DSnews.com?has printed an article about Safeguard Properties donating $150,000 to Cuyahoga County’s Foreclosure Prevention Program.

Safeguard Properties Honored for $150K Foreclosure Prevention Donation
by Nicole Barbosa | 06.13.08

Troubled borrowers have started to turn toward the unlikely. Not a traditional homeownership counselor or lender/servicing representative?but a vendor.

Though Ohio ranked only ninth nationwide with a foreclosure rate of one in every 410 homes, the Buckeye State posted 12,295 total foreclosure filings?placing fifth, according to the latest data released today by RealtyTrac. But these stats don’t keep companies, like Cleveland-based Safeguard Properties, from going out to their way to offer up advice and foreclosure prevention to homeowners in need of hope and answers.

Robert Klein, CEO and founder of the company, is receiving recognition and praise from colleagues for his dedication to this endeavor.

Klein and his company were recognized Friday morning by County Treasurer Jim Rokakis for the $150,000 dollar grant ($50,000 over three years) they provided to the Cuyahoga County Foreclosure Prevention Program.

?We are grateful for Safeguard’s commitment to the region and for their understanding of the critical role foreclosure prevention plays in protecting our neighborhoods and communities,? said Rokakis. ?This grant comes at an important time for all of us and will go along way towards helping to protect at-risk homeowners from foreclosure.?

The program, also known as the ‘Don’t Borrow Trouble’ campaign, attempts to provide the necessary tools (pamphlets, ads, etc.) to homeowners to prevent victimization by predacious lenders. Since it began in 2006, the program has assisted more than 10,000 homeowners and had a direct hand in the prevention of more than 2,100 foreclosures.

‘Cuyahoga County is our home, where we live and raise families. As a business, we see first-hand the devastation that results from foreclosures. It’s in all our interests to work together to prevent [them], and Safeguard is honored to participate in this initiative,’ Klein said.

For more information about the Cuyahoga County Foreclosure Prevention Program and the services they provide, click here.

Housing Wire has printed an article about Safeguard Properties donating $150,000 to Cuyahoga County’s Foreclosure Prevention Program.

Field Services Provider Donates $150,000 to Cleveland Foreclosure Prevention
By PAUL JACKSON
Published: June 13, 2008?

It?s a move that may seem odd to some, but to CEO Robert Klein and his employees at Cleveland-based Safeguard Properties, it?s part of what they see as being a positive influence in the local community. On Friday, the nation?s largest privately-held mortgage field services company said that it had donated $150,000 to Cuyahoga County?s Foreclosure Prevention Program.

Cuyahoga County, home to one of the nation?s highest foreclosure rates, includes Cleveland. The program, known as “Don?t Borrow Trouble,” is one of numerous local campaigns backed by Freddie Mac, among other large mortgage finance companies.

Safeguard, which primarily manages distressed real estate for its banking and finance clients nationwide, may seem to be an odd supporter of foreclosure prevention efforts — after all, the foreclosure surge is a huge source of revenue for the firm. But that?s not how the company sees it, based on Housing Wire?s previous discussions with Diane Roman Fusco, a Safeguard Properties spokesperson.

Fusco has said that the company sees itself ultimately in the business of managing real estate for its clients; that includes foreclosed properties, but property management need not be a specialty limited to that particular line of work, she said.

Beyond that, companies like Klein?s can be a positive source of support for housing in local communities, despite foreclosures, by ensuring that properties are properly managed and maintained. Ask anyone who has worked in servicing or lived in a neighborhood with high foreclosure activity: it?s most often the properties that are in disrepair and poorly managed that end up becoming problematic.

Safeguard?s donation was recognized in a special reception Friday, attended by Cuyahoga County Treasurer Jim Rokakis, program staff, representatives of non-profit counseling agencies and area business leaders.

“This grant comes at an important time for all of us and will go a long way towards helping to protect at-risk homeowners from foreclosure,” said Rokakis.

Since its inception, the foreclosure prevention program, in partnership with United Way?s First Call for Help hotline, has assisted nearly 10,000 homeowners and directly prevented over 2,100 foreclosures.

“Cuyahoga County is our home, where we live and raise families,” said Safeguard CEO Robert Klein. “As a business, we see first-hand the devastation that results from foreclosures — to families, neighborhoods and communities here and across the country.

“It?s in all of our interests to work together to prevent home foreclosures, and Safeguard is honored to participate in this initiative.”

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.

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.

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.

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.

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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