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Alan Jaffa Discusses Adapting to Industry Changes

Posted on September 13, 2018September 13, 2018 by Safeguard

The October issue of Mortgage Banking Magazine featured a column by Safeguard Properties CEO Alan Jaffa titled Investing in the Forces of Change.

INVESTING IN THE FORCES OF CHANGE

TOO MANY COOKS IN THE KITCHEN, too many hands in the pot—whatever the saying, it describes the mortgage servicing industry and the multitude of external regulatory and compliance forces that continue to mold the industry. But these forces are not limited to those coming from clients, the federal government or local municipalities. They are coming from within the industry as well.

In response to the overwhelming and constantly changing compliance landscape, field services companies are proactively developing industry best practices and quality-control procedures to ensure compliance with existing regulations, and to plan for those yet to come.

Evolution of the industry
The volume of vacant and foreclosed properties will remain high for some time. Yet the frenetic pace has slowed, which offers field services companies like Safeguard Properties breathing room to enhance their focus on technology research and development.

Smart devices, coupled with business intelligence, are changing the industry paradigm and shaping the way technology is used to ensure that vendors in the field operate effectively and efficiently through every facet of the default management process.

At Safeguard Properties’ annual Vendor Conference this past June, attendees were asked how many had integrated mobile technology into their business practices—94 percent responded positively. The increased reach of mobile networks and lower costs have helped with rapid adoption of mobile devices among vendors.

Safeguard’s investment in the development of mobile technology is by far our largest dollar spend. We recognize that it is not going to be the only driver for us as a company, but it is going to be a significant part of what we are doing and where we are headed.

For example, INSPI Mobile®, our proprietary mobile inspections platform, was designed to ensure the accuracy, quality and timeliness of inspections. The platform uses smart script technology to guide the inspector through the entire inspection reporting process, including the tracking, labeling and time-stamping of all photos. Because all photos are time-stamped, photos taken during a prior visit cannot be reused, thus further minimizing the risk for fraud.

More than 98 percent of all inspections Safeguard’s inspector network performs are completed through this application, with close to 70 percent of the inspections Safeguard performs in a given month reported in under two hours of completion—a process that was previously counted in days.

Another new proprietary application we’ve begun to roll out to our vendors is PhotoDirect. Vendors can take pictures of property damage, upload them while still at the property and transmit the photos in real time. These photos can then be made available for client viewing.
More than 1 billion photos flow through Safeguard annually, along with many millions of data points. We have invested in end-to-end processes and the supporting technology that can help our clients make informed decisions, many times in real time, while we have someone at a property. In addition, our clients can in turn use this information to document their own compliance with industry and regulatory requirements.

Forward-looking approaches
New and tighter regulations are squeezing an already highly regulated mortgage industry, putting players at greater risk than before. This scrutiny not only affects mortgage companies, but cascades down to field services companies and their vendors and employees. But it doesn’t stop there. It cascades even further down to subcontractors who also must comply with all regulatory requirements.

Safeguard has always conducted audits of our vendors, but over the past year we have instituted additional audit procedures to align with the new laws and regulations and the increased level of third-party oversight.

Safeguard’s business process and compliance audits are a proactive way to provide vendor network support to ensure effective operational controls, adequate screening, training and quality assurance. We firmly believe that just as our client audits have helped Safeguard improve our own business processes, vendors will experience similar benefits.

Background checks of employees and vendors are a key component of Consumer Financial Protection Bureau (CFPB) regulations. Safeguard performs background checks on the principals of all of its vendor companies as part of the initial onboarding and credentialing process.

Additionally, as part of our guidelines, we require our contractors to perform background checks on their employees and subcontractors who perform services on our behalf. As an additional compliance measure, and part of the annual business process and compliance audit, Safeguard audits our vendor’s employee/subcontractor files to ensure that background check information is available for anyone who steps on a property where Safeguard is performing services.

We are in an environment where we have to minimize the risks to our clients and to properties. By being proactive, and in a sense by self-regulating, we will help our industry comply with the new requirements.

Creative thinking
Safeguard has long been the standard bearer for introducing best practices into the field services industry. By utilizing the vast amount of metadata collected daily at properties across the country, valuable business intelligence is helping to improve the accuracy and efficiency of the work completed by the vendors who are at properties every day. This information also is being used by clients to make more effective business decisions about the properties in their portfolios.

By looking at industry problems or situations from a fresh perspective, Safeguard has been able to optimize mobile location and tracking to help ensure the right people are at the right property at the right time.

By utilizing mobile’s GPS functionality and the millions of data points in our system, each property is geocoded, feeding real-time location information to our mobile technology platforms. This satellite information is used to triangulate where the vendor is, and because it is fully integrated into the company’s secured internal system, it can provide additional guidance through property verification information.

Embedded metadata also is being used as a control when photos are submitted from the field. Technology has advanced to the point where date, time and GPS coordinates associated with a photo can be locked. By deploying an automated process that looks at embedded metadata, Safeguard is able to identify if work orders are submitted with reused, cropped, altered, fraudulent and other ineligible photos tagged as suspect and block their submission.

To house the massive amount of data being collected and stored, data centers are an integral part of a field services company’s infrastructure and data security strategy. This exponential data growth led to a strategic decision by Safeguard to shift its technological paradigm.

Traditional disaster-recovery models and regional Internet service providers had to be replaced with global Internet active/active data centers as well as be geographically dispersed. This data-center model gives Safeguard the necessary agility and scalability, and protects the company’s technology from environmental threats and regional disasters through its physical construction and service offerings, in line with Safeguard’s geographic-dispersion strategy.

In addition, Safeguard’s investment in technology ensures that the data centers can support the company’s current and future needs by providing real-time disaster-recovery capabilities and scalability options to provide excess capacity as needed.

The next technological evolution that will enhance quality will be the use of real-time video from the property. For example, the field services industry’s No. 1 risk is determining if a property is occupied or vacant. With video, if there is a question about a property’s status, the inspector can share the live video stream right from the property and another set of eyes can help with the property status determination.

Or, when a vendor is submitting a damages bid, it can use video to provide a detailed view of the issue and get approval while still on site, potentially eliminating additional trips to the property to repair damages.

Moving forward
As the industry continues to evolve to meet new requirements, the field services industry, whose job it is to protect and preserve vacant properties on behalf of the mortgage servicing industry, has made the business decision to embrace this new world head-on. We’re proving we can adapt quickly to market changes by looking ahead and using creative thinking to advance industry standards and quality control procedures.

Alan Jaffa is chief executive officer of Valley View, Ohio-based Safeguard Properties, the largest mortgage field service company in the United States. He can be reached at alan.jaffa@s.safeguardproperties.com.

Please click here for the Investing in the Forces of Change column in PDF.

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.

Alan Jaffa Discusses Adapting to Industry Changes

Posted on September 13, 2018September 13, 2018 by Safeguard

The October issue of Mortgage Banking Magazine featured a column by Safeguard Properties CEO Alan Jaffa titled Investing in the Forces of Change.

INVESTING IN THE FORCES OF CHANGE

Clues to Determining Occupancy Editorial by Safeguard Properties AVP of Inspections Jen Jozity

Posted on September 13, 2018September 13, 2018 by Safeguard

In the September issue of MReport, Safeguard Properties AVP of Inspections Operations Jen Jozity discusses the challenges of determining the occupancy status of defaulted properties.

Clues To Determining Occupancy

In the board game Clue, by Parker Brothers, players try to determine who murdered the game’s victim, where the crime took place and which weapon was used. There are six potential suspects, six weapons, and nine rooms that could be the scene of the crime. Players try to narrow down each possibility by strategically moving around the game board and collecting clues from the other players. Once a player thinks he or she has narrowed down the suspect, weapon, and room, they make an accusation. The player who guesses all three details correctly wins the game.

There are about 324 different winning scenarios possible in the game of Clue, and just like in the game, the mortgage servicing industry’s possible ways of indicating occupancy at defaulted properties are endless.

Every industry faces challenges that it must overcome in order to conduct business properly and effectively. Some are internal, while others deal with issues that, on the surface, can seem to be out of their control. Effective businesses find solutions to these problems and establish best practices—often setting the industry standards.

In the housing industry, and especially since the crisis it faced several years ago, keeping people in their homes is the number one priority. When all loan modifications and other alternatives have been exhausted, or when the homeowner has abandoned the property, mortgage servicing companies must find the most efficient way to not only maintain those assets, but also protect neighborhoods and communities from blight. They hire field services companies to manage such on their behalf.

One of the most challenging issues that the field services industry faces is the determination of occupancy. Inspectors have clues they look for in determining if homeowners still reside in their properties, or if they have abandoned them for whatever reason. But it is not cut-and-dry, and it can be a challenge even when all of the clues appear to be present.

Challenges Faced in the Field

When field inspectors and contractors get their orders to inspect or perform work on a property, they must review it for specific notes or instructions. For inspectors, each inspection requires a different level of service, and there are some that need extra care in following those orders.

Bankruptcy and no-contact inspection orders are particularly sensitive. Inspectors are instructed to snap the required photos from the street to avoid making any contact with the homeowner. This can make it more difficult for inspectors to identify key vacancy indicators as they try to complete their work from a distance and not violate the work order instructions.

Some of the other challenges faced when determining occupancy at a defaulted or foreclosed property include timing, utilities, and information issues.

Timing issues can occur for homeowners who travel for work or leave for a period of time to care for a relative out of town. The property is technically vacant, but it may be maintained as the grass is getting cut and the mail is being held by the post office or picked up by a neighbor or relative.

One of the key indicators for determining occupancy is checking if the utilities are on or have been used recently. Utility companies are often hesitant to give out information to a third party, therefore it is difficult for inspectors to determine usage when they are left on but other indicators show the house to be vacant.

Information regarding the property is often difficult to come by. During bankruptcy and no-contact inspections, there is obviously little to be collected; but for contact, exterior and interior inspections, information may be a key indicator of vacancy.

Confusing or conflicting information is a big issue in determining occupancy. Sometimes a house can be vacant but maintained because the homeowner is trying to sell it through a real estate agent before the foreclosure process takes its course. The agent may not want an inspector to place a vacancy sticker on the door if the home is being shown to potential buyers because of the negative connotation of the word vacant. Field services companies would report that home as vacant, but the real estate agent may disagree. This may delay work that bears completion on the property as subsequent contractors may be unsure of the property’s occupancy status without the sticker.

Additionally, some municipalities have ordinances prohibiting the use of vacancy stickers, because officials think they bring unnecessary negative attention to the abandoned properties.

Good sources of information for field services inspectors when determining occupancy are the neighbors—but they also can be sources of misinformation. A property may be determined as vacant by the inspector when one of the key indicators is the information received by the neighbors who said the homeowner left the property months ago. When trying to complete work on the property for damages, the insurance claims may get denied because the adjuster talks to a different neighbor who says they saw the homeowner at the property a few days ago.

Sometimes there are people at the property when it is actually vacant. For example, during a contact inspection, an inspector arrives at the property and is greeted by someone at the door. The person who answers the door says they are the homeowner. The inspector does not know what the homeowner looks like and may assume that the property is occupied. It turns out that the person at the door was a squatter who has been staying at the property for some time and has caused a significant amount of damage to the home.

Additionally, some indicators may not be what they seem. For example, an inspector sees a car in the driveway or garbage in the trash can outside. Normally this would indicate that someone was living in the home, but the car may belong to the neighbor who knows the home is abandoned and started utilizing the extra parking. The same could be true for the trash; in some communities, the number or size of garbage cans is limited, so the neighbors may be using the extra ones at the vacant home nearby.

No Clear Definition

Although field services companies set indicators for vacancy for their inspectors and contractors to use when determining the occupancy of a property, no clear definition of what is considered “vacant” has been established by the industry or government regulators. And, even if those indicators were set by the industry or government entities, there are always exceptions to every rule as every property and homeowner situation is unique. Some struggling homeowners may not maintain their properties at the same level that they once did.

Recently, the Akron Beacon Journal, a newspaper in Akron, Ohio, published an article featuring the work of surveyors cataloguing homes in that city. The article highlights some of the challenges they faced while trying to determine if a property was occupied or vacant.

“Determining if a house is indeed vacant or just not being kept up well is among the challenges faced by the surveyors who are inputting data on the 98,000 parcels in Akron. They look for obvious signs like boarded-up doors and windows, a lack of an electric meter, and notices on the door, and more subtle hints such as recent mail, an absence of blinds or window coverings, and the presence of seasonal items like a kiddie pool or flowers in bloom. Sometimes a neighbor will offer information about how long a house has been unoccupied or how vermin have taken over.”

While checking one of the properties that the surveyors had determined was vacant and marked accordingly on a city-issued iPad, a woman and two children walked up the street and entered the home. In the article, the surveyors said they were shocked that anyone would occupy that property in its current condition.

Field service companies doing the ground work for the mortgage servicing industry face those same challenge when determining the occupancy of defaulted properties across the country. To help reduce any confusion, field services companies must set best practices for determining occupancy and provide tools for their inspector and contractor networks out in the field.

Best Practices

Field services companies must manage different scenarios for determining occupancy for areas across the country. By using business intelligence of the data collected in the field, they can identify property trends in the industry and establish best practices that can be reviewed regularly.

For each order, inspectors are tasked with using their best judgment based on the training and previous data collected in the field. For properties on orders where contact with homeowners is permitted, not only should the attempt be made, but inspectors need to look for the visual clues for vacancy.

Some of the clues that indicate a property is vacant include:

No personals/empty through the windows
Tall grass or yard not maintained
Overflowing or excess mail
Notices or citations posted
Build-up of fliers or phone books
Previously-posted vacancy notices
Disconnected or removed utility meters
Property damage or vandalism
Snow not shoveled (where applicable)
Abandoned vehicles
Confirmation from neighbors

Field service companies need to equip their inspector and contractor networks with a detailed script to follow to more accurately determine the occupancy of a property. The vacancy indicators listed above should be included in the questions on that script. Inspectors must also submit multiple photos to prove that determination.

The increased use of mobile applications in the field also helps play a role in determining occupancy. Those apps should function so that the script questions can be answered in a way that will prompt the inspector to review their determinations. If a question is answered a certain way, then a secondary question will need to be answered, and so on. The apps also should allow only the proper photos to be uploaded with the order. This helps to streamline the inspections process and deliver a more accurate determination.

Multiple quality control checkpoints at the internal field services company level also help to ensure the occupancy of a property. Those updating the orders and verifying the work completed serve as a quality checkpoint. The orders also are subjected to quality checks from the company’s internal quality control department to ensure work is done to the highest standard.

Another best practice comes from the feedback of mortgage servicers. As regulation increases, so too do the audits performed by servicers on their field services partners as an intensive look into the company’s business practices, processes, and procedures. This can provide another look at whether or not properties are being identified properly.

Having these multiple levels of quality checks, from the beginning of the work order process to ensuring the proper procedures are in place, is important in aiding in the verification of occupancy at a property.

Piecing the Clues Together

In today’s housing industry, piecing the clues together to determine the occupancy of a defaulted property is not as easy as deciding it was Col. Mustard, in the ballroom, with the lead pipe in the game of Clue. All of the key indicators may be there, but as the industry recovers from the financial crisis of a few years ago, these are not always cut-and-dry.

Having a hard-and-fast rule or definition of occupancy is something the industry should consider for the near future, but establishing best practices based on the property data the inspector and contractor networks collect every day is something the field services companies need to do now. That, coupled with multiple quality control checks, can help the mortgage servicing industry solve the occupancy mystery and protect properties and neighborhood from blight.

Jennifer Jozity is the assistant vice president of inspections operations at Safeguard Properties. She can be reached at Jennifer.Jozity@s.safeguardproperties.com.

Please click here for Clues to Determining Occupancy article in PDF.

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.

Darren Kruk Takes Steps to Ensure Confidential Information is Secure

Posted on September 13, 2018October 4, 2018 by Safeguard

The June issue of Servicing Management featured an article authored by Safeguard’s Information Security Officer, Darren Kruk, titled No Laughing Matter.

No Laughing Matter
Field services companies take steps to ensure confidential information is secure.

The fictional story of Sandy Patterson in the popular 2013 comedy “Identity Thief” poked fun at the trials and tribulations of identity theft – making audiences chuckle and raking in more than $173 million worldwide. The film is about a woman named Diana (played by Melissa McCarthy) who lives in Florida and steals the identity of Sandy (played by Jason Bateman) from Denver.

Diana racks up large credit card bills, gets arrested for an assault in Sandy’s name (causing him to be questioned by police) and comes close to destroying Sandy’s life. After not getting the results he seeks from law enforcement, Sandy decides to take matters into his own hands and tracks down Diana to turn her into the police. They end up having a hilarious adventure, and everyone lives happily ever after, but in the real world, identity theft and information security breaches are no laughing matter.

According to the U.S. Office of Justice Programs, about 7% of people age 16 or older were victims of identity theft in 2012. Direct and indirect losses from identity theft totaled $24.7 billion that year. Approximately 36% of the victims reported moderate or severe emotional distress as a result. Now imagine the magnitude of a massive security breach at a company and the responsibilities it bears in keeping secure the data entrusted to it by millions of people and consumers.

Everyone can recall the recent data breach Target experienced around the holidays last year. That breach affected the credit card and personal information of 110 million Target shoppers. Since that time, it also has spawned dozens of legal actions and the resignations of Target’s top executives, including its chief information officer and CEO.

According to a Feb. 12 post on Krebs-OnSecurity, a blog written by Brian Krebs, a former Washington Post reporter who first alerted the public to the initial Target data breach, the breach “began with a malwarelaced email phishing attack sent to employees at an HVAC firm that did business with the nationwide retailer.”

It was a malicious email at a vendor’s business that caused one of the largest data security breaches in the country’s history. It potentially could have been avoided if Target had ensured that information security was a priority, not only internally, but for its vendors as well.

In the mortgage servicing industry, it falls onto field services companies to ensure the security of millions of points of sensitive property data by promoting secure behavior internally and through their vendor networks.

Promoting secure behavior

Promoting the secure behavior of employees and vendors, rather than relying on awareness alone, is the most important aspect of information security for any business. In the past, businesses have spent millions of dollars on security awareness. But for those programs to be effective, they need to address the behaviors of their biggest asset – their employees and vendors.

While security experts do not like to admit it, they know that a company’s biggest asset can also be its weakest point. The old standards are standards only because they are so successful. Why would cybercriminals traverse a maze of elaborate systems and firewalls when all they need to do is send a targeted phishing email to employees or vendors that would trick them into launching a backdoor exploit? Nothing could be easier, and that is why this is still the most prevalent means of attack.

The Information Security Forum released a report in May called “From Promoting Awareness to Embedding Behaviors.” The report states that instead of just making people aware of their information security responsibilities and how they need to respond, businesses need to embed positive information security behaviors that become habits and part of the corporate culture.

Field services companies can embrace the message in this report by offering ongoing information security training in topics including fraud prevention, secure coding for developers, phishing and social engineering.

While the security department professionals take advanced training annually and concentrate on security daily, most employees have other daily duties, and without frequent reinforcement, they are prone to being exploited.

This is why it is necessary to focus on this group and move beyond annual training. Suggestions include monthly newsletters, bulletins, security games and positive reinforcement for following security rules.

There needs to be a belief that information security is a necessity and not just an add-on. It needs to be baked into an organization and its system, not be just a module that is added on afterwards.

Often, security department professionals hear, “What regulations are requiring us to do this?” or “Which client is asking this of us?” The answer is that it doesn’t matter. Field services companies must implement security controls because it is the right thing to do, not because a client or regulation is demanding it of them.

Communication is key

In the information security world, communication trumps all. Hackers communicate and help each other develop better and more efficient techniques of cracking into business systems. That same degree of communication at all levels of the mortgage servicing industry will help to minimize information security risks and prevent data breaches.

In any company, there should be clear and frequent communication not only between departments, but also with employees, clients and vendors. This can take the form of business-tobusiness calls to discuss operational issues and service-level agreements but also should include communications regarding security issues.

Security departments tend to be secretive, not wanting to divulge issues that exist, but that is exactly what hackers count on. Security departments within field services organizations need to balance the need to protect weaknesses with the benefits of communication. By sharing experiences with employees, clients and vendors, all can benefit and collaborate on building security protocols.

Field services companies need to create and maintain a common forum for their security officers to have these discussions on a frequent basis, without judgment. Only then would those officers be able to share new techniques, trends in the industry, and new threats to assess and adapt to them faster and more efficiently.

Monitoring, logging, alerting

Knowing what to monitor and log when it comes to information security can often be tricky. The best practice for field services companies in keeping private client and consumer information secure is to identify the confidential information and continually monitor and log it. And, just as importantly, these companies must remember to set up alerts that warn of deviations to the norm.

Many security professionals conduct tests to determine the effectiveness of their company’s security programs. They look for ways a hacker can gain entrance into the company’s environment and realize that they can never have too much information on where weaknesses have been identified. Companies often remember to secure the servers, network gear and desktop systems but also need to remember to include the printers, faxes, phones, remote access and the industrial control systems (ICSs).

The ICSs tend to be the most forgotten. After all, it is easy to forget that your computer room air conditioner units and uninterruptible power supply systems are attached to the same network, usually via simple network management protocols (SNMP), and are often left with their default passwords and settings. Anything that contains embedded operating systems today can be used as an entry point into your environment.

It is important to recognize and track the shape of the company’s data traffic because a change from the norm can indicate a problem. Employees embedded and engrained in information security also need to respond to alerts once theyare received.

Effective ways to monitor and log confidential information include the following:

Asset management: The pillar to protecting sensitive information is having a clear understanding of the company’s and clients’ assets, their classification, and where and how they are stored. Without understanding what needs to be secured and where it is located, it would be very difficult to protect it. There should be clear definitions of the data types that exist within the company and a matrix identifying the location of them. This is important when dealing with change control approvals. Anyone who has spent hours reviewing changes for approval can attest that knowing what data may be affected by the change can be the difference between an approval and a denial- and the difference between secure data and leaving the company or client open to a potential breach. A variety of changes have been known to be denied simply because the authors of a proposal did not do their due diligence and did not understand that they were manipulating confidential data incorrectly.
Network intrusion and prevention: Limited access and prevention will keep hackers or unauthorized persons from accessing your environment. A layered approach to information security is the most effective and includes systems such as firewalls, network monitors, anti-denial of service and antidistributed denial of service, access-lists, virtual local area networks, integrated file integrity monitoring, and host-based intrusion detection systems. Each layer makes it more difficult for an attacker to enter and gives a chance for security professionals to stop and prevent unauthorized access.
Password protection: Everyone knows the reason for passwords and that they need to be complex and changed frequently. But there is one aspect of passwords that tends to be overlooked, and that is changing the default user accounts and passwords from the defaults. This includes the default iLO passwords, the SNMP strings and remote access modems. Security professionals also need to Google the backdoor passwords and accounts that are created by manufacturers to be able to get into their company’s systems to repair possible issues.

In “Identity Thief,” Diana made a simple phone call and was able to obtain enough information to steal Sandy’s identity and ruin his financial life. More than 110 million people were left vulnerable to cybercriminals in the 2013 Target security breach. Although one is a fictional movie, the message about the importance of protecting sensitive data remains the same in people’s personal lives and in all industries.

Field services companies’ security professionals need to keep an open mind and never stop exploring new ways to protect their companies’ systems. From creating positive security habits in their employees and vendors, to constant communication and monitoring data transfers, information security programs should never remain stagnant. It is important to keep learning and improving.

Field services companies and their vendor networks are tasked with assuming their clients’ posture with respect to data and protecting it as if the fate of the company depends on it. Often, it does.

Darren Kruk is the information security officer for property preservation and field services firm Safeguard Properties. He can be reached at darren.kruk@s.safeguardproperties.com.

Please click here for the article in PDF.

Greg Robinson Discusses Regulatory Reform and Compliance in the Field Services Industry

Posted on September 13, 2018October 4, 2018 by Safeguard

The June issue of MReport featured an article authored by Safeguard’s Chief Financial Officer Greg Robinson, titled Front of the Class.

Front of the Class

Regulatory reform brings compliance and third-party oversight to the forefront of the field services industry.

When President Obama signed the Dodd-Frank Wall Street Reform
and Consumer Protection Act of 2010, it represented the largest set
of financial regulatory reforms seen in the United States since the Great Depression.

The wide-ranging and comprehensive legislation significantly
impacted every aspect of the financial services sector—and the field services
industry was no exception. It is imperative that field services companies make
the appropriate investment in resources, both human and technology, to
minimize clients’ exposure to the risks of noncompliance for a wide range of
requirements. Those not committed to compliance and the necessary investment
will not survive the new regulatory environment; those who embrace the
compliance requirements will strengthen their organization and the industry in
immeasurable ways.

While not all-encompassing, the regulatory environment that field services
companies must operate in include but are not limited to:

Consumer Financial Protection Bureau (CFPB) rules and regulations
False Claims Act provisions
Gramm-Leach Bliley Act (GLBA)
Protecting Tenants at Foreclosure Act (PTFA)
Service Members Civil Relief Act (SCRA)
Fair Debt Collections Practices (FDCPA)
Unfair Deceptive or Abusive Acts or Practices (UDAAP)

The financial services industry has invested heavily in their audit and compliance
functions to ensure there are proper frameworks in place to assess their suppliers’
adherence to applicable rules and regulations. This has fostered a renewed sense
of partnership and collaboration within the industry as client/vendor audit and
compliance teams have worked side-by-side to identify gaps, implement monitoring
procedures, and create best practices around adherence to these important
requirements. Importantly, organizations that provide services in this space must
embrace the new environment and ensure that executive leadership is engaged and
provides thought leadership to their teams in this dynamic regulatory environment.

Financial Services Focus on Compliance and Audit

There is a renewed focus and investment on vendor oversight within the financial
services industry. Typically, the vendor management department of these
organizations will risk rank their vendors based on predefined criteria such as
annual spend, service provided, potential risk to the organization, and maturity
of the suppliers’ systems and processes. In the course of a year, depending on
their size, a field services company could undergo close to 75 onsite and desk
audit assessments. There’s no question audits can be time consuming, but each
audit should be looked at as an opportunity to strengthen and enhance existing
compliance frameworks.

There are two focused audits that field services companies undergo: vendor
compliance audits and global information security audits. These audits are
focused on different criteria but often overlap in a number of areas. The
global information security audits are generally focused around the ISO 27002
control set, Information Technology Infrastructure Library (ITIL) controls, Control
Objectives for Information and Related Technology (COBIT) controls, and other
IT-related control frameworks. From a testing perspective, the IT auditors
perform reviews of:

Physical security
Business continuity and disaster recovery
Software development and change management procedures
Application permission and authority levels
Data integrity and protection (encryption)
Network vulnerability testing

As field services companies typically receive and utilize confidential consumer data,
it is imperative that the controls safeguarding this data are robust, comprehensive,
and scalable.

The vendor compliance audits focus primarily on the business processes and
procedures and the frameworks by which controls are in place to ensure quality
service delivery. Comprehensive business process control walkthroughs are
performed and transactional control testing is conducted to ensure compliance.
In the past year, the audits have expanded their scope to ensure compliance with
regulations and to assess the field services companies’ policies and procedures
as they relate to:

Comprehensive customer complaint tracking systems
Legal complaint tracking systems
Background check validation for anyone who performs
services on a property
Human resource management and systems entitlement reviews
Customer service call monitoring
Vendor management controls and scalability of network
Protection of confidential customer data and adherence to
privacy requirements

Upon completion of the audit, an exit conference is conducted to share any
findings, risk rank those findings based on a severity matrix, and agree upon
remediation activities and timelines. This also is an opportunity for the vendor
to respond to any misinformation and agree upon the formal execution of a
CAP, or corrective action plan. Progress on the CAP is monitored monthly
and evidence is provided to close out action items once completed.

To ensure compliance, many in the field services industry have invested
heavily in resources to manage their organizational risk as a supplier. From
new technology and the expansion of in-house internal audit and compliance
teams, a strong partnership of collaboration with clients is formed to proactively
and aggressively manage risk and to ensure the frameworks are in place to
maintain regulatory compliance and fully protect the consumer.

Enhanced Focus on the Supply Chain

As third-party oversight and compliance has become more formalized, it should
be seen as an opportunity to expand activities focused on the compliance and
quality frameworks of third-party providers. While many field services
companies have implemented robust administrative compliance and verification
activities when onboarding vendors in the past, much like the financial services
industry, some have taken the process to the next level by including onsite
vendor audits at their headquarters as part of the overall audit.

So what are some best practices to consider when designing a framework
for establishing the nature, timing, and extent of audit procedures? First,
perform a high-level risk assessment or tierranking activity across all
service lines to place vendors into risk categories. The purpose of the
assessment is to group vendors into “risk” tiers to determine the audit
frequency as well as to properly schedule and execute on a plan.

To facilitate an audit program, contracting with a national independent
audit firm is highly suggested. The company’s subject matter experts
can work hand-in-hand with the firm to create the audit plan, scope, and
program. The scope can include compliance issues, administrative
oversight activities, control frameworks, and substantive testing of
work orders and human resource practices. The following includes
a brief overview of the focused audit and control objectives.

Internal file review—Vendor files are inclusive of verification of proper
insurance; required acknowledgements are executed by applicable
vendor personnel; evidence of required background checks are
available; confidentiality agreements protecting client data have been
executed; and diversity certifications are present if applicable.

Business process walkthroughs—Auditors perform a general
walkthrough of the organization’s controls surrounding the applicable
business processes they perform. Gaps are discussed and best
practice discussions are offered to improve the capacity of the
organization.

Work order testing—Substantive testing focused on key criteria is
conducted on a representative sample of vendor work orders.

License affirmations—File reviews are conducted to validate that the
organization maintains the proper licensing as required by its jurisdictions
and applicable professions.

Quality control framework—A review is conducted of the organization’s
quality control processes and procedures. Evidence is noted for the nature,
timing, extent, and tools utilized to formalize its quality program.

Similar to the client audits we undergo, an exit conference is conducted
to share any findings, risk rank them based on a severity matrix, and
agree upon remediation activities and timelines. A formal CAP is executed
and progress is monitored monthly.

Compliance Frameworks and Executive Ownership

As should be evident by the increased investment in third-party oversight,
executive involvement in compliance activities must be focused and
committed. It is a dynamic environment we are operating in and having
appropriate frameworks in place to be agile, to efficiently identify risks,
and to make procedural adjustments and resource investment is critical.

Anticipating client needs, implementing best practices to minimize their
risk, and creating comprehensive frameworks to ensure transparent
communication protocols are in place from the operational departments
to the boardroom should be a priority in any organization. To proactively
identify and mitigate risk in operations and vendor network, and create
an environment of continual process and procedure improvement, a
nimble governance structure is recommended.

While there are varied ways organizations can accomplish these objectives,
a streamlined committee approach consisting of a cross section of
executive and service-line leadership will enable companies to ensure
consistency and transparency of duties for their clients.

Compliance Committee

The purpose of the Compliance Committee is to ensure compliance and
ethical behavior within the organization by defining responsibilities and
ownership, increasing awareness of compliance requirements, and
providing a mechanism for identifying and responding to new
requirements and noncompliance with existing requirements.
The committee has general oversight responsibility for compliance
programs, policies, and procedures.

The purpose of the committee is to oversee the company’s
implementation of compliance programs, policies, and procedures
that are designed to be responsive to the various compliance and
regulatory risks; assist the organization in fulfilling its oversight
responsibility for the compliance and ethics programs, policies,
and procedures; delegate responsibility for ensuring compliance;
and determine prioritization and resources necessary to have an
effective compliance program.

Security Advisory Board

The purpose of a Security Advisory Board (SAB) is to provide continuity
of knowledge, leadership, executive oversight and guidance for security
policies and activities. The SAB acts as the governing body for risk and
compliance for all of the organization. This includes both physical and
information security.

Through the assessment of security risk and application of appropriate
controls, the SAB is continually focused on the protection of confidential
data and integrity of assets in support of business objectives, physical
and financial resources, reputation, legal position, employees, partners,
and other tangible and intangible assets.

Quality Council

Comprised of executive leadership, the Quality Council’s main focus is
to review progress on quality assurance efforts and drive change based
on the results of internal audits and quality assurance initiatives. The
objectives of the Quality Council include:

Report on key metrics such as quality control results and internal
operations audit findings.
Discuss trends impacting quality of services and agree on
short- and long-term actions to address quality problems.
Provide updates on quality improvement initiatives and
prioritize quality improvement initiatives and resources.

The governance structure can be organized within any framework that
meets the organization’s goals and objectives. The key point is that
executive leadership is continually involved in risk management and that
a transparent and actionable environment is created within an organization.

The enhanced focus on compliance brought on by the regulators has
proven to provide a solid framework for third-party oversight—something
that was much needed in the field services industry. Those who welcome
the changes and continue to invest in the resources necessary to improve
their organization will continue to flourish in this dynamic environment. This
requires the collaboration and partnership with their clients, executive
ownership, and understanding of risk factors that affect day-to-day activities,
proper investment in both human and technological resources, and a focused
partnership with vendors through collaborative third-party oversight.

Please click here for the article in PDF.

Steve Meyer Discusses the Silent Hazard at Abandoned Properties

Posted on September 13, 2018October 4, 2018 by Safeguard

The April issue of Servicing Management featured an article authored by Steve Meyer, Safeguard’s AVP of high risk and hazard claims, titled The Silent Hazard At Abandoned Properties.

The Silent Hazard At Abandoned Properties
How field services companies identify and remediate damage caused by “meth labs.”

The AMC television show “Breaking Bad” brought to light an increasing problem in the U.S. Although fictional, the show featured a story line that is all too familiar in today’s world. The main character, Walter White, is faced with stage III lung cancer and has to figure out a way to support his wife and teenage son, who has cerebral palsy. He decides to use his background as a chemistry teacher to partner with an ex-student and begin manufacturing the illegal drug crystal meth, or methamphetamine.

The television show had a popular run from 2008 to 2013. It opened people’s eyes to
another world where desperate people sometimes take desperate measures to
ensure a stable life. But it also begs the question of how many Americans are like
Walter White – with only one medical diagnosis, unemployment or other catastrophic
event away from taking extreme measures to keep their lives and their families afloat.
And for those like Walter, when they do turn to those extreme measures like
manufacturing crystal meth in their homes, what damage or hazards do they leave
behind? Field services companies see first-hand the damage of crystal meth
manufacturing in properties in many neighborhoods across the country.

An increasing problem
The mortgage servicing industry has seen an increase in the past five to six years of abandoned and foreclosed homes that once housed meth laboratories, or “meth labs.” In fact, the number of properties we have reported as being contaminated from crystal meth has increased approximately 30% over the past two to three years.

The challenge is that it is difficult to identify an abandoned or vacant property that was once used to manufacture meth. It can happen in any neighborhood, town or city in the country. Whether it be the previous homeowners trying any means to keep their home – and taking desperate measures as Walter White did – or squatters entering a vacant property and manufacturing the hazardous drug, field services companies must keep their inspector and contractor networks safe, protect the integrity of the property for their mortgage servicing clients, and follow state regulations when remediating the damage.

Identifying a former meth lab
Crystal meth is a restricted or illegal drug that is colorless and odorless. According
to Medical News Today, the substance is abused because it has a long-lasting euphoric
effect on the user. There are hundreds of “recipes” on how to produce the drug, but it
can be as simple as using an over-the-counter medication containing
pseudoephedrine, household chemicals and a plastic bottle.

A meth lab is an illicit operation that contains the supplies and chemicals used to
produce the drug. They are increasingly prevalent throughout the U.S., according to
the National Drug Intelligence Center (NDIC), a component of the U.S. Department
of Justice. In 2012, the U.S. Drug Enforcement Administration (DEA) reported that
more than 11,200 labs were seized in 49 states.

A large number of properties that house meth labs end up in foreclosure – and that
number continues to increase in neighborhoods across the country. In the past six
months, our contractors cleaned up approximately 925 properties that had been
contaminated with the chemicals found in crystal meth. Of those properties, roughly
218 were bank owned (REO) or post-foreclosure sale, while 707 were not REO.

Field service inspectors and contractors have to be educated on identifying vacant or abandoned properties that were used as meth labs. Some of the common signs given by the NDIC and the DEA include the following:

Unusual odors such as rotten eggs, cat urine, nail polish remover, and ammonia
or the other chemicals used to make crystal meth;
Unusually large amounts of cold medicine containing ephedrine or pseudoephedrine;
Jars containing a clear liquid with white or red residue on the bottom;
Glass cookware or frying pans with a powdery residue;
Propane tanks with blue fittings;
Metallic ribbon stored in oil or kerosene;
Excessive amounts of debris or trash, especially chemical containers, coffee
filters or pieces of cloth that are stained red, and duct tape rolls;
Windows covered with aluminum foil or blackened in some way;
Evidence of chemical waste or dumping; and
Extensive security measures such as “No Trespassing” signs or fences.

Once a vacant or abandoned home has been determined to be a former meth lab by
either the field services vendor, or often by law enforcement, servicers will be alerted,
and the appropriate measures can be taken to reduce damages and potential hazards.

Hazards of meth labs
Field services companies must be sure their contractors are taking precautions when
entering any vacant home that has the potential for having been contaminated by the
manufacture of crystal meth. The NDIC reports that the greatest risks are the
exposure to hazardous chemicals and the potential for fire or explosion due to the
volatility of the chemicals. Chemicals in the process – like Freon, ammonia, lithium
metal, hydriodic acid and iodine crystals – can cause severe respiratory problems if
inhaled. More specifically, exposure to these chemicals can cause dizziness, nausea,
disorientation, a lack of coordination, excess fluid in the lungs, severe chemical burns
and damage to internal organs.

Other chemicals, such as acetone, red phosphorus and hypophosphorous acid, are
extremely flammable and can cause an explosion at the property, posing a risk to
people and homes in close proximity.

The best way to remediate the damage caused by meth labs is for field services
companies to employ specially licensed or credentialed contractors as required by
each state.

State laws and regulations
When field services companies are dealing with a property contaminated by the presence of a meth lab, there are no national standards or guidelines on how to access and clean up the potential hazards; however, the U.S. Environmental Protection Agency (EPA) released voluntary guidelines in 2007 based on the best-available scientific
knowledge. The EPA’s recommended guidelines include the following:

Secure the property to prevent unauthorized entry;
Hire a contractor to conduct remediation, sampling and air monitoring;
Ventilate the property;
Perform preliminary assessment and sampling;
Remove contaminated materials;
Vacuum hard surfaces, including walls and floors;
Wash the walls;
Clean and seal the heating, ventilation and air-conditioning system; and
Conduct post-remediation sampling.

Additionally, 25 states have established their own regulations for remediating meth labs
and have their own set of licensing requirements. For example, Washington has a strict
program requiring that contractors complete an application form, take the 40-hour
training class and enroll in a two-day licensing course. This must be renewed every two
years.

Indiana requires that inspectors receive a special qualification by accumulating
40 hours of experience cleaning illegal drug labs, receive eight hours of training for
supervisors, pass an exam on illegal drug cleanup with a score of 80% or better
and maintain applicable insurance – professional liability and errors and omissions
in the amount of $1 million, and pollution prevention in the amount of $3 million.

To keep up with these unique requirements, field services companies including ours
have a dedicated internal office staff and network of licensed contractors who are
familiar with each of the states’ laws.

Remediating a meth lab
When it is determined that a vacant property once housed a meth lab, a field services
company will typically flag the property or loan to ensure that no one enters the
property unless he or she is completing the remediation and is properly licensed. Then
those licensed contractors perform a pre-assessment by testing to determine the level
of contamination. Samples are taken of housing materials and the air quality within the
property.

Most states have determined “safe” levels of meth residuals. For example, California
and Ohio established 1.5 micrograms per 100 square centimeters as the health-based
remediation standard. It can vary greatly in other states.

Once testing is complete, licensed contractors create a plan for remediation. They must
wear protective equipment depending on the level of contamination. This often includes
a respirator; a chemical-protective suit; gloves; and chemical-resistant, steel-toe boots,
according to the Occupational Safety and Health Administration.

Cleanup usually consists of a triplewash/triple-rinse process. Testing and sampling is
done after each wash until the contamination levels are within the acceptable standards
established by the state where the property is located. Cleaning products such as
Crystal Clean and Simple Green are what our contractors prefer to use during
remediation. It is rare that the company’s contractors have to tear out building materials
or recommend demolition, but it can happen.

Typical costs for assessment and remediation of a meth lab at a vacant property can
vary between $2,500 and $30,000 depending on the level of contamination. Our costs
have averaged between $10,000 and $20,000 per property. These costs may be
covered by insurance.

Conclusion
The show “Breaking Bad” highlighted the growing issue of meth labs that mortgage
servicers and field services companies face every day. Inspectors and contractors
working for field services companies can be subjected to serious health and other
hazards when they discover a meth lab at a vacant property. And it can happen
anywhere.

It is important that field services companies protect not only the properties they service
for their clients, but the boots-on-the-ground vendors performing the work.

By following requirements established by state governments, these companies can
clean up the mess left behind by the Walter Whites of the world.

Steve Meyer is assistant vice president of high risk and hazard claims at Safeguard
Properties. He can be reached at steve.meyer@s.safeguardproperties.com.

Please click here to view the article as a PDF.

Joe Iafigliola Utilizes Big Data in Vendor Management

Posted on September 13, 2018October 4, 2018 by Safeguard

The April issue of DS News featured an article authored by Joe Iafigliola, Safeguard’s vice president of vendor management, titled Using Big Data to Optimize Vendor Networks.

USING BIG DATA TO OPTIMIZE VENDOR NETWORKS

Flexibility and agility are the best tools of a field services provider

Changing markets require companies to adapt with agility and speed, or they will be left
behind as others adjust and take advantage of the situation. For example, consider the
photography industry. Everything from cameras and film, to how people consume
pictures changed with the advent of digital photography. However, some industry
leaders didn’t see how the world was changing around them. Their inability to
acknowledge the digital wave and its impact on photography contributed to their
demise. And, once they finally accepted digital was more than a trend, their
competition was already firmly seated in the very market they had dominated for years.
This scenario plays out in every industry every day. The field services arena is no
different. As the industry matures, players need to be aware of how the world is
changing around them, what is driving this change, and how to remain relevant.

Changes seem to be coming from all directions. Today’s regulatory environment is
continually evolving with new federal and state oversight. Local municipalities also
are enacting new ordinances and property registrations to deal with a shrinking tax
base and the glut of vacant properties that dot the landscape. Shifts in the market are
changing the way field service companies look and function. A couple years ago, many
field services companies worked from static reports. Now interactive visualization is
used to create graphic illustrations of information to help companies better manage
everything from compliance to workforce management.

They say necessity is the mother of invention, and nowhere is this truer than in the field
services industry. The industry is in a transition era. It’s being reshaped by the
influence of strong economic, regulatory, and market forces; but the industry is also
agile and is adapting at breakneck speed.

Investments in business intelligence, technology, and quality control are spurring
innovations that were never thought of a couple years ago. These innovations are
having a significant impact on the ability to manage the boots on the ground—the field
services vendors who are working in our neighborhoods as the eyes and ears for
mortgage servicers.

APPLYING DATA TO FOSTER BUSINESS AGILITY
Field services companies gather millions of data points into their systems every day
from internal and external sources. Many are turning these nuggets of intelligence
into actionable information that can maximize the efficiency of complex vendor networks,
such as ensuring the correct number of vendors needed for each geographic region is
recruited and those vendors have the necessary skill sets. Each time an order is
completed, information is gathered and used for future analysis. For example, property
condition reports and on-time order completion can be analyzed to determine
contractor performance by geographic region. Work orders then can be allocated
based on performance history to continuously improve the quality and timeliness of
services provided to clients.

Data analytics also is being used to help clients make informed decisions about millions
of vacant, defaulted, and foreclosed properties across the country so they can
proactively address property issues, cutting down on ordinance violations and neighbor
complaints and eliminating blight. Safeguard Properties, one of the largest field
services companies in the United States, reports 15 to 20 percent of the defaulted
properties it inspects eventually become vacant or abandoned by their owners.

Mortgage companies are in a classic Catch-22 when it comes to vacant properties in
their mortgage portfolios that have been abandoned by their owners but have not
gone through the foreclosure process. Failure to identify and secure abandoned
properties in a timely manner can expose these properties to vandalism and
deterioration. On the other hand, securing a defaulted property in error, believing it
to be vacant, can expose a mortgage servicer to potentially significant financial and
legal liability.

Assuring inspections are thorough and inspectors proceed according to the most
current status of the property is critical. Field services companies that are able to
store and access a property’s data history, such as property status, color, siding
material, and architectural style, as well as the number of garages a home has,
can improve the quality and accuracy of inspections.

But data can be misleading or drive the wrong decisions until it is turned into
information. By integrating current data with historical data, predictive analytics
can be applied to help identify trends and patterns to create agility in services and
network capacity to meet changing market and client needs.

Today business intelligence has shifted the focus from having a simple overview of
what’s going on to now being able to deploy the data to discover causes, effects, and
solutions. But it all starts by asking the simple question: “What do we need to know?”
And then using data and technology to produce sound information to answer it.

INTEGRATING DATA AND TECHNOLOGY TO OPTIMIZE EFFICIENCY AND LOWER COSTS
The key combination necessary to grow and prosper in this new business landscape is
the ability to integrate the millions of data points and turn them into intuitive displays of
information. In fact, Gartner has forecasted an increase in information technology
spending in 2014 that will reach $3.8 trillion. Strategic investment in technology is the
real game-changer with expenditures in mobile technology leading the way. No longer
must a vendor be tied to a desktop or laptop to upload reports and photos. Advances
in wireless communication have severed the land line and offer vendors the freedom
to complete their work anywhere.

As consolidation in the field services industry continues, more emphasis is being placed
on efficiency, especially in managing vendors—the boots on the ground. Order
workflow has taken on a strategic focus as technology is allowing decisions to be made
at the property level. Heat maps that visually plot which contractors in an area have
extra capacity help to determine where work orders should be funneled. Supply chain
network designers utilize this information to determine where to issue work orders and
to which vendors. This information is overlaid with vendor quality results to determine
optimal order distribution. It also can alert to the need to change order flow and work
distribution to another vendor, if for example, a vendor runs into a capacity issue
related to a significant amount of work at a property and needs additional time before it
can take another work order. Data analytics and heat maps can identify the next best
choice and route work to a different vendor. Distribution of work orders verified by data
analytics reduces time loss, leading to faster response times, improved compliance,
higher quality of work, and ultimately, reduced costs.

For clients, this efficiency also translates into a higher return on their investments in the
form of lower field service costs. As banks place more and more emphasis on
reinvesting in vacant properties and getting squeezed by compliance burdens, field
service companies need to be cognizant of this new dynamic and savvy enough to
integrate data from the field with technology to create processes that optimize efficiency.

SELF-AUDITS: IMPROVING PERFORMANCE AND SATISFYING REGULATORS
Although market conditions have evened out as the country appears to leave the
financial crisis behind, the rules of the mortgage game are still changing. New and
tighter regulations are squeezing an already highly-regulated mortgage industry,
putting players at greater risk than previously experienced. This scrutiny not only
affects mortgage companies, but also cascades down to field services companies
and their vendors and employees. But it doesn’t stop there. It cascades further
down to sub-vendors who must also comply with all regulatory requirements.

Field services companies are finding themselves in a unique position to help their
servicing clients maneuver through myriad of government regulations, as well as
strengthen their own risk-management requirements. Servicers today must
document nearly every process to demonstrate compliance. To monitor and
ensure compliance with internal policies and external regulatory requirements,
companies not only audit their own processes and outcomes, but also those of
their vendors and suppliers. And this has never been more important than in
today’s mortgage servicing business.

The ability to maintain compliance ultimately rests on having sound processes. What
processes are in place to ensure client and customer confidentiality? Are vendors
and their subs licensed in the various municipalities in which they are working? Are
work orders being distributed in the most efficient way possible? The list goes on
and on.

Vendor audits add another level of oversight and are a useful tool in developing
competencies that can help vendors complete work accurately and on time.

A strong focus on compliance and quality control procedures helps assure all parties
involved—vendors, field services companies, mortgage servicers, and
investors—comply with all regulations and ordinances. This protects the condition
and value of vacant and abandoned properties, upholds the value and integrity of
surrounding properties and neighborhoods, and protects the most fragile
communities from expanding blight.

Being agile in today’s business world means being adaptable. It means managing
ever-evolving needs and regulations. It means creating nimble operations that can
see the forest through the trees as market conditions shift. The common thread
that spans the field services industry is that property and neighborhood preservation
will continue to be vital to the servicing industry; and data, technology, and
compliance are the new forces driving the field services companies that will succeed
in this new world.

Please click here to view the article in PDF.

George Mehok Discusses Big Data in the Field Service Industry

Posted on September 13, 2018October 4, 2018 by Safeguard

The March issue of Mortgage Banking Magazine featured an article authored by George Mehok, Safeguard’s chief information officer, titled Big Data in the Field Service Industry.

Big Data in the Field Service Industry
Transforming property preservation data into valuable business information

When you come right down to it, property preservation companies are in the risk-mitigation business. Our primary job is to help reduce the financial and reputational risks that vacant, defaulted and foreclosed properties pose to our mortgage servicing clients and communities across the country.

The month of January 2014 certainly raised our awareness around two major challenges for the mortgage industry from a property preservation perspective: reducing the negative effects of severe weather on vacant and abandoned properties, and ensuring vendor compliance with expanding regulatory requirements.

During January, severe cold weather gripped much of the Midwest and Northeast, greatly increasing the risk of potentially costly freeze-related damage to millions of vacant and abandoned properties across the country.

On Jan. 10, the new Consumer Financial Protection Bureau (CFPB) rules took effect–the latest of a crush of federal, state and municipal regulatory requirements imposed on the mortgage industry in the wake of the housing crisis.

Unrelated as these issues may seem — protecting properties against severe weather damage and compliance with regulatory requirements — they share a common resource to help mitigate their associated risks: data and the technology to turn that data into valuable information to make more effective business decisions.

“Big data” has become the big buzzword in the business world, especially as Facebook™, Twitter^®, Yahoo and any number of social media and online companies peg staggering market values to their ability to capture and sell vast amounts of data about their users. Nearly every major consulting firm is promoting its ability to help companies harness the power of big data to drive market share and revenues.

The mortgage industry certainly relies on data to support loan origination and track the quality and performance of loans. It utilizes data to evaluate and mitigate risk and monitor compliance with regulatory requirements, including tracking the performance of vendors and agents representing them in every facet of the mortgage process.

Without data, the mortgage industry, like every other industry, simply couldn’t function.

At the same time, The Wall Street Journal’s CIO Journal reported in October 2013 on a survey conducted by Boston-based Bain & Co. Inc. that found only 4 percent of business leaders at large companies believed data analytics helped them make better business decisions or improve financial performance within their organizations. This study included companies in the financial services industry.

The fact is, not all data is useful. It can be trash or treasure, depending on an organization’s ability to effectively capture, store, categorize, mine, analyze and use it.

As the largest property preservation company in the United States, Safeguard Properties gathers millions of data points into its system every day from internal and external sources that can help us and our clients make informed decisions about millions of vacant, defaulted and foreclosed properties across the country.

In addition to using data for decision-making about properties, we use it to develop analytics to monitor our operational performance and continuously improve the quality and timeliness of services we deliver to our clients. We also use business intelligence data to maximize the efficiency of our vendor network, ensuring that we recruit the right types and quantities of vendors needed for each geographic region, and that we allocate work based on the best performance.

The use of analytics at Safeguard has helped to transform the decision-making process by supporting it with fact-based, data-driven analysis. The process of turning that data into useful business intelligence begins by asking the question, “What do we need to know?” and then using data and technology to produce sound information to answer it.

A practical example of how business intelligence is transforming Safeguard’s decision making process is its use in determining Safeguard and vendor performance. Safeguard processes millions of orders monthly. These orders are then analyzed by sophisticated business intelligence software to produce detailed scorecards used to grade our on-time and quality performance for each inspection and maintenance order type. The scorecards assist Safeguard in creating corrective actions to its business processes and contractor work order allocation. This analysis is a critical ingredient to managing a complex vendor network.

To view the article in its entirety, please click on the PDF.

Alan Jaffa Weighs in on Foreclosure Fast-Tracking

Posted on September 13, 2018October 4, 2018 by Safeguard

In its March issue of DS News, a Point-Counterpoint article was published, titled Not So Fast. In it, Safeguard’s CEO Alan Jaffa weighs in on foreclosure fast-tracking timelines and is countered by Ilyce Glink, owner of Think Glink Media.

NOT SO FAST
No one is arguing against healing communities holistically, but varying opinions prevail
in how to approach a solution—begging the question, how fast is too fast when
fast-tracking foreclosures?

The conversation around fast-tracking foreclosures is picking up speed, but not without hitting a few speed bumps. Namely, deciding what properties qualify for fast-tracked foreclosure and how to treat them. Alan Jaffa and Ilyce Glink weigh in on why fasttracking is good in theory, and probably a good practice, but should slow down until the details surrounding them are ironed out.

According to Alan Jaffa
What is an abandoned property? We know it when we see it—or we think we do. It’s the neighborhood eyesore, the house with high grass, overgrown bushes, and debris in the yard. Nobody has been seen living there for months. The utilities are off. Maybe a section of fence around a swimming pool has fallen down, posing a safety risk to children playing in the area.

It’s estimated that about 14 percent of all homes in the U.S.—about 18 million properties—are vacant. Identifying which of those are, in fact, abandoned has become one of the biggest challenges the mortgage industry faces when properties go into default.

Despite what may seem obvious to many, no standard definition of an abandoned property exists, yet mortgage servicers are expected to identify an abandoned property, protect it from damage, and maintain it until it moves through foreclosure.

It’s a Catch-22 for the mortgage industry. Failure to secure a property believed to be abandoned can expose the property to severe damage and vandalism and pose safety and nuisance risks to surrounding neighborhoods. Servicers also are at risk for severe municipal fines and financial penalties for failing to act quickly to secure and protect the property.

On the other hand, the industry faces reputational and litigation risks for securing a property prior to foreclosure if it is challenged by the homeowner, no matter how compelling the evidence that nobody was living there.

Lawmakers and business leaders are searching for ways to rebuild communities. Repairing and restoring vacant and abandoned properties is critical to that process—to stabilize at-risk neighborhoods, stem blight, stop the out-migration of residents, and uphold property values. Restoring abandoned properties offers affordable housing alternatives to
first-time homebuyers and lower-income families. And it brings new vitality to communities, as businesses choose to locate in what become trendy neighborhoods and municipalities shore up their tax bases.

But the process of rebuilding can only start after an abandoned property moves through foreclosure and into new hands—a responsible homeowner, a reputable investor, a land bank, or a community development organization committed to revitalization.

The longer the process takes, the more damage is done—to the property, to the neighborhood, and to the community. Even abandoned properties that receive regular inspections and maintenance services will deteriorate because of damage and
vandalism. They lose value, negatively impact surrounding properties, and drain revenues from municipalities.

Expediting the foreclosure process—just for properties that are designated as abandoned—is the single most effective step that individual states can take to protect property values and revitalize struggling neighborhoods.

Foreclosure fast-track legislation also would define an abandoned property in each state, as the states of Illinois and New Jersey did when they enacted foreclosure fast-track laws in the past two years. This can offer important guidance and help
mitigate risk for the mortgage industry and their field service partners tasked with identifying those properties.

In the meantime, the mortgage servicing industry and investor community can take the leadership by coming together to agree on a common definition of abandonment as a guidepost for states and municipalities to consider.

According to Ilyce Glink
As a real estate columnist and call-in radio talk show host, I’ve been hanging out at the front lines of the mortgage and housing crisis for years. I’ve listened to, and commiserated with, the stories of folks who lost control of their financial lives due to economic circumstances beyond their control, only to then lose their homes by what can only be described as “misguided” financial policies of the lending industry, not to mention those of the federal and state governments.

It’s not a pretty place to begin a conversation over expediting foreclosures. Beyond lawsuits, national settlements, and fines are families who have suffered real and quite serious losses, many from foreclosures that should have never happened.
Government programs that were supposed to help people refinance, modify their loans, or find other options to avoid foreclosure were slow and, in some cases, non-starters. It was as if the mortgage industry was trying to run through a sea of Jell-O.

Once homeowners caught onto the idea that there was no good way out, many opted for strategic default, leaving their homes in the wake of endless rounds of lost documentation and temporary, but never permanent, loan modifications. On the other side, lenders often started foreclosure proceedings—causing thousands of homeowners to pack up and
depart—but then never actually took possession, leading to today’s so-called zombie foreclosure problem.

It seems like a calculated move on the part of the mortgage holders to avoid the costs of maintaining a foreclosed home until they can sell it. And perhaps at the 30,000-foot level, it is. On the ground, it has created a literal wasteland of neighborhoods, pockmarking the country with abandoned, deteriorating, and crime-infested homes.

Lenders should step in and maintain these properties. By doing so, they would limit blight, squatters, and other illegal activity that vacant homes attract and improve home values across the neighborhood. But local lawmakers and leaders are
struggling to make this happen. By one count, more than 1,000 laws have been passed to try to deal with this problem. Simply the variety of legal definitions that exist to describe vacant property points to the many scenarios in which a foreclosure should be expedited so this problem can be solved.

So here are a few circumstances where I think expediting foreclosures makes sense:

The mortgage, home equity loan, and property taxes haven’t been paid for years. Regardless of who is living in the house (if anyone is), nobody’s paying for it and that’s not helpful to the lender or the community.

The home has long been vacant. If the previous owners moved, removed all their furniture and personal belongings, and forwarded their mail to a new address, that too is sign that the home is abandoned and a foreclosure should be expedited.

The house shows obvious signs of abandonment. Papers and mail have piled up. There are broken windows. Kitchens, baths, mechanical systems, and copper piping have been stripped. Grass is uncut and exterior landscaping is unkempt and perhaps littered with junk. Water, gas, and electric service to the house have been stopped. Notices of unpaid utilities or unaddressed code violations have been taped to the door. And there is a distinct absence of blinds, curtains, and
furnishings inside the home.

There are obvious signs of illegal activity that endangers the entire neighborhood. Signs of squatters, drug use, and gangs are all damaging to property values. The good news is that the neighbors always know what’s going on. The smart
move? Post signs on the front door with a toll-free number so they can call and report what’s going on with the property.

Combining any of these factors (such as nonpayment of the mortgage for years plus signs of illegal activity and abandonment) increases the odds that the house should be taken through the foreclosure process quickly.

But expediting foreclosure doesn’t make sense if the mortgage holder hasn’t already done the basic research required to find out the status of the homeowner and the home itself.

Please click here to view a PDF of the article.

Joe Iafigliola Reveals Vendor Management Best Practices in Property Preservation

Posted on September 13, 2018October 4, 2018 by Safeguard

In its December issue, Servicing Management published an article authored by Safeguard’s Joe Iafigliola, vice president of vendor management, titled Vendor Management Best Practices In Property Preservation.

Vendor Management Best Practices In Property Preservation
Building a trained and qualified vendor network is core to a property preservation firm’s success.

In the property preservation industry, the tens of thousands of vendors who inspect, secure and maintain vacant and abandoned properties are critical partners to protect the value and condition of those properties and the neighborhoods and communities around them – and to minimize the financial and reputational risk that mortgage servicers face.

Various studies over the years have noted that the presence of a vacant property in a neighborhood can negatively impact surrounding home values by tens of thousands of dollars – not to mention the cost to communities resulting from reduced tax valuations, and the added burden on city services to address crime and nuisances associated with vacant properties.

Additionally, mortgage servicers and the government-sponsored enterprises (GSEs) that back mortgage loans are more focused than ever on compliance with municipal and state vacant-property ordinances, regulatory requirements and guidelines. Failure to secure and maintain vacant and abandoned properties in a timely manner increasingly results in significant fines and penalties and harm to an institution’s reputation in the community.

Finding excellent vendor partners, evaluating their capabilities, training them on regulatory guidelines and industry procedures, monitoring their work to assure quality and compliance, and providing them with industry-leading tools to perform their jobs at the highest levels of quality and professionalism are critical to a property preservation firm’s success in protecting properties, neighborhoods and communities.

What follows are proven methods for building a trained and qualified vendor network, based on our company’s experience.

Recruiting and screening
The overall system of vendor management, while utilizing tools, technologies and the most effective business processes, ultimately relies on people and relationships. The best source for identifying and recruiting new vendors is a property preservation company’s existing vendor network.

Property preservation companies are wise to encourage organic growth within their vendor networks. Vendors who perform at the highest levels of quality and timeliness and who understand what it takes to be successful in the field are the best referrals for recruiting new vendor companies – and the best candidates for expanding their own businesses across larger regions.

Key to this strategy is clearly communicating the opportunities, providing a thorough and clear business application process, and utilizing capable professionals to work with vendor companies to develop an effective business plan for expanding their operations.

Outreach to recruit prospective vendors also is critical, as relying on organic growth may not be sufficient to meet the demands for inspecting and maintaining properties in every geographical region. Maintaining an active profile and presence on social media sites such as Facebook and LinkedIn can be an effective tool to identify prospective vendors. Also effective are traditional business networking activities through local chambers of commerce and Better Business Bureau offices to generate potential leads.

Another important component in the recruitment process is diversity, because a network that reflects and is sensitive to the diversity of the community in which vendors work will be more successful and effective. Therefore, we seek to identify vendor companies that demonstrate diversity in ethnicity and gender, as well as provide opportunities for military veterans and people with disabilities.

Regardless of their origin, every lead must be carefully and completely screened. A rigorous and thorough screening protocol based on characteristics of the most successful vendors provides a strong benchmark to predict likely success in prospective vendors. Among these are the vendors’ experience in the field service industry, the manner in which they perform their own internal quality controls, their track record in delivering a quality product and their levels of capital to sustain them through the business cycle.

The majority of leads do not make it through this screening process. Candidate companies that pass the initial screening move to the next step: the qualification process.

Vendor qualification
After an initial screening, qualification experts more thoroughly review each vendor candidate to better understand the vendor’s business processes, organizational structure, operation, staffing, experience and quality control procedures to assure that they have the depth, business knowledge, equipment, people and experience to meet timelines and quality standards.

At this point, background checks are performed on the principals and any individuals within the vendor company who sign required documents.

To qualify as a network vendor, companies also must carry appropriate insurance coverage. Those lacking sufficient coverage are referred to brokers who can help vendors understand the unique insurance requirements of the field service industry and help them obtain appropriate coverage to protect their own companies, their clients and their field service partners in the event of an issue.

Onboarding and training
Once vendor companies have demonstrated their qualifications, passed required background checks, and met insurance and other requirements, they can begin the onboarding process. This consists of classroom training and field training to become credentialed.

The onboarding process utilizes an eLearning platform developed by local universities. Principals of the vendor company must complete a curriculum that begins with an understanding of the work-order process, including how work orders are received, updated and submitted in a work-order submission portal. Access to the learning portal also is given to a vendor’s quality control leaders, crew leads and any other individuals at the vendor company who wish to complete the curriculum.

The learning curriculum is broad and deep. It includes videos on virtually every aspect of inspection and maintenance in the field, from how to determine the occupancy status of a property – to the proper procedures to perform a lock change, winterize plumbing or secure a fence. Offering training through a distributed eLearning platform has enhanced the quality and participation levels among vendors, as it allows vendors and their crew members the flexibility to take the classes to meet their schedules. It also provides an audit trail so that the field service company can track and monitor participation levels to assure that all training is completed.

After the completion of the onboarding training curriculum, new vendors move to the field work phase to receive credentialing. This is a probationary period during which each work order given to the vendor is monitored by a member of the vendor management team with expertise in credentialing. Credentialing experts offer comprehensive hands-on training and work with vendors one-on-one to assure that they understand the entire work-order process, from reading and understanding the work order, to updating it in the system and submitting final invoices. Vendors must demonstrate that they have completed a set number of work orders correctly before they can become fully credentialed.

An important component of credentialing is that it is “event-based,” not “time-based.” Depending on the geography and volumes, vendors may meet their requirements to complete work orders to expected standards in weeks or months.

As part of the credentialing process, quality and performance goals are also established, and each vendor must meet these goals to successfully graduate from the credentialing program. Once the vendor graduates, the field quality representative in charge of the vendor’s area will be notified. That field quality representative will continue to inspect a sampling of the vendor’s completed work orders, meet with vendors at their offices and continue to review their business processes, particularly quality control procedures.

Field quality representatives have ultimate responsibility for the quality of vendors in their areas. They are assessed using a scorecard that measures their vendors’ compliance with work orders and the quality of the properties they worked on.

Quality assurance
Training does not end when a vendor becomes a credentialed member of the network. Rather, it is ongoing. Vendors and their crews have continuous access to the eLearning curriculum to review training materials and best practices and receive updates to requirements, processes and procedures.

Additionally, on an almost-weekly basis, field quality representatives conduct field training sessions in their areas on best practices for services such as landscape maintenance, winterizations and monthly interior inspections to identify active water leaks and other potential issues.

In fact, the field quality leaders in each of the 64 geographical regions are critical to assuring that vendors meet specifications and standards. They own the quality results delivered by vendors and collectively perform thousands of quality inspections each month to assure that vendors are performing to required standards. These include accompanied field visits with vendors; unaccompanied property visits to check up on work performed; and discussions with owners, crew leads and quality control leaders at vendor companies. Vendors are audited, as well, on their compliance with company policies and procedures, such as those requiring that all vendors perform background checks on their work crews – both employees and subcontractors who perform work at properties. Scorecards and “heat maps” are developed to evaluate and visually plot the performance of vendors in each market, reflecting trends in quality both for vendors and the field quality representative responsible for a particular area.

Extending the reach of the field quality control team is a separate team of 20 analysts who utilize a property inspection network to conduct third-party reviews of work completed. These analysts compare the results of the inspector with those submitted by the contractor who performed the service. If discrepancies or inconsistencies are found, appropriate actions and follow-up are taken. These can include anything from requiring additional training, to taking disciplinary action. Each month, thousands of third-party follow-up inspections are performed. The results of these inspections, as well, are consolidated into scorecards and heat maps, so that vendor performance can be monitored and improved on an ongoing basis.

Orchestrating a comprehensive vendor recruitment, training and management process delivers value, not only to the organization, but to the mortgage servicing industry and the communities in which vacant, defaulted and foreclosed properties exist. A strong focus on compliance and quality control procedures helps to assure that all parties involved – vendors, property preservation companies, mortgage servicers and investors – comply with all regulations and ordinances. This protects the condition and value of vacant and abandoned properties, upholds the value and integrity of surrounding properties and neighborhoods, and protects the most fragile communities from expanding urban blight.

Joe Iafigliola is vice president of vendor management at Safeguard Properties. He can be reached at Joe.Iafigliola@s.safeguardproperties.com.

Please click here to view the article in PDF.