Safeguard is mentioned in a Time Magazine photo essay about the tough economic times in Cleveland. The subject in two of the photos is Paul Carlozzi, Safeguard’s Field Services and QC Supervisor.
Safeguard recognized for Best Practices in Data Storage Management
In an article in the Cleveland Plain Dealer, it is noted that Safeguard was recognized for Best Practices in Data Storage Management at the Infrastructure Management World meeting in Washington, D.C.
Robert Klein named E&Y Entrepreneur of the Year Finalist
An article posted to DSnews.com noted that Robert Klein, CEO of Safeguard Properties, has been named as a finalst for the?2008 Ernst & Young Entrepreneur of the Year award.
Robert Klein named Ernst & Young Entrepreneur of the Year Finalist
Robert Klein, CEO of Safeguard Properties, a privately held field services company, was among 27 other Northeast Ohio entrepreneurs honored as finalists for the 2008 Ernst & Young Entrepreneur of the Year Award.
Today Safeguard, which Klein founded in 1990, is responsible for nearly 700,000 work orders monthly on defaulted and foreclosed properties.
Mortgage Banking “An Outbreak of Ordinances”
Robert Klein, CEO of Safeguard Properties, contributed an article to the August issue of Mortgage Banking magazine regarding the increasing number of vacant properties and the needs of local government to address the challenges caused by the changing housing market.
An Outbreak of Ordinances
By Robert Klein
As the volume of foreclosures increases across the country, so do the numbers of vacant properties. Vacancies aren’t just a problem in major cities; they’re a growing problem in suburban and rural communities as well.
Particularly in urban areas, vacant properties invite criminal activity, reduce surrounding property values, create safety hazards, deteriorate neighborhoods and stress the budgets of already-cash-strapped municipalities.
In 2005, before the current foreclosure crisis hit its stride, the National Vacant Properties Campaign (NVPC), Washington, D.C., reported more than 25,000 vacant properties and 11,000 abandoned properties in the city of Cleveland; 27,000 abandoned houses and 32,000 vacant lots in Philadelphia; and 42,000 vacant houses and 17,000 vacant lots in Baltimore.
Today, in declining metropolitan markets, vacant properties comprise between 5 percent and 10 percent of a city’s housing stock, and in many cities that percentage is even higher.
NVPC reported in 2005 that the abandoned property rate in St. Louis was 17 percent-?one of the highest in the country. In the previous five years, the city had spent more than $15 million, or about $100 per household, to demolish vacant and abandoned properties.
The problem, and the cost, will only grow as foreclosures continue to increase. According to The Wall Street Journal, at the end of first-quarter 2008, foreclosures nationally were up nearly 29 percent over year-end 2007, and 140 percent over 2006.
Those of us in the mortgage services and field services industries don’t have to refer to statistics to understand the scope of the problem. We have first-hand knowledge of the very real challenges of maintaining vacant properties and keeping them safe and secure.
As an industry, we’ve seen property portfolios grow in communities where we’d expect them to, and even in communities where we wouldn’t have expected it. We’ve seen lower sale prices and properties remaining in inventory for longer periods.
We’ve seen more severe damage to properties than ever before — not only by vandals but also by desperate and frustrated homeowners. And we’ve experienced the criminal activities that occur in and around vacant properties — even those that are regularly inspected and maintained.
Because of what we’ve experienced, we can empathize with cities and understand their need to enact new vacant-property ordinances or strengthen those already on the books as they look to protect their communities from the ravages of blight.
Also because of what we’ve experienced in the field, as an industry we have much to offer cities across the country as they consider and enact vacant-property ordinances.
The servicing industry has experienced first-hand the challenges of complying with many city ordinances that were developed with the best of intentions, but that pose significant challenges to mortgage servicers and field servicers as we attempt to comply with them.
Many ordinances are vague or confusing; in certain instances they may conflict with other laws and regulations, and some actually have the potential to create consequences that are worse than the problem they are attempting to solve. As more ordinances take effect across the country, the challenges will continue to grow.
To address these challenges, mortgage servicers and field servicers have formed a National Vacant Property Registration Committee, comprised of approximately 20 individuals, under the umbrella of the Mortgage Bankers Association (MBA), to reach out to cities and offer our help, support and expertise.
In early July, the committee initiated weekly calls and invited interested industry representatives to offer their views and ask questions about ordinances under consideration and discuss specific issues with proposed or already enacted ordinances.
Among the municipalities whose ordinances are being discussed are: Chicago; Fairfax County, Virginia; City of Riverside, California; Riverside County, California; Dallas; New York City; St. Paul, Minnesota; and Boston; as well as a statewide ordinance in Rhode Island. Ultimately, the committee is preparing to create a model ordinance that would combine the best practices from ordinances around the country and offer it as a starting point for cities to consider as they enact their own legislation.
In creating this model ordinance, the committee recognizes that cities are free to enact whatever ordinances and laws serve the best interests of their respective communities. At the same time, by reaching out and offering the value of our industry’s experience and perspective, we hope to demonstrate the benefit of collaboration to create more uniformity in ordinances, and create ordinances that serve the mutual interests of municipalities and mortgage servicers.
Efforts to date
As a starting point, a listing of all known vacant-property registration ordinances was compiled that includes the name of the municipality, date of enactment and a link to the complete ordinance. That list is updated as new ordinances are identified, and is available at www.safeguardproperties.com/pub/vacant_registration.pdf. At press time, the list includes approximately 47 cities in 18 states, including 12 cities in California; seven in Massachusetts; four in Ohio; three each in New York, Michigan and Delaware; and two each in Illinois, Pennsylvania and Minnesota. Key points of each ordinance are summarized on the listing.
Additionally, industry calls have been held to discuss ordinances being proposed in specific cities. The purpose of these calls was to gather input and discuss solutions that could be offered by the industry as alternatives to ordinance provisions that were viewed as challenging.
As more ordinances are considered across the country, it is essential to have the highest level of participation possible from the industry. The committee will be enlisting the support of industry representatives to write letters and attend public meetings where ordinances are being discussed. Especially in larger cities, it is important to get involved, as ordinances enacted in those cities often become models for other cities to follow.
On a broader scale, committee members have begun raising awareness in forums where municipal leaders gather, describing the challenges the industry faces in complying with ordinances and offering the industry’s support and collaboration. Among those forums was the June gathering of the U.S. Conference of Mayors, where representatives from MBA and other industry representatives had the opportunity to speak on the subject of vacant-property ordinances.
Ordinance issues identified
The goal behind all of the committee’s efforts has been to identify key provisions that raise concerns and develop consensus on a set of recommendations to address those concerns. Some central issues for servicers include the following:
Uniformity in ordinances
When cities enact ordinances, they usually do not consider that national servicers must amend their procedures for each city where they have properties — potentially leading to compliance with hundreds and even thousands of different ordinances. By creating a model ordinance as a guide for cities to consider, the industry hopes municipalities will adopt more uniform ordinances across the country.
Distinguising between pre-sale and post-sale registration
Servicers are concerned about ownership liability and “mortgagee in possession” implications of pre-sale registration. It is important to help municipalities understand the distinction between the rights of servicers pre-sale and post-sale.
For example, some ordinances require registration as soon as seven days after foreclosure initiation. This provision could include occupied properties, because foreclosure proceedings often begin well in advance of property abandonment. Servicers have no control of occupied properties, and even when properties are unoccupied, servicer rights are limited prior to sale.
The industry recognizes the advantage of pre-sale registration so the municipality has a point of contact to address violations and safety post-sale registration, because servicers are recognized at that point as full-fledged owners. Because servicers are not seeking to retain properties in their inventories, the recommendation is to provide a 60-day window for registration after taking title or possession.
Pre-sale ordinance requirements
In pre-sale, servicers only have the right to gain access to the property to protect their collateral interests. Ordinances with requirements that go beyond the preservation and protection stipulations may raise potential conflicts with other laws and regulations. Some examples include provisions that call for the removal of personal property from the interior and exterior of properties, and those that require rekeying of all exits to deny access to homes. In pre-sale, lock changes can only be done to give servicers access to protect their collateral interests — not to deny access to the homeowner. Homeowners have the legal right to access and control the property.
Post-sale ordinance requirements
In general, industry representatives have no issue with post-sale registration, because servicers are recognized at that point as full-fledged owners. Because servicers are not seeking to retain properties in their inventories, the recommendation is to provide a 60-day window for registration after taking title or possession.
Defining vacancy status
Vacancy status can mean different things in different cities. Servicers would like municipalities to clarify and define the term “pre-sale,” differentiating between “vacant and maintained” and “vacant and abandoned.” The industry also supports separate registration requirements for pre-sale and post-sale properties.
Local contact requirements
Ordinances that require that a maintenance contact be located within a specific distance from the property are challenging for servicers that utilize national field service companies that have a central national point of contact. Ordinances that require a local contact may actually add a step and delay the process, because the local contact must initiate contact with the national servicer, who in turn contacts the national field service provider.
Respecting that the intent of this provision is to ensure that responsible parties address problems quickly, the industry is proposing that municipalities identify time frames in which to address safety and maintenance issues. The industry does not have the same concern with city ordinances requiring a local contact for the purpose of serving legal notice.
Registration fees
Registration fees vary significantly from city to city, ranging from a one-time fee of $35 to annual fees of hundreds of dollars. Industry representatives raised the question of whether fees are reimbursable by the Department of Housing and Urban Development (HUD) and other investors, and whether they can be added to the unpaid principal balance (UPB) if the mortgage becomes current. The committee is requesting investor guidance on this issue, and will share that with the industry when it is available.
Penalties
The penalty provisions in some ordinances were considered to be confusing and potentially costly, as failure to comply could result in fines of hundreds of dollars per month per property. Ordinances are unclear as to whether a penalty could be imposed at each occurrence of a violation or upon each visit by an inspector, which could result in significant fines.
In many instances, ordinances include general statements requiring that properties be maintained to applicable building codes and local regulations. These statements are considered to be overly broad. Particularly in cases where a servicer intends to sell a real estate-owned (REO) property “as is,” these provisions may require that the property be brought up to code beyond ensuring the safety and security of the property and its surroundings — such as electrical upgrades, cosmetic repairs and other costly items.
Deregistration of properties
Deregistration of properties could become cumbersome and confusing, because many ordinances do not define a specific deregistration process. Servicers are concerned that deregistration might require inspections to establish proof of occupancy, which would be time-consuming and costly. Industry representatives also suggested that cities define a process for servicers to deregister a property after a loan is sold or reconveyed to the investor or insurer, and the servicer is no longer responsible.
Securing of windows and doors
Because boarded-up homes are unattractive, some cities are considering alternatives to boarding. In situations where metal products are being considered, industry participants raised concerns about vandalism by metal thieves, leaving the property even more vulnerable to further damage and criminal activity. Metal also is more costly. The industry believes that the current industry practice of “bolt-boarding” is the most effective method of keeping a property secure from vandalism. Bolt-boarding involves securing a window or doorway with a 10-inch bolt placed through the center of a board, with a 2×4-foot interior bar holding it in place. Bolt-boarding also does not damage window and door frames.
Signage requirements
Certain ordinances require that properties have a sign visible from the street that displays a name, address and 24-hour contact number. The concern is that this type of sign will call more attention to a vacant property, as it advertises that it is unoccupied, and actually could invite vandalism. Committee participants also questioned how this provision would be enforced in multi-unit structures, within gated communities and on properties that are part of a homeowners or condominium association, as there may be signage restrictions.
Lighting requirements
As with signage, industry representatives expressed concern that lighting requirements also advertise that a property is vacant. Lighting also is expensive to install, and the light fixtures themselves could be targeted by thieves.
Reaching consensus
It is evident that mortgage servicers and municipalities share a common goal — compliance with vacant-property ordinances. Municipalities faced with the growing burden of vacant and abandoned properties want to ensure that the parties responsible will maintain them so they don’t deteriorate, further reduce property values, invite crime and contribute to urban blight. Servicers also want the properties in their portfolios to comply with city ordinances.
The most effective way to achieve that consensus is through outreach and by demonstrating to cities that mortgage servicers and their field servicers are committed and credible partners in efforts to address issues commonly associated with vacant and abandoned properties.
In discussions with municipalities, one of the biggest frustrations they express is their inability to reach a contact when code violations and other issues arise with vacant properties. Too often, the information they have is either outdated or lists a general contact; as a result, code-violation notices wind up in the wrong department or wrong city, and the violations remain unresolved.
When city officials learn about the Property Preservation Resource Center on the MBA Web site (www.mortgagebankers.org/propertypreservation), which lists the property preservation contacts across the country for most mortgage servicers, they appreciate it.
In fact, most mortgage servicers recognize that one of the important advantages of having vacant-property registration ordinances is that more cities will have access to accurate and updated contact information so that property issues can be brought to everyone’s attention and addressed before further damages can occur.
By working together as an industry to unify our voice, reaching out in a spirit of cooperation with municipalities across the country and keeping the channels of communication open, everybody wins.
Managing REO “Initiatives to Combat Vacant Blight”
Robert Klein, CEO of Safeguard Properties, was recently interviewed by Managing REO Magazine regarding the initiatives of property preservation companies to lower the impact of vacant blight.
Initiatives to Combat Vacant Blight
Field service companies and property preservation teams are making a difference in local communities by forming new initiatives to care for vacant real estate owned assets.
By Jennifer Harmon
The industry is dealing with increasing amounts of vacant REO properties. As their values drop, mortgage companies are being hurt as much as the next-door neighbors.
Robert Klein, the founder and CEO of Safeguard Properties, believes lenders today are focused on doing a better job on the basics to maintain a property.
Beginning in September, Safeguard will launch its “Good Neighbor” door hanger contact procedure where at the initial secure of a vacant property, the company will leave door hangers at neighboring properties with an 800 number to contact the company 24/7 if they notice any questionable activity or maintenance issues that need attention.
This approach, which comes at no cost to clients, has received enthusiastic endorsement from code enforcement and city officials, says Mr. Klein. The privately held field service company, located in Cleveland now has over 500 employees nationwide.
“It’s very positive when you make contact,” he says. “The neighbor knows someone is paying attention to the home , to this vacant property. They know it is being maintained on a regular basis. It’s not just in limbo and no one is paying attention to it.”
It is critical to understand these properties. The industry spent well over $1 billion last year to secure and maintain safety and health issues of these homes, according to Mr. Klein. “I think we have a great responsibility. Vacant properties impact me and where I live. As an agency, I think it’s something we should be doing. We can’t solve the entire housing problem, but in our little world, we do what we can. We make the best out of a bad situation.”
Safeguard is focused on proactively partnering with cities and municipalities in dealing with issues that lead to vacant blight. Servicers and local govemments are partners in fighting blight, maintaining safe neighborhoods and ensuring properties are maintained.
Mr. Klein says the correlation between vacant properties and criminal activity is also well documented in communities nationwide.”As foreclosures and vacancies mount, we have seen a material increase in the number of copper pipe thefts, arsons and related crimes at these vacant properties. This ripple effect drastically reduces the servicer’s collateral in their assets and wreaks havoc on the communities where the properties exist.”
During extensive communication with code enforcement officials around the country, Safeguard found that it is common practice that all complaints regardless of type (tall grass, theft, vandalism, etc.) must be acted on appropriately to resolution. Typically, the city will issue a citation, complete the required maintenance, declare the property a nuisance and/or place the property on the local fast track for demolition.
“We’ve been in touch with code enforcement officials for the past five years,”he says.”The biggest concern is that they can’t handle the calls coming in from the neighbors to respond to these complaints. It puts the burden on the city to send someone out.”
A lot of times the neighbor does not know who to contact at the lender or servicer they have an issue with a property. “We work with the cities. The MBA (Mortgage Bankers Association) has created point of contact on their web site with code enforcement to help resolve these issues.”
The company is supported by a nationwide network of subcontractors able to perform any requested superintendence, preservation and maintenance functions. With this door hanger initiative, it takes the burden off of the city officials to get to these complaints.
Vacant blights are a national issue. Mr. Klein says neighbors are the best eyes and ears to detect problems.Sometimes after a company like Safeguard does an inspection of a vacant REO, the day after the company leaves, something terrible can happen. “These programs add more security to the property to make sure it is better maintained.”
The biggest goal is to make sure the property is not an eyesore. Safeguard makes sure the grass is cut, that there are no broken windows and if there is a leak inside the home, the company addresses those types of problems.
Safeguard now does the maid service. After the mortgage company has taken title and the property is vacant, Safeguard goes out and cleans the property and removes the cobwebs.
“You have no idea what we find in some of these properties. We will wash the counters down, clean the fridge, put in air fresheners so it doesn’t smell like an REO,” says Mr. Klein.
“The lender wants to sell it as soon as possible to a homeowner who will live in the property. You want to make it as attractive as possible. But also sometimes it doesn’t make sense to make repairs. You have to make it look and smell good. We try to do the best we can. We do as much as we can so the neighbors don’t have a run down home with 50 tires in the front yard.”
Properties are becoming more seriously damaged as well. Some homeowners in foreclosure are so frustrated they will do serious damage to the property. They take out appliances, put holes in the walls and holes in the floor. “There is no rhyme or reason. They are taking their frustration out on the system or the process. We are seeing that more and more.”
By the time the mortgage company gets a hold of one of these properties, it is problematic. Safeguard will hire different contractors to do different repairs such as re-roof a home. In today’s market the industry is seeing an increase in the amount of repairs being done to vacant REOs.
“The goal of the mortgage company is to sell it as quickly as possible. Every day they hold on to it is costing them money, in addition to the foreclosure process. It’s a bigger financial loss. We want to make the house as inviting and attractive to the possible homeowner. This depends on the value of the property and how much the lender can get. The things you do to a $500,000 home are different than a home that is $30,000.”
Even for a home that is around $250,000, lenders are doing more for repairs. The objective is to get the highest return because the lender has already lost money. “It’s worth it to put in $10,000 to a home if you can get additional value on the home,” he says.
“Regardless of whether the repair is done or not,there is a heightened awareness to make sure the property compares with the neighborhood.”
Years ago, REOs competed against other REO properties, Mr. Klein recalls. “In today’s environment that is no longer the case. REO are competing with the homeowner trying to sell their property. You have to compete. If the neighbor has a nice front lawn with grass trim, you have to do the same thing. II’s a business decision.”
The bottom line is that vacant properties should conform to the rest of the neighborhood. In addressing the blight issue, it will take different means for different areas of the county, he said.
Long Island Business News “Vandals Move In”
The Long Island Business News ran an article in which Robert Klein, CEO of Safeguard Properties, was quoted.
Vandals move in
By Michael H. Samuels
Friday, August 8, 2008
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Property preservation companies on Long Island and nationwide are so overwhelmed by the high number of foreclosures that an increased number of abandoned homes are falling victim to vandalism, burglaries and raucous spring break parties that cause tens of thousands of dollars in damage.
“Sometimes, initially, when we go out there the first time, we are finding that these homes have already been vandalized,” said Robert Klein, chief executive of Safeguard Properties, a national property preservation firm. “We are taking a very, very active approach. But with the volume of foreclosures, we need to stay on top of it.”
He said mortgage lending and property preservation firms saw the increase coming and hired additional contractors to inspect and maintain homes.
Banks and other mortgage lenders hire firms such as Safeguard to inspect and maintain homes after they reach foreclosure, said Tom Kelly, a spokesman for JPMorgan Chase and Co.
Kelly added that banks do not want homeowners to foreclose and would prefer to help owners keep or sell their homes. The preservation companies, Kelly said, protect the value of the property while it?s vacant.
But some homes fall prey.
Georgia Westcott, a Babylon-based Realtor, said a spring break party — the empty beer bottles were a dead giveaway — damaged a long-vacant West Babylon home. The wreckage, estimated at $20,000, included damaged sheetrock.
It was obvious the house was chosen because it had been left empty for a long time, she added.
“There was obviously malicious damage,” she said. “In the case of these homes, no one is going in to fix it. That makes it harder to sell and it just sits in the neighborhood.”
She said at many homes, break-ins lead to ruined heating systems, making the property nearly impossible to sell.
Most lenders won?t approve a loan on a home without heat, she said.
Property preservation firms are supposed to prevent the break-ins. Typical maintenance performed by such companies includes boarding up broken windows, placing a tarp on leaky roofs, changing the locks and mowing the lawn twice a month, Klein said.
Safeguard, with 6,000 contractors and 500 employees nationwide, performs 800,000 inspections and work orders on a monthly basis.
He estimated that the lending services industry spent more than $1 billion since the beginning of 2007 securing and maintaining foreclosed homes.
But Realtors on Long Island said not enough is being done.
Instead, they are finding squatters in some homes, copper wiring missing, granite countertops removed and heating systems destroyed.
It?s especially a problem in Suffolk County, which boasts the highest number of foreclosed homes in the state. Nassau County is No. 2.
Recent numbers show that there are more than 8,055 subprime loans in foreclosure in Suffolk, and more than 4,881 in Nassau.
Estimates are that as a result of the foreclosures, Suffolk?s property values could decrease by between $1.2 billion to $2.9 billion, said Suffolk County Legis. Wayne Horsley, D-Lindenhurst.
In addition, property values of homes within an eighth of a mile of a foreclosed home typically dip between 0.9 and 1.136 percent, he said.
As a result, real estate agents here are buddying up, afraid to enter foreclosed homes alone after a number of them found homes burglarized or damaged.
“We are seeing whole communities near the state of foreclosure,” Horsley said. “These houses are boarded up. Banks have walked away from them. The former owners have walked away from them. Grass is growing over 3 feet tall. (Agents) are walking into a situation that may be very dangerous.”
Fox News Denver “The Dirty Job Surrounding Foreclosure Fixups”
Denver TV Station Fox 31 recently ran a story about abandoned properties, and the efforts of field service companies like Safeguard Properties to return them to productive use.?
Chicago Tribune “New laws Sprout as Homes Sit”
Robert Klein, CEO of Safeguard Properties, was quoted in a Chicago Tribune article about the difficulties in enforcing local ordinances with foreclosed properties.
New laws sprout as homes sit
But existing rules on vacancies often unenforced
By Mary Ellen Podmolik | Chicago Tribune reporter
August 24, 2008
Cece Edwards and her Chatham neighbors pride themselves on caring for their homes, but their block just doesn’t look like it once did.
Three residences are abandoned. Neighbors take turns picking up garbage and mowing the front yards, but they feel uneasy about the unsecured doors and fence-high weeds behind the buildings.
“You come out every day and you see this monstrosity thing going on, and you’re compelled to do something,” Edwards said. “The rest of the block is beautiful. It’s so sad. You’ve got really huge mortgage companies that own title to these properties and aren’t cleaning them up.”
Now communities large and small around the country, including Chicago, are passing laws designed to get tough with property owners. The ordinances look good on paper, but can they be enforced?
Consider this: Chicago already had an ordinance requiring owners of vacant property to register them with the city for $100 a year. The city’s building department estimates there are 10,000 vacant residential buildings in Chicago and only 1,500 are registered. City officials say that’s because the ordinance wasn’t heartily enforced.
In early November Chicago will have an even stricter law on its books. It calls for vacant property owners to register and pay $250 every six months. Higher fees will be assessed for code violations.
Enforcement also calls for what could be dramatic and visible changes in how vacant houses are secured.
For example, doors and windows can be boarded up with plywood only for the first six months of vacancy. After that owners must replace plywood with expensive steel panels or install windows and doors and a burglar alarm?a difficult endeavor where the power has been shut off. A large sign also must be posted identifying the owner and the person or company responsible for the property’s condition.
“Many of these buildings have been sitting vacant and unattended for five, six, 10 years,” said Richard Monocchio, acting commissioner of the city’s department of buildings. “It was time for the city to push these investors, these absentee landlords and in many cases, banks, to not just sit and wait for the market but to do something positive with these buildings so they wouldn’t have a [debilitating] effect on the neighbors.”
Monocchio hopes that the registration fees and fines will spur banks and other mortgage lenders to try to avoid foreclosures. “We hope one of the offshoots of this ordinance is a greater incentive on the part of the banking community to work with people that are in the house.”
Two months before it takes effect, the law already has naysayers.
“When you put a sign in front of your house, that’s the one they target to break in,” said Daryl Russell, a broker associate at Williamson Realty in South Holland. “That’s an open invitation that this is the one that is vacant.”
Russell said he tries to inspect his South Side foreclosure listings weekly for squatters. Break-ins by vandals and thieves also are common. At times, he said he’s had to wait for as long as 45 days to get reimbursed by property owners for thousands of dollars spent resecuring buildings.
“[The city] is missing the bigger problem,” Russell said. “How do we keep the people from going into properties? How do we keep people from losing the properties?”
Others question the wisdom of requiring steel doors.
“They’ll start stealing those doors. Right now they’re stealing all metal from those properties,” said Remi Gorys, president of A City Suburban Service Inc., which has been securing buildings for 15 years.
Flood of foreclosures
Chicago also will no longer grant work permits involving vacant buildings unless they are registered. And to gear up for the new law, residents will be reminded at aldermanic and block club meetings to call 311 to anonymously report vacant, unattended buildings.
South suburban Oak Forest passed a law in late July requiring owners to pay $200 to register vacant buildings. Neighbors had been cutting lawns at vacant homes, but with 78 foreclosed homes, Oak Forest has hired a firm to mow grass. The city is draining swimming pools that could pose safety hazards.
More such laws are expected around the Chicago area as the housing crisis deepens. Foreclosures in Chicago in July rose by 84 percent over their level in the same month two years ago. In the 60611 ZIP code on the city’s Near North side, for instance, the number of foreclosures filed has quadrupled, to 25 in July from 6 in the same month two years ago. During the same time frame, foreclosures in the 60659 ZIP code, which covers North Park and West Ridge, climbed 489 percent, to 53 from 9, according to data from RealtyTrac.
As reported Thursday, the Woodstock Institute, a Chicago-based non-profit that promotes community reinvestment, said in a report that the number of foreclosed properties going to auction in the five-county Chicago area climbed 98 percent between 2006 and 2007, to 13,727, and that it believes the trend is continuing this year. The finding is significant because it means many properties are ending up back with lenders rather than sold to buyers or investors who theoretically would be motivated to repair and maintain them.
Who’s the owner?
While on calls, Chicago’s 190 building inspectors will be expected to report addresses of vacant buildings they find so that the city can run title searches.
But determining ownership is not easy. Registration ordinances recently have recently been passed in communities like Temecula, Calif.; Methuen, Mass.; and Lee’s Summit, Mo., to name a few.
Lee’s Summit estimates the number of vacant homes in the community of 93,000 people has swelled to 300, but with the registry it hopes to determine a real number. “The biggest problem is you don’t know who to call,” said Mark Dunning, the city’s director of code administration. “You can make about 10 phone calls and not get anywhere.”
Real estate agents who work with banks to try to sell foreclosed properties worry that they will become targets of government regulations. For instance, Atlanta city inspectors, weary of the condition of foreclosed homes, have begun ticketing listing agents for code violations.
Registration enforcement has been slow around the country. In the first two months after registration rules went into effect this spring in Lake Elsinore, Calif., fewer than 60 of the estimated 1,000 foreclosed properties had been registered.
Mortgage bankers and firms hired to maintain vacant homes also are frustrated by the disparity in rules. For the past three months, Safeguard Properties, a large field services firm that works extensively in Chicago, has conducted weekly teleconferences with 70 to 80 mortgage servicing companies to update them on new laws.
“Every single day we get reports from different localities,” said Robert Klein, chief executive of Brooklyn Heights, Ohio-based Safeguard. “I’ve got ordinances from localities that I can’t even pronounce their names. There’s no way in the world that this industry can physically deal with 5,000 different ordinances, and each of them has their different caveats in them.”
Wall Street Journal “Vacant-Property Fees Add to Mortgage Firms’ Woes”
Robert Klein was quoted in a Wall Street Journal article regarding vacant property fees imposed by local governments.
Vacant-Property Fees Add to Mortgage Firms’ Woes
By RUTH SIMON
As home foreclosures continue to rise, a growing number of local governments are imposing stiff fees on mortgage companies responsible for the vacant properties.
Local officials say the levies are intended to offset the cost of maintaining and policing abandoned homes and to keep these properties from becoming blights on neighborhoods. The tougher rules also are adding to the financial burden on mortgage companies grappling with a surge in foreclosures, which some economists estimate may reach three million by the end of this year. And the new rules may raise costs and lower returns for investors who hold bonds backed by pools of mortgages.
“These ordinances are popping up every single day,” said Robert Klein, chief executive of Safeguard Properties in Brooklyn Heights, Ohio, which maintains vacant homes for mortgage companies nationwide. Mr. Klein said his office is tracking more than 60 local ordinances that deal with foreclosed properties. Local governments taking a tougher stand span the country, from Providence, R.I.; to Cincinnati, Ohio; to Chula Vista, Calif.
Keeping up with so many different regulations and changes is a challenge for the mortgage industry, said Chad Neel, president of FIS Field Services Inc., a Lender Processing Services Inc. unit that helps lenders manage defaults and foreclosures. In some cases, he added, “they force you to maintain the property at a standard that’s higher than the one for homeowners.”
The Mortgage Bankers Association says that mortgage companies are committed to maintaining vacant properties.
City officials complain that local taxpayers can’t continue to pick up the cost of cutting lawns, draining swimming pools, boarding up windows and policing vacant properties. In October alone, Louisville, Ky., spent $106,000 maintaining properties owned by major lenders, said Mayor Jerry Abramson, who has been talking to banks about reimbursement for property maintenance. “The cities are shouldered with the financial cost when they receive a complaint from a neighbor,” Mr. Abramson said.
Some municipalities are responding to the challenge by doubling or tripling existing fees and stepping up enforcement of existing ordinances, while others are adding fees and penalties. Registration fees on vacant or foreclosed properties can range from $35 to $500, said Diane Pendley, a managing director at ratings firm Fitch Inc., with annual fees sometimes topping $700 and penalties as high as $1,000 a day.
In June, California Gov. Arnold Schwarzenegger signed a bill that lets local governments in the state impose a $1,000-a-day fine on financial institutions that fail to maintain vacant properties if problems aren’t fixed within 14 days. The new law allows cities “to go in, abate the problem and tack [the cost] on to the tax bill” without having to enact a local ordinance, said California state Sen. Don Perata, the bill’s sponsor.
Chula Vista, Calif., went a step further last fall by requiring that mortgage companies register and take responsibility for vacant homes even if a property hasn’t yet been the subject of a foreclosure action. The program is designed to keep vacant homes from falling into “a black hole” between delinquency and foreclosure, said Chula Vista’s code-enforcement manager, Doug Leeper, who drafted the measure.
Under the program, property owners can face fines as high as $1,000 a day if a vacant home is improperly maintained; unpaid levies are tacked on to the lender’s property-tax bill. Chula Vista already has imposed $296,000 in fines and penalties, Mr. Leeper said. He said he has fielded inquiries about the program from about 250 communities in Arizona, California, Colorado Florida, Illinois, Missouri, Oregon and Tennessee.
Providence, R.I., recently enacted a “vacant property penalty” that lets the city impose a fine equal to 10% of assessed value if a vacant property remains unoccupied and becomes a blight on the neighborhood. “We have inspectors out there now inspecting every neighborhood in the city and identifying every property,” said Providence’s planning director, Thomas E. Deller, adding that his department already has inspected more than 950 vacant properties.
Other municipalities are beefing up existing statutes. While Cincinnati has had a vacant-property ordinance for more than a decade, in 2006 it increased the application fees for vacant properties to as much as $3,500 a year after five years from a flat $300. This year, the city began obtaining civil judgments against property owners who don’t pay their fees. It also is putting together a program that will let the city repair, demolish or barricade abandoned homes and then, to recover the cost, put a tax lien on the property. City officials say they have collected about $192,000 in fees so far this year compared with roughly $265,000 in all of 2007.
Many of the vacant properties “are owned by lenders, and we are having a difficult time of getting them to step up to the plate,” said Edward Cunningham, Cincinnati’s division manager for property maintenance and code enforcement, adding that the money collected by the city goes into a fund used to deal with vacant buildings.
The registration programs are also designed to make it easier for cities to determine whom they should contact if the neighbors start to complain.
“The idea is to get some responsibility so these buildings don’t sit there and have a negative impact on the community while people argue about who is responsible,” said William Good, commissioner of inspectional services for Boston, which recently began requiring that properties be registered with the city as soon as a foreclosure notice is issued. To increase accountability, Boston is requiring that owners of vacant properties hire a local property manager to be responsible for inspecting the property monthly and maintaining it.
Safeguard Launches Good Neighbor Door-Hanger Initiative
Safeguard’s “Good Neighbor” program was mentioned on MortgageOrb.com.
Safeguard Properties, a Cleveland-based field services company, has introduced an initiative designed to reduce the risk of criminal activity at properties left vacant due to foreclosure. The company proposes that a door hanger be left at properties adjacent to a vacant and secured property. The door hanger will provide an 800 number that will enable neighbors to contact Safeguard 24/7 if they see any questionable activity or maintenance issue that needs to be addressed.
Servicers and local governments are partners in fighting blight, maintaining safe neighborhoods and ensuring properties are maintained, says Safeguard, but the correlation between vacant properties and criminal activity is well documented in communities nationwide.
As foreclosures and vacancies mount, the company has seen a material increase in the number of copper-pipe thefts, arsons and related crimes at these vacant properties. This ripple effect drastically reduces the servicer?s collateral in its assets and wreaks havoc on the communities where the properties exist.
This door-hanger approach has received enthusiastic endorsement from code enforcement and city officials, Safeguard adds. The first draft of the proposed Good Neighbor door hanger is available at https://safeguardproperties.com/pub/pdf/P&P_door_hanger.pdf