Robert Klein Contributes Feature Article in DSNews

Worth the Risk?? Managing the Challenges of Vacant, Low-Value Properties in Your Portfolio?

The stories of how vacant properties wind up vacant are almost as varied as the properties themselves. Two years ago, so-called bank walkaways began to make headlines as part of the housing crisis. Since then, the public perception has come to be that mortgage companies are the reason why most vacant and abandoned properties exist.

The fact is, far more vacant properties exist because of homeowner abandonment, not bank walkaways. Homeowners in default often abandon their properties without making contact with their mortgage companies. When this happens, field service companies are tasked with conducting default inspections for mortgage servicers. These inspections have one goal: to verify occupancy on a home in default.

Industry data indicates that 20 percent of the properties inspected are eventually found vacant?abandoned by the homeowner. Once a home is determined vacant, a property preservation team will take steps to secure the property and will continue to inspect and maintain it as long as it remains in the servicer?s portfolio.

In many cases of homeowner abandonment, no lienholder even exists. Vacancies often result when an aging parent with no mortgage moves into a nursing home or passes away and leaves the home to children who may not be in a financial position to keep up with utilities, taxes, and maintenance. The home is simply abandoned.

Regardless of how properties become vacant, the result is that they are at high risk to lose value because of vandalism and deteriorating conditions. They are more likely to create a nuisance and safety risk to the neighborhood, straining already cash-strapped municipal budgets. Beyond that, they also negatively impact the value of surrounding properties.

Ideal World vs. Real World
In an ideal world, if a homeowner defaulted on a loan, the mortgage company would make contact with the owner and discuss his or her financial situation. The mortgage company would talk about the possibility of a loan modification, short sale, or a deed-in-lieu of foreclosure. If those options were not viable, a foreclosure proceeding would begin. The homeowner would remain in the home through the foreclosure and vacate after the foreclosure sale concluded. During that time, the home would be occupied and thus protected. It would not create a nuisance; its value would be maintained; and its condition would not deteriorate. As an REO, the property would be placed on the market for sale.

Unfortunately, the real world presents a much different scenario. More homeowners with underwater mortgages are abandoning properties, leaving the responsibility to mortgage companies to keep them maintained and secured.

The mortgage industry spends billions of dollars a year on field servicing to perform ongoing inspections and maintenance services on vacant properties in its portfolios. This is done not only to protect collateral interests in these properties, but also to uphold property values and protect the well-being of the neighborhoods in which they are located.

However, even a vacant property that receives the highest level of property preservation services will deteriorate because there is simply no better substitute than occupancy for keeping a property in prime condition.

To address today?s real-world housing challenges, the mortgage industry focuses on four key strategies to reduce the numbers of vacant properties, maintain the value and condition of properties that do become vacant, and return vacant properties to viable occupancy as quickly as possible.

1 Reducing Lengthy Foreclosure Processes
Depending on the state, the foreclosure process can take several months?or even years?to complete. The rationale behind a protracted foreclosure process is to protect the homeowner and allow more time for the mortgage company and the borrower to explore alternatives to foreclosure.

That said, when a property is vacant and is without a homeowner to protect it, a drawn-out foreclosure process can be counterproductive. Vacant properties must follow the same foreclosure process as occupied properties. Government moratoriums on foreclosure sales and the recent voluntary halts in foreclosures by mortgage servicers in response to robo-signing controversies only extend the time vacant properties remain in limbo.

Meanwhile, the vacant property is at greater risk despite ongoing field service attention. Squatters may move in, or the property could become a haven for illegal drug activity. Thieves will remove copper pipes, furnaces, ductwork, aluminum siding, and other metals to sell for a few hundred dollars. The resulting damages often render the home valueless. In fact, the property may actually end up with negative value because demoli-tion costs can exceed the market value.

For this reason, the mortgage industry advocated for change in state laws to allow vacant properties to move through the foreclosure process as quickly as possible. This is critical to protect property values and their condition and to prevent them from contributing to neighborhood blight.

Once a property is certified as vacant, it should be treated differently from an occupied property and accelerated to foreclosure. This change helps maintain the safety of neighborhoods, stabilize housing values, reduce the strain on municipal budgets, and uphold a community?s tax base.

2 Code Enforcement Outreach and Collaboration
The mortgage industry and code enforcement officials across the country share a common goal to address code violations and other vacant property issues as quickly as possible. For years, mortgage servicers and enforcement officials have worked to overcome myriad challenges that stand in the way of sending and receiving timely notification when property issues occur.

When many cities enacted vacant property ordinances as a means to identify a current contact for notification of property issues, the mortgage servicing industry offered alternatives to help cities achieve that goal without the administrative burden and at lower cost. By engaging in dialogue at conferences and code enforcement summits, both sides learned to understand each other?s organizational challenges and identify ways to overcome them and connect more effectively.

Today, code enforcement officials in major cities and smaller municipalities alike have access to new resources that provide instant communication with property preservation contacts who have authority to act immediately to address code violations and other property issues.

Field service companies also collaborated with city code enforcement departments to share best practices, such as the most effective ways to secure properties and winterize plumbing to prevent burst pipes.

While it is impossible to calculate the value of such collaboration, the savings to servicers in reduced fines, penalties, and property damages can add up to millions of dollars. At the same time, protecting housing stock and the safety of neighborhoods is invaluable to code enforcement officials and municipalities.

3 Reaching Out to Help Borrowers
Another perception that persists in the minds of the public is that mortgage companies are eager to foreclose on defaulted borrowers. The data tells a different story. RealtyTrac reported that in 2010, 1 million homes were foreclosed. At the same time, the Mortgage Bankers Association (MBA) reported that 1.5 million borrowers received loan modifications.

Why were there 50 percent more loan modifications than foreclosures? It simply makes more sense for everyone concerned. Loan modifications help borrowers keep their homes and stabilize their lives. They help communities by reducing the potential inventory of vacant properties. Lastly, it is more cost effective for servicers to keep bor-rowers in their homes than to foreclose and sell the properties.

Yet efforts such as loan modifications and short sales are not without their challenges. Many borrowers who pursue modification are overwhelmed by the paperwork necessary to qualify for government programs and fail to complete the process. To overcome this, servicers are offering assistance. The long time frames to complete short sales often result in missed sales opportunities, and right now, the industry is discussing ways to reduce the wait.

Among the best practices discussed in the industry is providing a ?one-stop? contact for borrowers to help them understand all of their options?loan modifications, short sales, and deeds-in-lieu. Servicers also contribute financially to nonprofit organizations that provide counseling and assistance to troubled borrowers.

Mortgage servicers recognize that borrowers facing foreclosure are under tremendous stress and are working to help them find the right solution to regain their financial footing.

4 Pursuing New Alternatives for Property Disposition
Unfortunately, in many cities, there are far fewer homebuyers than homes available for sale. In these cities, legislative efforts are influencing urban planners and the mortgage industry to collaborate on new ways to dispose of surplus properties.

For many years, mortgage servicers donated properties on an individual basis to land banks, land trusts, and neighborhood development agencies.

One such market taking advantage of these programs is Cuyahoga County, Ohio, which includes Cleveland. A land bank was established in 2010 that demonstrated early success. Now other cities are studying it as a model for their own programs.

The Cuyahoga County Land Bank already took in hundreds of low-value and distressed properties from large servicers, HUD, and Fannie Mae. These homes will be evaluated and either assembled into parcels for new use, demolished, renovated, or sold. The city of Chicago is in the process of establishing a not-for-profit entity that can function in a similar way as a land bank.

Private investors also are considering ways to purchase portfolios of surplus properties from lenders and servicers prior to foreclosure and allowing borrowers to remain in the homes as tenants.

No one solution will help the country move out of the housing crisis, just as no one factor led to its creation. One element common among the strategies showing the most promise, however, is a willingness and a commitment to address the challenges in a spirit of collaboration. And teaming up to work together toward a common goal is an approach that?s anything but risky.

Robert Klein is founder and chairman of Safeguard Properties, the largest mortgage field services company in the U.S.

About Safeguard
Safeguard Properties is the largest privately held field services company in the country. Located in Cleveland, Ohio and founded in 1990 by Robert Klein, Safeguard has grown from a regional preservation company with a few employees and a handful of contractors performing services in the Midwest, to a national company with over 800 employees. Safeguard is supported by a nationwide network of subcontractors able to perform any requested superintendence, preservation, and maintenance functions, as well as numerous ancillary services in the U.S., the Virgin Islands, and Puerto Rico.

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CHIEF EXECUTIVE OFFICER

Alan Jaffa

Alan Jaffa is the chief executive officer for Safeguard, steering the company as the mortgage field services industry leader. He also serves on the board of advisors for SCG Partners, a middle-market private equity fund focused on diversifying and expanding Safeguard Properties’ business model into complimentary markets.

Alan joined Safeguard in 1995, learning the business from the ground up. He was promoted to chief operating officer in 2002, and was named CEO in May 2010. His hands-on experience has given him unique insights as a leader to innovate, improve and strengthen Safeguard’s processes to assure that the company adheres to the highest standards of quality and customer service.

Under Alan’s leadership, Safeguard has grown significantly with strategies that have included new and expanded services, technology investments that deliver higher quality and greater efficiency to clients, and strategic acquisitions. He takes a team approach to process improvement, involving staff at all levels of the organization to address issues, brainstorm solutions, and identify new and better ways to serve clients.

In 2008, Alan was recognized by Crain’s Cleveland Business in its annual “40-Under-40” profile of young leaders. He also was named a NEO Ernst & Young Entrepreneur of the Year® finalist in 2013.

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Chief Operating Officer

Michael Greenbaum

Michael Greenbaum is the chief operating officer for Safeguard. Mike has been instrumental in aligning operations to become more efficient, effective, and compliant with our ever-changing industry requirements. Mike has a proven track record of excellence, partnership and collaboration at Safeguard. Under Mike’s leadership, all operational departments of Safeguard have reviewed, updated and enhanced their business processes to maximize efficiency and improve quality control.

Mike joined Safeguard in July 2010 as vice president of REO and has continued to take on additional duties and responsibilities within the organization, including the role of vice president of operations in 2013 and then COO in 2015.

Mike built his business career in supply-chain management, operations, finance and marketing. He has held senior management and executive positions with Erico, a manufacturing company in Solon, Ohio; Accel, Inc., a packaging company in Lewis Center, Ohio; and McMaster-Carr, an industrial supply company in Aurora, Ohio.

Before entering the business world, Mike served in the U.S. Army, Ordinance Branch, and specialized in supply chain management. He is a distinguished graduate of West Point (U.S. Military Academy), where he majored in quantitative economics.

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CHEIF INFORMATION OFFICER

George Mehok

George Mehok is the chief information officer for Safeguard. He is responsible for all strategic technology decisions, new systems deployments and data center operations supporting a national network of more than 10,000 mobile workers.

George has more than 20 years of leadership experience dedicated to high-growth companies in the mobile telecommunications and financial services industries, spanning startups to global industry leaders.

George played a senior role in the formation of Verizon Wireless, leading the IT product development and strategic planning team. He led the integration planning for the Verizon merger including: GTE, Vodafone-AirTouch, Bell Atlantic Mobile and PrimeCo.

As chief information officer at Revol Wireless, a VC-backed CDMA wireless communications network operator, George’s team implemented an integrated technology infrastructure and award-winning business intelligence platform.

George holds a bachelor’s degree in political science and economics from Eastern Michigan University and an M.B.A. from The Ohio State University. He is a board member of Akron University’s School of Business Center for Information Technology, in addition to an advisory board member for OHTec.

In 2013, George won the Crain’s Cleveland Business CIO of the Year award for his team’s work in completing a major acquisition and technology transformation at Safeguard. In 2015, George’s team was recognized by InformationWeek’s annual Elite 100 ranking of the most innovative U.S.-based users of business technology. The mobile inspection technology developed at Safeguard was selected as InformationWeek’s “One of the top 20 ideas to steal in 2015”.

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General Counsel and Executive Vice President

Linda Erkkila, Esq.

Linda Erkkila is the general counsel and executive vice president for Safeguard, with oversight responsibilities for the legal, human resources, training, compliance and audit departments. Linda’s broad scope of oversight covers regulatory issues that impact Safeguard’s operations, pro-active risk mitigation, enterprise strategic planning, human capital and training initiatives, compliance and audit services, litigation and claims management, and counsel related to mergers, acquisition and joint ventures.

Linda’s oversight of the legal department along with multiple compliance and human capital focused departments assures that Safeguard’s strategic initiatives align with its resources, leverage opportunities across the company, and contemplate compliance mandates. Her practice spans almost 20 years, and Linda’s experience, both as outside and in-house counsel, covers a wide range of corporate matters, including regulatory disclosure, corporate governance compliance, risk assessment, executive compensation, litigation management, and merger and acquisition activity. Her experience at a former Fortune 500 financial institution during the subprime crisis helped develop Linda’s pro-active approach to change management during periods of heightened regulatory scrutiny.

Linda previously served as vice president and attorney for National City Corporation, as securities and corporate governance counsel for Agilysys Inc., and as an associate at Thompson Hine LLP. She earned her JD at Cleveland-Marshall College of Law. Linda holds a degree in economics from Miami University and an MBA. In 2017, Linda was named as both a “Woman of Influence” by HousingWire and as a “Leading Lady” by MReport.

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Chief Financial Officer

Joe Iafigliola

Joe Iafigliola is the Chief Financial Officer for Safeguard. Joe is responsible for oversight of the Control, Quality Assurance, Accounting and Information Security departments, and is a Managing Director of SCG Partners, a middle-market private equity fund focused on diversifying and expanding Safeguard Properties’ business model into complimentary markets.

Joe has been in a wide variety of roles in finance, supply chain management, information systems development, and sales and marketing. His career includes senior positions with McMaster-Carr Supply Company, Newell/Rubbermaid, and Procter and Gamble.

Joe has an MBA from The Weatherhead School of Management at Case Western Reserve University, is a Certified Management Accountant (CMA), and holds a bachelor’s degree from The Ohio State University’s Honors Accounting program.

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AVP, High Risk and Investor Compliance

Steve Meyer

Steve Meyer is the assistant vice president of high risk and investor compliance for Safeguard. In this role, Steve is responsible for managing our clients’ conveyance processes, Safeguard’s investor compliance team and developing our working relationships with cities and municipalities around the country. He also works directly with our clients in our many outreach efforts and he represents Safeguard at a number of industry conferences each year.

Steve joined Safeguard in 1998 as manager over the hazard claims team. He was instrumental in the development and creation of policies, procedures and operating protocol. Under Steve’s leadership, the department became one of the largest within Safeguard. In 2002, he assumed responsibility for the newly-formed high risk department, once again building its success. Steve was promoted to director over these two areas in 2007, and he was promoted to assistant vice president in 2012.

Prior to joining Safeguard, Steve spent 10 years within the insurance industry, holding a number of positions including multi-line property adjuster, branch claims supervisor, and multi-line and subrogation/litigation supervisor. Steve is a graduate of Grove City College.

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AVP, Operations

Jennifer Jozity

Jennifer Jozity is the assistant vice president of operations, overseeing inspections, REO and property preservation for Safeguard. Jen ensures quality work is performed in the field and internally, to meet and exceed our clients’ expectations. Jen has demonstrated the ability to deliver consistent results in order audit and order management.  She will build upon these strengths in order to deliver this level of excellence in both REO and property preservation operations.

Jen joined Safeguard in 1997 and was promoted to director of inspections operations in 2009 and assistant vice president of inspections operations in 2012.

She graduated from Cleveland State University with a degree in business.

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AVP, Finance

Jennifer Anspach

Jennifer Anspach is the assistant vice president of finance for Safeguard. She is responsible for the company’s national workforce of approximately 1,000 employees. She manages recruitment strategies, employee relations, training, personnel policies, retention, payroll and benefits programs. Additionally, Jennifer has oversight of the accounts receivable and loss functions formerly within the accounting department.

Jennifer joined the company in April 2009 as a manager of accounting and finance and a year later was promoted to director. She was named AVP of human capital in 2014. Prior to joining Safeguard, she held several management positions at OfficeMax and InkStop in both operations and finance.

Jennifer is a graduate of Youngstown State University. She was named a Crain’s Cleveland Business Archer Award finalist for HR Executive of the Year in 2017.

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AVP, Application Architecture

Rick Moran

Rick Moran is the assistant vice president of application architecture for Safeguard. Rick is responsible for evolving the Safeguard IT systems. He leads the design of Safeguard’s enterprise application architecture. This includes Safeguard’s real-time integration with other systems, vendors and clients; the future upgrade roadmap for systems; and standards designed to meet availability, security, performance and goals.

Rick has been with Safeguard since 2011. During that time, he has led the system upgrades necessary to support Safeguard’s growth. In addition, Rick’s team has designed and implemented several innovative systems.

Prior to joining Safeguard, Rick was director of enterprise architecture at Revol Wireless, a privately held CDMA Wireless provider in Ohio and Indiana, and operated his own consulting firm providing services to the manufacturing, telecommunications, and energy sectors.

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AVP, Technology Infrastructure and Cloud Services

Steve Machovina

Steve Machovina is the assistant vice president of technology infrastructure and cloud services for Safeguard. He is responsible for the overall management and design of Safeguard’s hybrid cloud infrastructure. He manages all technology engineering staff who support data centers, telecommunications, network, servers, storage, service monitoring, and disaster recovery.

Steve joined Safeguard in November 2013 as director of information technology operations.

Prior to joining Safeguard, Steve was vice president of information technology at Revol Wireless, a privately held wireless provider in Ohio and Indiana. He also held management positions with Northcoast PCS and Corecomm Communications, and spent nine years as a Coast Guard officer and pilot.

Steve holds a BBA in management information systems from Kent State University in Ohio and an MBA from Wayne State University in Michigan.

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AVP, Mobile and Analytics

Jason Heckman

Jason Heckman is the assistant vice president of mobile and analytics for Safeguard. He is responsible for both Safeguard’s mobile development and strategy as well as the company’s data warehousing and business intelligence. Jason oversees the design, development and release of all Safeguard’s internally developed mobile applications. He also oversees the development and delivery of operational and analytical data technologies throughout the organization.

Jason joined Safeguard as manager of mobile in 2012. During that time he led the development and integration of Safeguard’s mobile applications across the company’s vendor network to provide real-time data from the field. In 2014, he was promoted to director of mobile applications and named assistant vice president in 2017.

Prior to joining Safeguard, Jason was the director of application development and business intelligence for Revol Wireless, a privately held wireless provider in Ohio and Indiana.

Jason holds a bachelor’s degree in business management from Case Western Reserve University in Ohio.

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AVP, Business Development

Tim Rath

Tim Rath is the AVP of business development for Safeguard. He is responsible for developing innovative growth strategies for Safeguard and developing and overseeing potential partnerships, mergers and acquisitions.

Tim joined Safeguard in 2011 as project director and has filled numerous roles within Vendor Management, most recently serving as director of vendor management, a role he assumed in 2011.

Prior to Safeguard, Tim worked as director of supply chain at PartsSource Inc. in Aurora, Ohio, a provider of medical replacement parts, procurement solutions and healthcare supply chain management technology services. He also has held sales positions with Rexel, ComDoc, and Pier Associates, all based in Ohio.

Tim holds a degree in marketing and sales from The University of Akron in Akron, Ohio. He also earned his FAA Certified Commercial UAS (Drone) Pilot license in 2017.