M&T Bank Helps Unemployed Borrowers

On November 21, DSNews published an article titled M&T Bank Takes Action to Help Unemployed Borrowers.

M&T Bank Takes Action to Help Unemployed Borrowers

Who ever heard of banks helping their unemployed borrowers find jobs? Though this may be hard to believe, this concept is becoming a reality thanks to a company in Bend, Oregon, named NextJob. This company’s motto is “A job for every person and a person for every job.”

Realizing that job loss in the current economy is the major reason homeowners default on their mortgages, management of M&T Bank in Buffalo, New York, announced Thursday that they will be offering a pilot program of NextJob’s services to their unemployed borrowers at no cost.

Participants will work directly with a NextJob coach to develop a detailed job search action plan, create an effective resume and cover letter, and analyze career direction options.
They will also be trained to identify skills that could transfer to another industry or field, discover “hidden” jobs that are open but never advertised, learn how to effectively use the latest in internet tools, and prepare for successful interviews.

“We were impressed with the services offered by NextJob, and as a bank committed to the customers and communities we serve, we felt this would be an effective program to offer our unemployed borrowers,” explained Mark Mendel, SVP Customer Asset Management.

In 2012, Fifth Third Bank, Cincinnati, Ohio, was the first bank in the nation to work with NextJob on implementing this innovative reemployment training program. Borrowers who participated in the initial pilot program had been out of work for approximately 22 months. After completing the training, almost 40 percent of participants were fully employed within six months. Because of this success, Fifth Third Bank expanded the program bank-wide in February of this year.

According to John Courtney, NextJob president, “Job loss remains one of the top issues in our economy and is responsible for half of mortgage defaults, which are the number one debts in America. Our reemployment program is a natural opportunity to make an impact in alleviating this problem.”

Courtney explained, “We developed this idea four years ago, and conducted a pilot program two years ago. We now have three banks participating and by December, we will have four. “He said that momentum is accelerating for this remedial program as more banks and lending institutions learn about it.

Please click here to view the online article.

About Safeguard 
Safeguard Properties is the largest mortgage field services company in the U.S. Founded in 1990 by Robert Klein and based in Valley View, Ohio, the company inspects and maintains defaulted and foreclosed properties for mortgage servicers, lenders,  and other financial institutions. Safeguard employs approximately 1,700 people, in addition to a network of thousands of contractors nationally. Website: www.safeguardproperties.com.

Judicial Foreclosure Process Still in the Way

On November 7, National Mortgage News published an article titled Judicial Foreclosure Process Still in the Way as Delinquencies, Foreclosures Drop.

Judicial Foreclosure Process Still in the Way as Delinquencies, Foreclosures Drop

The judicial states still lag behind a national trend that is keeping the foreclosure inventory to its lowest level since 2008, according to the Mortgage Bankers Association.

MBA’s National Delinquency Survey shows the delinquency rate for mortgage loans on one-to-four unit residential properties in the third quarter dropped to 6.41%. It dropped 55 basis points from the previous quarter and 99 bps from one year ago, to its lowest level since 2008.

The foreclosure inventory also dropped to 3.08%, down 25 bps from the second quarter and 99 bps year-over-year and remains at levels comparable to 2008.

Since the recession lenders have originated higher quality loans, exited the subprime loan market and are now preparing to comply with qualified mortgage requirements in 2014. These changes suggest the rate of delinquencies and foreclosures will continue to decline, said Jay Brinkmann, MBA’s chief economist, during a press conference.

Legacy loans originated during the early years of the crisis and long foreclosure processing issues remain the biggest challenge to a full recovery.

“About 77% of the seriously delinquent loans that are still out there were originated in 2007 and earlier, which is down from the magnitude we had before,” but still a challenge, he says.

Third-quarter data show significant progress is being made in clearing the seriously delinquent loan backlog particularly in states like Florida, which is trying to clear out some of this backlog, Brinkmann said, but they still dominate the distressed loan market.

“This is atypical for a normal credit cycle,” he added, “by this point one would expect loans originated that long ago to have been well passed their peak problem period.”

However, the effect of better performing new originations, the fact that “as the loans get older, even the 2008 loans perform better,” and improved results reported in previous quarters indicate, suggest the market is in the right track, he added

The degree to which the mortgage delinquency and foreclosure problem has changed over the past five years is best illustrated by some of the nation’s worst performing markets.

The top three states with the highest rate of loans 90 days or more past due or in foreclosure are Florida, New Jersey and New York, but their stories are quite different.

Florida’s foreclosure rate still is the highest in the country. However, during the quarter it dropped 1 percentage point and has shown “a significant drop in a year-over-year and quarter-over-quarter basis,” he said, while by contrast, the rate in up in New Jersey and New York making them the only two states in the country that saw an increase in foreclosures.

“While there’s room for speculation as to why,” a glance at what is keeping the numbers up in these states and other states where the foreclosure rate is higher than the national average, he explained, is state regulation. “The only states above that average that have nonjudicial foreclosure systems are Rhode Island and Nevada, so it’s the judicial foreclosure system, which tends to slow things up.”

Data once again show the big difference between the foreclosure inventory numbers in judicial and nonjudicial states.

In addition current data show the foreclosure start rate also is dominated by the states with judicial foreclosure systems, he said, as of the 18 states with rates above the national average, 13 have judicial systems. During the quarter the nonjudicial state average is 1.66% and for judicial states the rate is three times as high at 5.28% despite drops in some states including Illinois, Maryland and Connecticut “that typically have high percentages of loans in foreclosure.”

Please click here to view the online article.

About Safeguard 
Safeguard Properties is the largest mortgage field services company in the U.S. Founded in 1990 by Robert Klein and based in Valley View, Ohio, the company inspects and maintains defaulted and foreclosed properties for mortgage servicers, lenders,  and other financial institutions. Safeguard employs approximately 1,700 people, in addition to a network of thousands of contractors nationally. Website: www.safeguardproperties.com.

Environmental Risks for Vacant Properties

On November 27, Property Casualty 360 published an article titled Vacant Property’s Environmental Risks.
 
Vacant Property’s Environmental Risks

Vacancy isn’t the only headache property owners can face: Empty buildings and land can cause pollution-related liability. Learn about possible options to mitigate environmental liabilities through insurance and risk management.
 
As America’s real estate crisis recovers along with our economy, more than 14 million properties remain vacant or abandoned across the country. Real estate is considered a vacant property when it is not currently occupied or in use. This includes empty lots as well as structures.

Cities like Detroit, Cleveland and Las Vegas are dealing with thousands of undeveloped lots, empty houses and even entire neighborhoods, as well as commercial, retail and industrial properties. This has resulted in an increase in crime and lower property values for surrounding areas. Local communities left to care for these properties by default do not have the time or resources to keep the properties in good condition, thus causing an increase in exposure to risks like vandalism, fire, theft and water damage. In turn, these risks hinder the possibility of resale and revitalization in the future as economic conditions continue to improve, leading to possible setbacks throughout our communities.

Several environmental risks are associated with all types of vacant properties. Older buildings may have existing asbestos insulation and tiles, as well as lead paint and lead piping. All buildings constructed before 1980 have the potential to contain both asbestos-containing materials and lead-based paint. Leaking heating oil tanks, pipes and appliances are prevalent, as well as any chemicals or lubricants stored on premises in garages or sheds.

Unknown underground storage tanks may exist onsite as well. Underground storage tanks that are not maintained regularly cause soil and groundwater contamination at the subject property itself as well as surrounding real estate. Retail shopping centers or commercial office buildings that have housed dry cleaners, printers, or restaurants have serious concerns pertaining to the improper storage and disposal of chemicals, inks, dyes and grease/oils.

Poor maintenance, concrete cracks, dilapidated roofing, clogged sewer pipes and broken sprinkler systems can result in water intrusion and mold growth. Mold grows rapidly in warm and moist environments—bathrooms, basements, under carpeting, inside walls and HVAC ducts—and easily can spread throughout a commercial, retail or residential structure, impacting others.

Weather-related events such as flash flooding exacerbate indoor water and mold issues, and cause excessive surface water and silt runoff affecting neighboring properties or waterways such as ponds, streams or rivers. Should a waterway become impacted, not only is the quality of water at risk, it threatens plant and animal life as well.

Vacant buildings and land are attractive locations to illegally dispose of hazardous waste, drums and containers—a practice commonly called “midnight dumping.” The drums and containers are almost never appropriate to properly contain the waste and the contents are easily released onto the property.

Criminal activity at abandoned sites is a major concern. Criminals establish illegal methamphetamine labs in abandoned properties, with the remnants left behind after they move on.
These residual materials cause widespread contamination to a facility and can cost thousands of dollars to restore the property back to its previous condition.

Often city officials are unsure who is legally responsible for dealing with these environmental hazards. If the property owners can be tracked down, they may be held liable. Banks taking over properties via foreclosure and local municipalities are left with figuring out how to deal with these issues. Some local organizations even attempt adverse possession in hopes of improving their declining neighborhoods.

Adjacent property owners or additional on-site tenants also are affected by contamination stemming from a vacant property. Mold growth easily spreads between units. Leaks, toxic fumes and mold can devastate innocent landowners.

Mitigate Losses

Generally, environmental issues are excluded from most general liability or property insurance policies, including defense costs. So property owners, cities and financial institutions that did not cause a problem may still have to defend themselves from suits that could arise from the threat of contamination.

Owners also must spend the time and money to figure out the source of the contamination, then implement a solution that can sometimes take many years to complete. Environmental insurance policies can be an effective tool for concerned parties to manage the risks while protecting their assets as the real estate market recovers.

Many city officials are moving forward with redevelopment plans, which include the demolition and removal of abandoned structures. The contractors hired to perform the work will come into contact with many of these environmental exposures during the course of debris removal, site preparation, demolition, grading, landscaping, and other activities.

A contractors’ pollution liability (CPL) insurance policy protects contractors if a pollution condition occurs as a result of their work or work performed on their behalf (i.e., subcontractors). Defense costs are also covered under this type of policy. For example, if a demolition contractor causes a release of asbestos fibers, causing unsafe air quality conditions, an injured third party could sue. An excavation contractor could unknowingly unearth an abandoned storage tank and puncture it, causing a leak and subsequent damage to a neighboring property.

Contractors do have options available to them to adequately protect themselves from any resulting claims or lawsuits, as a CPL policy provides protection for both ongoing and completed operations after the contractor has finished work on the project. Coverage can be purchased on a claims-made or occurrence basis and be tailored for specific projects/contracts. A CPL policy addresses potential contaminants such as asbestos, lead, silica and mold. Additional features of a CPL program may include coverage for over-the-road spills during transit and disposal of waste at a non-owned location, such as a landfill. Limits of liability generally start at $500,000 and can go upward to $50 million.

Environmental insurance also exists for the property owner or manager, including banks or other financial institutions that have taken over vacant properties via foreclosure. Occupied buildings have various environmental exposures, but empty structures with no supervision or maintenance can turn a small issue into a multi-million-dollar remediation project.

Site pollution, or pollution legal liability, is a policy crafted to cover both third- and first-party claims, including defense costs, resulting from pollution conditions at, on, under, or emanating from scheduled locations (in this instance, vacant properties). Variations of this policy include secured creditor environmental insurance and lender liability, which protect financial institutions and borrowers throughout the buying and selling process. Many policies are crafted especially for commercial property portfolios, and there is no exclusion for vacant properties.

These policies can be tailored to cover environmental hazards including mold, storage tanks, transportation pollution, illicit abandonment, in-place asbestos and lead, soil/groundwater contamination, air and noise pollution, and waste disposal to non-owned locations. Business interruption image restoration may also be purchased and some policies today even assist with green standards compliance.

Most policies include coverage for natural resources damages within the policy form itself. Coverage is written on a claims-made basis and policy terms generally vary from 1 to 10 years in length. Policy terms can be built to fit the needs of the specific property owner, lender requirements and the risks associated with that particular location. Much like the CPL policy, liability limits can range from $500,000 to beyond $50 million, depending on the complexity of the property schedule and any transactional requirements.

Vacant properties will remain a large part of real estate landscape for the next several years. Focusing on the potential issue now will lend to a more successful outcome as our economy continues to recover. When at all possible, property owners, municipalities, and financial institutions will need to best provide protection for these properties as well as adjacent property owners or tenants. Supervision, security, maintenance, and environmental awareness—including the purchase of adequate insurance—will manage challenges as well as create proactive solutions for redevelopment in the future.

Please click here to view the online article.

About Safeguard 
Safeguard Properties is the largest mortgage field services company in the U.S. Founded in 1990 by Robert Klein and based in Valley View, Ohio, the company inspects and maintains defaulted and foreclosed properties for mortgage servicers, lenders,  and other financial institutions. Safeguard employs approximately 1,700 people, in addition to a network of thousands of contractors nationally. Website: www.safeguardproperties.com.

Eminent Domain Proposals Spread in Hardest-Hit Communities

On November 18, HousingWire published an article titled Eminent Domain Proposals Spread in Hardest-Hit Communities.

Eminent domain proposals spread in hardest-hit communities
Irvington, New Jersey next stop on the map

A proposal suggesting the use of eminent domain to aid underwater borrowers continues to spread to various municipalities despite significant pushback from the mortgage industry.

The most recent push is in the city of Irvington, N.J., where officials and neighborhood activists are considering eminent domain as a means to help troubled homeowners.

The list of counties and cities that have briefly considered eminent domain tells a very specific story: One in which hardest-hit communities are searching for solutions to foreclosure-blighted neighborhoods in the aftermath of the largest housing crash since the Great Depression.

Yet, analysts like to point out that eminent domain does little to cure these issues since it’s designed to help only ‘current’ borrowers.

As for what cities have considered eminent domain, many of them are located along the West Coast.

California tops the list, with several local cities taking a second look at the plan.

So far, the California county of San Bernardino has considered eminent domain and killed it. Other areas were it has been at least considered include Brockton, Mass., which has already rejected it; North Las Vegas, NV; and Chicago, which held a city council meeting on the proposal, analysts say.

The California city of Richmond went the furthest, accepting the proposal without implementing it. The city is currently the greatest threat to investors, but it also faces a serious litigation threat if it decides to actually implement such a plan.

Other areas that have at least considered eminent domain include El Monte, Calif., and the California cities of Pamona and Salinas, according to Chris Killian, managing director for SIFMA’s Securitization Group.

But with investors and mortgage industry partners ready to file suit to protect their interests in affected mortgage pools, Killian has watched eminent domain proposals die off in several cities after the initial pitch.

He says many cities look at the proposal early on and believe it can save homes at no cost to the city. It’s not until the threat of litigation from investors and other interested parties hits the cities that they realize “the costs outweigh the benefits in this” and there is a “level of risk the cities don’t want to take on,” Killian said.

Eminent domain first gained the public’s attention in San Bernardino County, Calif., when the county explored the idea of addressing negative equity by using private capital supplied in part by the plan’s chief advocate, Mortgage Resolution Partners. The idea included plans to acquire underwater mortgages, writing down the principal and then refinancing the loans.

Killian says the list of municipalities that have considered eminent domain includes several “locations that have struggled coming out of the financial crisis in the last couple of years.”

These are places usually facing higher rates of foreclosure and delinquencies, he points out. Yet, despite the re-emergence of the eminent domain escape plan, he sees a constant threat of litigation from investors as an ongoing deterrent for city officials.

“The pitch that the municipalities are offered is a costless transaction that helps their constituents,” says Killian. “Without looking into it, it’s a pretty attractive proposition.”

But once the risk of litigation alone is weighed in, “what you see is a lot of people looking at it and saying it’s not what I thought it was.”, he said.

Please click here to view the online article.

About Safeguard 
Safeguard Properties is the largest mortgage field services company in the U.S. Founded in 1990 by Robert Klein and based in Valley View, Ohio, the company inspects and maintains defaulted and foreclosed properties for mortgage servicers, lenders,  and other financial institutions. Safeguard employs approximately 1,700 people, in addition to a network of thousands of contractors nationally. Website: www.safeguardproperties.com.

Eminent Domain Battle Shifts to Pomona, CA

On November 5, the Mortgage Bankers Association (MBA) published an artilce titled Eminent Domain Battle Shifts to Another California City.

Eminent Domain Battle Shifts to Another California City

Popping up like a Hydra, the latest battle over use of eminent domain to seize underwater mortgages has shifted to Pomona, Calif., a city of 150,000 residents outside Los Angeles.

The City of Pomona is currently considering several proposals to address perceived issues in the city’s real estate market–all of which would use the city’s powers of eminent domain. As with other municipalities in California, one proposal, from San Francisco-based Mortgage Resolution Partners, would have the city acquire underwater, but performing, mortgage loans held by private-label mortgage-backed securities.

In a letter this week to Pomona City Council members and City Manager Linda Lowry, the Mortgage Bankers Association and the California Mortgage Bankers Association, Sacramento, expressed “serious concerns” with the MRP proposal and urged them to reject it in favor of supporting programs that are already working to assist underwater borrowers in California.

“We believe that MRP’s proposal in particular raises very serious legal and constitutional issues, in addition to the threat it poses to the City’s housing market and economy,” the letter said. “No jurisdiction has ever used eminent domain to acquire underwater mortgages from securitized pools. Such a novel use of the eminent domain powers is unprecedented and would, in our view, not survive the multiple legal challenges that would ensue.”

Proposals to employ eminent domain to seize underwater mortgages have proliferated over the past year, with California a hotbed of such plans. Over the summer, Richmond, Calif. became one of the largest cities in the U.S. to embrace the private-sector program offered by MRP to seize underwater mortgages through eminent domain–in some instances for as little as 25 cents on the dollar. In letters it sent to more than 30 servicers this summer, the city offered to purchase more than 600 mortgages. The city said if the servicers do not agree to sell, it would seize the mortgages.
 
Other municipalities, such as Fontana and Ontario, Calif., North Las Vegas, Nev., and towns in Colorado, Illinois and Massachusetts have also considered eminent domain as a strategy to seize underwater mortgages. Most of these have backed off the strategy following discussion with MBA, local mortgage bankers’ groups and other industry group about drawbacks, including potential restriction of future lending.
 
These drawbacks also include deep constitutional concerns. The American Land Title Association issued a statement this summer (http://www.alta.org/press/9-11-2013%20ALTA%20Eminent%20Domain%20Statement.pdf), saying such create legal uncertainty and confusion and will likely take years to resolve. Bond investors argue that use of eminent domain as proposed is unconstitutional because it benefits a small group of citizens at the expense of out-of-state investors, effectively violating the interstate commerce clause..

MBA has been a leading opponent against such use of eminent domain. MBA President and CEO David Stevens said such eminent domain actions could cause “irreparable harm” to current homeowners and prospective homebuyers. “If it is demonstrated that any local government can simply intervene and abrogate a private lending contract, the uncertainty that will be introduced in to the mortgage system and housing market will impact lending everywhere in the U.S.,” he said.
 
The Federal Housing Finance Agency and HUD have also expressed concerns with such programs, saying it would severely impact loans guaranteed by Fannie Mae, Freddie Mac and FHA. FHFA said it had the discretion to direct the GSEs to stop their activities in towns that use eminent domain to seize mortgages; HUD expressed “doubt” that such mortgages would qualify for FHA financing. And Fitch Ratings, New York, said such use of eminent domain would likely negatively affect private-label U.S. residential mortgage-backed securities and future lending in those regions. Fitch said should Richmond and other local governments succeed, such programs could “further weigh on private investor confidence and appetite for private-label mortgage-backed securities going forward.”

In their letter, MBA and the California MBA said such action in Pomona might also prove premature, noting that home prices in Pomona have increased by 27.7 percent during the past year, reflecting the broader housing recovery. DataQuick, San Diego, reported last month that mortgage delinquencies for Los Angeles County have declined by 56.4 percent over the same period.

“The market is clearly on the mend and we would urge leaders to exercise caution before the City takes any action that would harm Pomona and be disruptive to the market and this recovery process,” the letter said.

The letter noted MRP’s proposal likely targets the small percentage of Pomona loans that are in private-label securities and then (if past proposals are any indication) narrows this group further to focus on those who are current on their existing mortgages, likely have good credit, and ideally do not have existing home equity loans or other liens on the property.

“While the small group of people that satisfy this criterion would initially appear to be helped, this help comes at the substantial expense of the entire community and other potential mortgage borrowers across the country,” the letter said. “Such a proposal, on its face, also substantially undervalues the existing owners’ holdings due to the nature of the compensation. In our view, it is impossible to argue that fair compensation has been provided when the amount of compensation would be (according to MRP’s own documents) well below the value of the home that collateralizes the mortgage; when it does not reflect the diminution in the value of the overall investment; and when the home that MRP and their partners paid the investors $160,000 for is refinanced shortly thereafter for $190,000–with much of the additional $30,000 going to MRP and its funders. The plan simply does not provide just compensation and could expose a jurisdiction utilizing eminent domain to significant liability beyond the initial condemnation payment.”

Furthermore, the letter said, a homeowner signs both a mortgage and a note. The mortgage note is typically held by the PLS trustee who is often domiciled outside the State of California. “A City’s eminent domain authority does not extend beyond the City’s borders; it certainly does not apply outside the state,” the letter said. “We therefore believe that local governments that seek to use eminent domain in this highly unusual way will face years of costly litigation brought by multiple litigants who, because of fiduciary and other obligations, are forced to sue to protect the assets of their investors. For these and other reasons, Pomona may be tied up in costly litigation with potentially tremendous liability for years.”

In addition to the legal issues, the letter said use of eminent domain would not only significantly tighten credit availability for credit-worthy borrowers in Pomona, it would also increase the cost of available credit in the city as lenders price the risk of such mortgage seizures into the cost of doing business in the community. “Any mortgage loan that is offered will likely require much stronger credit scores, higher interest rates and larger down payments,” the letter said. “This in turn could actually reverse recent increases in housing values in the city.”

The letter also pointed out that many people who invest in private-label securities have their investments held in private pension plans–many of whom are employees of the city.

“PLS losses are suffered not by large institutions, but by everyday savers and investors who have these investments in their pension and 401k plans, college savings plans and individual investment portfolios,” the letter said. “This would undoubtedly include local police, fire, teachers and other public pensioners. In fact, last month, the California Public Employee Retirement System, which holds approximately $11 billion in mortgage-backed investments, publically stated it has ‘some concerns about the precedent this may set and the impact to investors.’”

The letter was signed by Susan Milazzo, executive director of CMBA; and Pete Mills, senior vice president of residential policy and member services with MBA.
 

Please click here to view the online article.

About Safeguard 
Safeguard Properties is the largest mortgage field services company in the U.S. Founded in 1990 by Robert Klein and based in Valley View, Ohio, the company inspects and maintains defaulted and foreclosed properties for mortgage servicers, lenders,  and other financial institutions. Safeguard employs approximately 1,700 people, in addition to a network of thousands of contractors nationally. Website: www.safeguardproperties.com.

Blighted Cities Prefer Razing to Rebuilding

On November 12, The New York Times published an article titled Blighted Cities Prefer Razing to Rebuilding.

Blighted Cities Prefer Razing to Rebuilding

BALTIMORE — Shivihah Smith’s East Baltimore neighborhood, where he lives with his mother and grandmother, is disappearing. The block one over is gone. A dozen rowhouses on an adjacent block were removed one afternoon last year. And on the corner a few weeks ago, a pair of houses that were damaged by fire collapsed. The city bulldozed those and two others, leaving scavengers to pick through the debris for bits of metal and copper wire.

“The city doesn’t want these old houses,” lamented Mr. Smith, 36.

For the Smiths, the bulldozing of city blocks is a source of anguish. But for Baltimore, as for a number of American cities in the Northeast and Midwest that have lost big chunks of their population, it is increasingly regarded as a path to salvation. Because despite the well-publicized embrace by young professionals of once-struggling city centers in New York, Seattle and Los Angeles, for many cities urban planning has often become a form of creative destruction.

“It is not the house itself that has value, it is the land the house stands on,” said Sandra Pianalto, the president and chief executive of the Federal Reserve Bank of Cleveland. “This led us to the counterintuitive concept that the best policy to stabilize neighborhoods may not always be rehabilitation. It may be demolition.”

Large-scale destruction is well known in Detroit, but it is also underway in Baltimore, Philadelphia, Cleveland, Cincinnati, Buffalo and others at a total cost of more than $250 million. Officials are tearing down tens of thousands of vacant buildings, many habitable, as they seek to stimulate economic growth, reduce crime and blight, and increase environmental sustainability.

A recent Brookings Institution study found that from 2000 to 2010 the number of vacant housing units nationally had increased by 4.5 million, or 44 percent. And a report by the University of California, Berkeley, determined that over the past 15 years, 130 cities, most with relatively small populations, have dissolved themselves, more than half the total ever recorded in the United States.

The continuing struggles of former manufacturing centers have fundamentally altered urban planning, traditionally a discipline based on growth and expansion.

Today, it is also about disinvestment patterns to help determine which depopulated neighborhoods are worth saving; what blocks should be torn down and rebuilt; and based on economic activity, transportation options, infrastructure and population density, where people might best be relocated. Some even focus on returning abandoned urban areas into forests and meadows.

“It’s like a whole new field,” said Margaret Dewar, a professor of urban and regional planning at the University of Michigan, who helped plan for a land bank in Detroit to oversee that city’s vacant properties.

In all, more than half of the nation’s 20 largest cities in 1950 have lost at least one-third of their populations. And since 2000, a number of cities, including Baltimore, St. Louis, Pittsburgh, Cincinnati and Buffalo, have lost around 10 percent; Cleveland has lost more than 17 percent; and more than 25 percent of residents have left Detroit, whose bankruptcy declaration this summer has heightened anxiety in other postindustrial cities.

The result of this shrinkage, also called “ungrowth” and “right sizing,” has been compressed tax bases, increased crime and unemployment, tight municipal budgets and abandoned neighborhoods. The question is what to do with the urban ghost towns unlikely to be repopulated because of continued suburbanization and deindustrialization.

“In the past, cities would look at buildings individually, determine there was a problem, tear them down and then quickly find another use for the land,” said Justin B. Hollander, an urban planning professor at Tufts University. “Now they’re looking at the whole DNA of the city and saying, ‘There are just too many structures for the population we have.’ ”

Cleveland, whose population has shrunk by about 80,000 during the past decade to 395,000, has spent $50 million over the past six years to raze houses, which cost $10,000 each to destroy, compared with $27,000 annually to maintain.

Some neighborhoods have lost two-thirds of their residents since 2000. There are so many vacant lots that the city, now home to more than 200 community gardens and farms, zones for urban farms and allows people to keep pigs, sheep and goats in residential areas. A vineyard has popped up as well.

Two miles northwest of the Gateway Arch in St. Louis, which has at least 6,000 vacant buildings, is an uninhabited deciduous forest where a sprawling 74-acre housing development once stood before the city demolished it because so few people lived there.

Philadelphia, which has 40,000 vacant lots, has promoted the benefits of lower-density living by allowing people in largely vacant neighborhoods to spread out to the lot next door — where a neighbor’s home once was. The city has been studying a plan to sell $500 leases to urban farmers. One such farm, Greensgrow, which was built on a former Superfund site, sold $1 million in produce in 2012.

Baltimore has begun to turn over vacant lots to groups of amateur farmers. Boone Street Farm, boxed in by abandoned rowhouses on an eighth of an acre, is completing its third season of growing tomatoes, spinach, sweet potatoes and other fruits and vegetables in the city’s Midway neighborhood. It sells produce to restaurants, has a table at a local farmers market and delivers $10 boxes of produce weekly to members of its community-supported agriculture program.

But even as they bulldoze thousands of vacant houses, Baltimore and other shrinking cities have continued to seek new people.

“I’m trying to grow the city, not get smaller,” said Stephanie Rawlings-Blake, Baltimore’s mayor, about the notion that the city could be fine with between 500,000 and 600,000 people. “I’m not the first to say that a city that’s not growing is dying.”

Baltimore lost nearly 110,000 jobs from 1990 to 2010, about 23 percent, and has seen its population drop from 950,000 in 1950 to 621,000 today. The city has 20,000 vacant buildings and lots, and more than one house in eight is vacant.

Mayor Rawlings-Blake wants to attract 10,000 families to the city within a decade and has reached out to immigrants, gays and lesbians (Maryland allows same-sex marriage), and Orthodox Jews who might want to buy newly refurbished three-story rowhouses that the city is selling for as little as $100,000.

At least one city that has taken a pioneering approach to confronting diminution has found that accepting shrinkage does not mean problems go away. Youngstown, Ohio, once a bustling steel city of 170,000 but now with only 66,000 people, has sought to head off collapse by tearing down thousands of vacant houses — 3,000 so far and 10 more each week.

But while the city had planned on a stable population of 80,000, more than 1,000 people move away every year, leaving behind 130 additional empty homes in addition to the city’s 22,000 vacant properties and structures. Four thousand of those homes are in dangerous condition, according to the city, but each demolition costs $9,000 and the city has yet to decide whether to close nearly abandoned neighborhoods to try to save money.

“It’s almost anti-American to say our city is shrinking,” said Heather McMahon, the executive director of the Mahoning Valley Organizing Collaborative, a Youngstown community group.

“But if we’re going to survive as a city and not go bankrupt like Detroit,” she said, “we’re going to have to figure something out.”

Please click here to view the online article.

About Safeguard 
Safeguard Properties is the largest mortgage field services company in the U.S. Founded in 1990 by Robert Klein and based in Valley View, Ohio, the company inspects and maintains defaulted and foreclosed properties for mortgage servicers, lenders,  and other financial institutions. Safeguard employs approximately 1,700 people, in addition to a network of thousands of contractors nationally. Website: www.safeguardproperties.com.

Vampire REOs and Zombie Foreclosures Threaten Housing Recovery

On October 3, National Mortgage News published an article titled Vampire REOs and Zombie Foreclosures Threatening Housing Recovery.

Vampire REOs and Zombie Foreclosures Threatening Housing Recovery

Realtors nationwide have been complaining for a long period of time about a shortage of bank-owned homes available to sell.

RealtyTrac has identified two threats that are harming housing recovery efforts right now: vampire REOs and zombie foreclosures.

According to the Irvine, Calif.-based data firm, about 47% of bank-owned homes across the country are still occupied by the previous owner who was foreclosed on by their lender, deemed to be vampire REOs.

These properties often will look like normal, nondistressed homes. But in reality, they represent a shadow inventory that is becoming more imminent as rising home prices motivate banks to sell off these types of homes to try to recoup their losses on soured loans.

Houston, which has a total REO inventory of 6,582 homes, has the highest percentage of vampire REOs with 65%, RealtyTrac said.

Another metropolitan area that has a large volume of vampire bank-owned inventory is Miami. Here, vampire REOs account for 64% of the city’s REO inventory of 30,868 assets.

Meanwhile, other notable markets in which vampire REOs are larger than 50% of the city’s bank-owned inventory levels include Los Angeles (61% of its 12,992 REOs), Cincinnati (57% out of 5,398), Cleveland (52% out of 5,523), Philadelphia (52% of the 4,881 bank-owned housing units), Riverside, Calif. (52% of 10,801 REOs), Dallas (51% out of 6,676) and Orlando (half of its 12,614 total REO inventory).

RealtyTrac also said homes that are still deteriorating through the foreclosure process but have been vacated by the homeowner–known as zombie foreclosures–make up 20% of its database. Often, these homes are not maintained properly and represent a threat to the quality of the surrounding neighborhood, therefore causing property values to fall in markets where these assets sit.

Additionally, the homeowner who left the property may not be aware that he or she is still responsible for property taxes and any other expenses that come with homeownership, leaving them in an even tougher financial spot when they discover this reality.

Cities where zombie foreclosure inventory is greater than 25% of the total amount of properties in foreclosure are St. Louis, Indianapolis, Jacksonville, Las Vegas, and the Florida markets of Palm Bay, Tampa, Lakeland, Fort Myers and Sarasota.

“These threats to the housing market can be bargain opportunities for proactive buyers and investors,” RealtyTrac said. “Zombie foreclosures represent a prime opportunity for a short sale that helps the homeowner, the neighborhood and even the hesitant-to-foreclose bank in the process; while vampire bank-owned homes represent imminent inventory that you can act on before other buyers and investors are aware of it.

The following data is based only on 220,000 out of the total 525,000 REOs nationwide that RealtyTrac shows as active.

To view the online article, please click here.

About Safeguard 
Safeguard Properties is the largest mortgage field services company in the U.S. Founded in 1990 by Robert Klein and based in Valley View, Ohio, the company inspects and maintains defaulted and foreclosed properties for mortgage servicers, lenders,  and other financial institutions. Safeguard employs approximately 1,700 people, in addition to a network of thousands of contractors nationally. Website: www.safeguardproperties.com.

Study Shows Immigrant Homeowners Fared Better in Recession

On October 29, DSNews published an article titled Study: Immigrants Fared Better than Native Homeowners in Recession.

Study: Immigrants Fared Better than Native Homeowners in Recession

A new study from the University of Southern California Lusk Center for Real Estate reveals that immigrant Asian and Latino homeowners were more successful at holding onto their homes during the Great Recession than native-born homeowners.

Gary Painter, research director for the USC Lusk Center for Real Estate who co-authored the report with associate professor Zhou Yu, noted that while most homeowners took an economic hit during the recession, the decline in homeownership and headship rates was much slower for immigrants. In fact, in some metro areas, there was no decline at all among the immigrant population.

“In 2007-2009, we had this shock in both housing and jobs and expected the more vulnerable population of immigrants to suffer the most. This wasn’t the case,” Painter said. “Immigrants came through the recession in a much better position than their native-born counterparts.”

Painter, who has spent 15 years studying the ever-growing importance of the immigrant population on the U.S. economy, says the study primarily looked at the data itself and not the factors behind immigrant populations’ successful navigation of the recession. However, a number of demographic trends occurring at the time surely played a role.

“When the recession hit, there were fewer immigrants coming into the country,” Painter said. “That meant the immigration population here was more mature and settled, while any newcomers would have most likely rented.”

He continued, “A second reason is that immigrants have always been more geographically mobile and may have been able to move away more quickly to find jobs in areas that weren’t hit as hard by the recession.”

Painter also noted that recent immigrants were unlikely to be exposed to the most egregious abuses of subprime mortgage lending.

Painter expects research into immigration and its effects on the economy to continue gaining in importance since current population trends predict the majority of population growth in the United States—over 100 million people in the next 40 years—will come from immigration.

The Lusk Center study was funded by the Russell Sage Foundation and used data from the U.S. Census Bureau’s American Community Survey. The authors reviewed the top 20 U.S. cities in terms of immigrant population and an additional 60 cities that represent a cross section of smaller metropolitan areas across the country. The authors also reviewed records on home foreclosures from the Federal Reserve and unemployment data.

The University of Southern California Lusk Center for Real Estate seeks to advance real estate knowledge, inform business practice, and address timely issues affecting the real estate industry, urban economy, and public policy.

To view the online article, please click here.

About Safeguard 
Safeguard Properties is the largest mortgage field services company in the U.S. Founded in 1990 by Robert Klein and based in Valley View, Ohio, the company inspects and maintains defaulted and foreclosed properties for mortgage servicers, lenders,  and other financial institutions. Safeguard employs approximately 1,700 people, in addition to a network of thousands of contractors nationally. Website: www.safeguardproperties.com.

Seminar Offers Ideas on Problem Properties

On October 26, the Post-Tribune published an article titled Seminar Offers Ideas on Dealing With Problem Properties.

Seminar offers ideas on dealing with problem properties

MERRILLVILLE — Indiana has the highest rate of foreclosed houses that are abandoned in the nation — at nearly 30 percent — and municipalities in Northwest Indiana are looking for strategies to deal with the problem.

As population has dwindled in northern Lake County’s urban core, abandoned properties contribute to drops in local property values and serve as magnets to crime and blight.

The Lake County Housing Taskforce and the Greater Northwest Indiana Association of Realtors sponsored seminar Thursday on solutions to get problem properties back on the tax rolls.

Speakers focused on three main strategies for tackling the problem: code enforcement, tax sales, and land banks. Currently, Northwest Indiana doesn’t have a land bank. These bodies, which can be run by municipalities or nonprofits, help cities or counties manage and repurpose properties that have been abandoned, underused or foreclosed.

County Commissioner Mike Repay, D-Hammond, believes it could be used to something significant in Lake County — provided that 16 municipalities can agree how to run the system.

“I think the key to making it work is a cooperative approach,” Repay said. “I’m more than willing to participate and take a leadership role, but it’s a matter of getting people on the same page.”

Andy Fraizer, executive director of the Indiana Association for Community Economic Development, said many land banks in Michigan have little to no staff and don’t require a lot of additional funding to run. Fraizer said it’s important for a land bank to establish a clear and transparent mission and help engage the community.

The Indiana General Assembly passed the first law in 2006 allowing county executives — such as the Lake County Commissioners — to establish land banks, but the state’s experience has been mixed bag so far. The state’s first land bank — the Indy Land Bank — was shut down after city officials were caught taking bribes to steer dozens of properties to certain nonprofit organizations. Another land bank, the nonprofit Renew Indianapolis, is finalizing its policies and plans.

The city of South Bend just released a study to try to gauge the scope of abandoned housing in that city and how best to tackle it.

“It’s a large issue with a lot of moving pieces, and it’s inextricably linked to how we do tax sales in Indiana,” Fraizer said.

Property owners who don’t pay their taxes have their parcels placed in the Treasurer’s Sale. But Fraizer said the sales don’t always bring out people who plan on living at a property.

“Buyers purchase at a sale because they expect to get a bargain,” Fraizer said.

Repay said buyers only receive a lien against back taxes and must pay to receive a clear title, which can result in the same property boomeranging back to the sales if the taxes aren’t paid.

Officials from Hammond, Munster and Highland discussed how code enforcement can be used to benefit the community — from working with homeowners who have trouble maintaining their properties to tearing down uninhabitable homes.

Clay Johnson, Munster’s deputy town manager, said the town’s landscape ordinance influences businesses to bring their properties up to standard, while Highland Redevelopment Director Cecile Petro said the town bans boarded up windows and doors.

Hammond Code Enforcement Officer Kelly Kearney about 80 percent of the department’s time is spent in the lengthy process it takes to clear a home’s title and get it placed on the demolition list.

“It’s amazing to me that people just get up and leave a house,” Kearney said. “They leave clothes and beds; I don’t understand why they do it. I think the more people you have, the more problems you have.”

To view the online article, please click here.

About Safeguard 
Safeguard Properties is the largest mortgage field services company in the U.S. Founded in 1990 by Robert Klein and based in Valley View, Ohio, the company inspects and maintains defaulted and foreclosed properties for mortgage servicers, lenders,  and other financial institutions. Safeguard employs approximately 1,700 people, in addition to a network of thousands of contractors nationally. Website: www.safeguardproperties.com.

Oregon State Foreclosure Mediation Program Ramping Up

On October 29, The Oregonian published an article titled Expanded State Foreclosure Mediation Program Ramping Up.

Please click here for prior reporting.  Following is the aforementioned article.

Expanded state foreclosure mediation program ramping up

SALEM — Oregon’s newly expanded foreclosure mediation program is still ramping up, but the first 100 meetings between lenders and borrowers are booked.

The mediation program — created by the legislature in 2012 but largely ineffective until lawmakers revamped it this year — requires the state’s large lenders to offer a meeting with homeowners before they can foreclose. Lenders are scheduled to meet face-to-face with 76 homeowners in November, and 34 more so far in December, the program’s administrator told an advisory committee Tuesday.

Chase Bank is the largest mortgage servicer participating so far. It submitted more than 600 pending foreclosures in a single week to Mediation Case Manager, the contractor running the program for the state. Nationstar Mortgage has submitted more than 500 cases, and Mediation Case Manager officials said Wells Fargo, the state’s largest mortgage lender, is expected to submit a large batch of cases soon.

“We feel really good about working with the servicers,” said Jay Foster, president of Mediation Case Manager. “And they seem to be embracing the program, which is good.”

In all, lenders have referred more than 1,700 pending foreclosures to the program. The majority — more than 1,300 — were either just received by the program administrator or are in the 25-day period the homeowner has to respond.

Now Mediation Case Manager and the state turn to reaching homeowners who want to participate.

The program has struggled to reach some borrowers who left their homes and disconnected their phones. Others have simply declined to take part.

Of those reached by program administrators in August and September, 25-30 percent agreed to participate and submitted their part of a fee — $175, or $50 with an income-based waiver — to cover the program’s cost. They’re awaiting their meetings.

It’s too early to see whether the program has been successful in avoiding foreclosures or otherwise helping homeowners. Only four meetings had been held as of Oct. 23, and in each case the parties agreed to meet a second time.

“We’re just starting to see the volume of cases that we’re seeing the patterns and learning the lessons,” said Emily Reiman, who runs housing counseling programs for the Springfield-based Neighborhood Economic Development Corp. “It’s hard to draw a whole lot of conclusions right now.”

The program, meanwhile, has created a temporary bottleneck in the foreclosure process, leading to a steep decline in filings while lenders work through the first batch of cases under the new laws.

Under the program, large banks are required to offer homeowners the chance to meet before starting the foreclosure process. If the homeowner chooses to participate, they need to first meet with a housing counselor. Both the bank and the homeowner pay a fee to cover the cost of the session. The goal is avoid foreclosures where an alternative — like a mortgage modification, a sale, or handing over the keys without the credit hit of a foreclosure — is possible.

A year ago, the program only covered foreclosures initiated outside the courts under an administrative system created in the 1950s. But when it took effect, other legal changes at the same time sent most foreclosures to the courts, rendering the program moot.

The Legislature tweaked the program to include in-court foreclosures under an expansion that took effect in August. 

To view the online article, please click here.

About Safeguard 
Safeguard Properties is the largest mortgage field services company in the U.S. Founded in 1990 by Robert Klein and based in Valley View, Ohio, the company inspects and maintains defaulted and foreclosed properties for mortgage servicers, lenders,  and other financial institutions. Safeguard employs approximately 1,700 people, in addition to a network of thousands of contractors nationally. Website: www.safeguardproperties.com.