afford with creative financing they didn’t understand,” Leeper said.

Within San Diego County, there were 1,979 foreclosures in August, a 1 percent decline from July, but a rise of nearly 140 percent over the previous year. The 91913 eastern Chula Vista ZIP code led the county in notices of default, with 106 filings. That area’s 94 foreclosures represented a 154 percent increase over the August 2007 figure.

Robert Klein, chief executive officer of Safeguard, a property-management firm that represents lenders nationwide, said he understands why cities are concerned about blight. Even so, Klein complains that the adoption of Chula Vista-style ordinances is complicating the lives of lenders and property managers, who now must adapt to different sets of rules.

“Every day we discover a new ordinance coming out somewhere,” Klein said.

Having to work with “a patchwork of local ordinances” will drive up the costs of lending, said Dustin Hobbs, spokesman for the California Association of Mortgage Bankers.

Hobbs said there is no need for California cities to adopt ordinances because they already have the authority to levy fines for housing blight under recently approved Senate Bill 1137.

Houston countered that unlike Chula Vista’s measure, the bill does nothing to require lenders to speed up the maintenance process.

Allan Mallach, a senior fellow with the Brookings Institution, said the Chula Vista measure is an important tool for cities fighting blight.

“This issue of holding lenders or creditors responsible from the point when the foreclosure begins rather than after they take title is tremendously important,” Mallach said.

A recent article in the New York Times talks about maintaining vacant properties in Long Island.

Vacant, With Much to Maintain

By MARCELLE S. FISCHLER
Bay Shore

PAUL CARLOZZI, a quality control inspector for Safeguard Properties, a national property preservation company, walked the perimeter of a one-story brick and frame house, valued at $300,000 but now in default and vacant.

Mr. Carlozzi noted that a contractor had been hired to clear 48 cubic yards of debris from the yard and mow the three-foot-high grass. He said the door locks had already been changed.

But then he noticed that two windows were open. That was “not a good sign.”

“Contractor!” he yelled, opening the front door with a master key, warning any trespassers of his presence. “Anybody in here?”

The house had no running water or electricity, and it reeked of mildew. But that hadn’t deterred a “squatter” from using “a makeshift bed set up in one of the rooms,” said Mr. Carlozzi, a 30-year-old former marine.

Vandals had already taken copper piping and the furnace, “so there is minimal left to steal,” he added.

But he was having another contractor dispatched anyway, to “secure the property” by boarding up windows and installing security doors.

Hired by banks and other lending institutions on the Island, home preservation companies are racing to keep increasing numbers of foreclosed properties from sharing the fate of the Bay Shore house.

Robert Klein, chief executive of Safeguard, said that in September his 25 local inspectors and contractors did 8,500 default inspections in Nassau and Suffolk Counties and filled 330 maintenance orders for cutting grass and making repairs. The numbers represent a sliver of the company’s nationwide business during that time: 250,000 maintenance orders and 750,000 inspections to verify occupancy.

“We are seeing an increase in damages to properties,” Mr. Klein said. “We try to do everything we can to lessen the impact” to the neighborhood.

According to the research firm PropertyShark.com, foreclosures on the Island reached a two-year high in the third quarter of this year. There were 716 new auctions scheduled – 37 percent more than the number recorded over the same period last year.

One in every 1,398 homes in Long Island is scheduled for auction. Nassau County has one in every 932 homes, while in Suffolk the number is 2,422. The glut is most visible in the boarded-up homes in areas like Brookhaven, which has had 113 foreclosures, and in Hempstead village, where there have been 60.

During a recent week Mr. Carlozzi, who is based in Cleveland, inspected 52 area homes in various stages of the foreclosure process.

Such inspections include everything from driving past dwellings whose owners are 45 days late on payments to verify occupancy, to winterizing pipes and making monthly stops at homes that are vacant but haven’t yet gone reached the stage of a foreclosure auction.

Mr. Carlozzi says he also meets with contractors to repair homes repossessed by banks, so they can be put back on the market.

Mr. Carlozzi said that some distressed homeowners “sweep the floors” when they leave, while others harbor resentment at the downturn in their lives and “may take out their aggression on the property.” Thus cabinetry, appliances and plumbing may have been ripped out before he arrives, he said – though it is sometimes hard to determine whether the damage was done by homeowners or vandals.

Sometimes, the abandoned homes are used for parties or prostitution, he added.

Just down the block from the house with the squatter, Mr. Carlozzi inspected a boarded-up new home with nearly 4,000 square feet of space and balconies on three levels. An outside spigot had been ripped out and baseboard heaters were missing.

Mark Palladini, an associate broker who specializes in foreclosed properties with Re/Max Best in West Babylon, is trying to sell that bank-owned property for $475,000. Its builder, caught between the crumbling real estate market and the mortgage crisis, lost the house and a similar one next door to the bank, he said.

According to Mr. Palladini, “Copper around here is the new gold.” Vandals chopping out copper pipes and wiring “leave $75,000 worth of damage at times.”

Once eager for a bargain, speculators have been reluctant to buy foreclosed houses at auction, said Bill Staniford, chief executive of PropertyShark. Nearly 90 percent of the 336 foreclosed Nassau County properties that went to auction went back to the bank that made the original loan, leaving a growing pool of vacant and unsold properties that the banks must try to resell and, in the meantime, pay preservation companies to maintain.

Safeguard contractors fix broken stairs and leaky roofs, replace stolen fixtures and do “maid service,” dusting out cobwebs, scrubbing toilets and countertops to get the homes “into marketable condition.” They also remove belongings that occupants have left behind.

“We want to put families back in these properties,” Mr. Carlozzi said. “We aren’t looking for investors; we want homeowners.”

Todd Yovino, the owner-broker of Island Advantage, takes care of hundreds of foreclosed properties that his Huntington-based realty company handles in the metropolitan area. His firm does weekly status reports on delinquencies and helps evicted occupants with relocation.

“We are picking up the Pennysavers” off the driveway, “so the neighbor next door who is paying his mortgage and has a vested interest doesn’t need to look at an eyesore,” he said.

Boarded-up homes are a “calling card for the vandals,” Mr. Yovino said, adding that instead, he tries to keep lawns neat, put blinds in the windows and leave lights on timers.

“As soon as you board them,” he said, “you are taking off 10 to 15 percent of the value.”

Mr. Carlozzi likened his job to that of “a mortician, waiting on the tragedy of another to make a living.”

At an abandoned high ranch in Bay Shore, a pool table had been left in the living room, a pile of clothes in the laundry room, a box of crayons and a computer on a desk. There were glasses on the kitchen counter and rolls of Christmas wrapping paper in the closet.

It seemed as if “it’s all been left in a hurry,” Mr. Carlozzi said.

An article in DSnews.com mentioned Safeguard Properties’ new door-hanger initiative.

Safeguard Properties Connects Homeowners with Counseling Agencies

Rachel Daniels | 10.06.08

Safeguard Properties, a privately held field services company located in Cleveland, Ohio, announced that they have added an additional contact number to the ?door hanger’ notices they place on the doors of delinquent borrowers on the 45th day of delinquency and continuing monthly through the delinquency and foreclosure process. While typically the door hanger would have the contact information of the mortgagee, Safeguard will now also print contact information for the Homeownership Preservation Foundation’s 888-995-HOPE Hotline, which according to Safeguard has expanded their call center operation to support the projected increase in calls and to facilitate service to both HOPE NOW Alliance and non HOPE NOW Alliance member servicers. Safeguard estimates that these ?door hanger? inspections are performed on over one million delinquent loans monthly

According to Safeguard, ?foreclosure prevention has a greater chance of success when it reaches borrowers in the earliest stages of delinquency. It has been proven that expanded outreach, education, and counseling efforts by reputable homeownership education and counseling organizations, and state /local government can get homeowners on track as early as possible.? Safeguard hopes that this additional, free service will encourage more homeowners to become proactive when their loans are becoming delinquent.