Robert Klein Looks Back at VPR Ordinances

In its October issue, Servicing Management published an article authored by Robert Klein, founder and chairman of Safeguard Properties, titled Vacant Property Ordinances: A Look Through The Rearview Mirror.

Vacant Property Ordinances: A Look Through The Rearview Mirror

To minimize the impact of vacant and abandoned properties, municipalities have been enacting vacant property ordinances.

Major national news outlets and mortgage industry trade media often refer to 2008 as the beginning of the housing market crash, without citing a particular flashpoint. Signs of a market slowdown certainly were apparent before then, primarily in the subprime market. But by 2008, the meltdown had expanded to the prime market, and that year, Congress responded with its controversial bailout package with hopes of stemming the problem.

Of course, we know the housing crisis didn’t subside; it got worse. Through 2009 and beyond, the fallout continued as credit tightened, businesses cut spending and unemployment climbed to more than 10%. Homeowners with historically strong credit scores began to fall behind on their mortgages and faced foreclosure. Borrowers whose home values fell below their mortgage balances abandoned their homes. New construction of homes and condominium units, especially in seasonal communities, went unsold. Even lower-value homes with no mortgages were abandoned when owners and heirs found them to be more expensive to maintain than they were worth.

All of this contributed to even greater numbers of vacant and abandoned properties across the country. How many is anybody’s guess, as estimates range from 10 million to 18 million, depending on the source and the timing of data. Regardless of the actual number, what is not in dispute is that municipalities across the country continue to struggle under the weight of vacant and abandoned properties, even as the housing market begins to stabilize.

In many municipalities, these properties stress municipal budgets, negatively impact home values, and thwart government, community and private-sector efforts to revitalize once-thriving neighborhoods.

Among the strategies to minimize the impact of vacant and abandoned properties has been the enactment of vacant property ordinances. In 2008, a vacant property registration committee was created for the Mortgage Bankers Association, where the concept for this type of ordinance was fully developed. The committee brought together industry representatives to discuss the impact of these rules on the property preservation world and recommend more workable alternatives for both cities and servicers.

Five years ago, we began tracking the existence of 50 to 60 municipal ordinances. Today, we track more than 1,300 separate ordinances, as well as statewide vacant property registries in the states of Maryland, Georgia, Connecticut and New Jersey.

The degree to which vacant property ordinances and registries have been effective is open to debate. The answer depends on many factors, including the specific requirements of each ordinance, the fees generated and what the municipality hoped to achieve by enacting an ordinance in the first place.

The entire field services industry understands the value of vacant property ordinances to protect communities from the blight that untended properties can create. Every day, we witness firsthand the damage, criminal activity, safety issues, neighborhood decline and other problems associated with vacant properties, even among vacant properties that receive regular inspections and maintenance services.

Not only do we work to assure that our mortgage servicing clients comply with all local ordinances, but we have provided input from a field service perspective to numerous municipalities that were crafting vacant property ordinances.

It is useful to look back at the evolution of vacant property ordinances over the past five years in an attempt to understand what this evolution means for the mortgage industry and communities alike.

The evolution of ordinances

Five years ago, we witnessed municipalities enacting vacant property ordinances to address the most basic problem for code enforcement officials: the inability to locate a responsible party when issues arose because county property records, tax databases and other sources often were out-of-date or inaccurate. Vacant property ordinances allowed for the creation of registries and databases with updated contact information on individuals and entities responsible for vacant properties. The fees and penalties that were levied for failure to comply with the ordinances covered the administration costs.

As the housing crisis grew, so did the economic problems for cities across the country. Greater numbers of vacant properties further taxed the fragile resources of police, fire and city service departments responding to crimes, neighbor complaints and other problems at vacant properties. Compounding the problem, tax revenues fell as more residents lost jobs and property values declined.

Some cities considering vacant property ordinances began to view them as a potential source of new revenue. As a result, in 2009 and 2010, we began to see more ordinances with higher registration fees and stiffer penalties for failure to comply.

Today, annual registration fees for each vacant property a servicer has in a particular city can range from $10 to $500, and penalties can reach $1,000 per day or more for failure to comply with ordinance requirements. One city in Ohio recently began requiring mortgage companies to post a $10,000 bond for each vacant property – not only “bank-owned” properties, but also defaulted properties still in title to the homeowner.

Whether these fees and penalties have generated sufficient revenues for cities to cover the administrative expenses of the program – and whether they have made a difference to improve or maintain the condition of a vacant property – is difficult to determine.

Anecdotally, we have heard that cities administering their own programs often find it difficult to adequately staff the function. Therefore, because they are not able to enforce the ordinance completely, they are not generating the revenues they expected.

Other cities that utilize third-party services to administer the program have earned revenues because they receive a percentage of what their provider generates. The irony, however, is that the revenues have come largely from mortgage servicers who already maintain their vacant properties and readily comply with the ordinances. Irresponsible owners remain difficult to track down, so not only are they not complying with the ordinances, but they are still not maintaining their properties. In other words, the programs may be generating income for the cities because of responsible servicers who not only comply with the ordinance but already maintain their properties. Yet, irresponsible property owners continue to fall through the cracks, both in terms of property maintenance and registering their properties with the city.

Many of these third-party services also specifically target servicers because the trigger is the filing of a notice of default. Foreclosure does not cause blight; vacancy does. Vacant property registrations with triggers of a notice of default do not address the problem.

Another development in vacant property ordinances was that, as problems with vacant properties grew, many municipalities attempted to protect vacant properties by unknowingly imposing requirements that actually had the potential to do more harm than good. Examples include suggested requirements that vacant properties be lighted, that metal covers be used instead of plywood boarding to secure windows and doors, that notices of vacancy and contact information for the property be posted on signs large enough to see from the street, and that in ground pools be maintained with fresh water, rather than covering the pool to protect it.

Fortunately, municipalities have begun to seek guidance from the mortgage servicing and field servicing industries to remove these types of requirements. More cities now understand that properties still in title to a homeowner do not have electricity because power has been turned off; therefore, lighting is not practical. Also, lighting a vacant property or posting large notices may actually attract more crime, alerting vandals to the fact that a property is empty, just as metal covers on windows and doors actually expose a vacant property to greater harm because thieves can steal the metal and sell it.

Similarly, filling a swimming pool at a property still in title to the homeowner is not viable because the water has likely been turned off. More importantly, however, an uncovered pool at a vacant property is a dangerous invitation for children and teenagers, whereas a pool cover provides a much safer deterrent.

Still, five years into the mortgage crisis, controversy remains with regard to vacant property requirements on mortgage holders that do not distinguish between pre- and post-foreclosure properties, making mortgage holders equally responsible for pre- and post-sale properties, even though they do not have legal title prior to the foreclosure sale.

In fact, the Federal Housing Finance Agency (FHFA) recently won a lawsuit against the City of Chicago, filed in December 2011, on that issue. In its lawsuit, FHFA, as conservator for Fannie Mae and Freddie Mac, claimed that the failure of the Chicago ordinance to recognize the distinction between the presale and post-sale status of properties increased the liability for those entities and potentially for taxpayers. A federal judge ruled that Fannie Mae and Freddie Mac could continue to follow their own guidelines “to maintain the properties in a manner to preserve their value” instead of following Chicago’s vacant property ordinance requirements.

Alternatives to ordinances

A major issue with vacant property ordinance requirements has been that they vary significantly from city to city. As the numbers of ordinances grow, it becomes increasingly difficult for servicers to comply with each ordinance. Today, we are aware of about 1,500 different municipal ordinances. Depending on the source and how a city or town is defined, estimates are that 20,000 to 25,000 municipalities exist across the country, so the potential for thousands of more ordinances, each with a new set of unique requirements, is very real.

A major step forward to assure that mortgage servicers and their field service representatives maintain compliance with ordinances would be the adoption of more statewide vacant property ordinances. These would allow cities and towns in each state to agree on requirements that recognize different geographical and community needs, while creating greater uniformity, both for servicers and municipalities.

In the meantime, municipalities and code enforcement departments already have access to a nationwide resource that helps connect code enforcement officials and mortgage servicers to proactively manage code violations. We developed the Compliance Connections system in response to the basic challenge that code enforcement departments lacked up-to-date databases to locate a responsible party at a vacant property when issues occurred. The system has helped hundreds of code enforcement departments work with servicers to address and resolve tens of thousands of code violations quickly and efficiently. And municipalities can use it for free.

If we learned one thing in five years since the housing crisis erupted, it is that we all need to cooperate to resolve our problems. Creating more uniformity in vacant property ordinances is a good place to start.

Robert Klein is founder and chairman of Safeguard Properties. He can be reached at robert.klein@safeguardproperties.com.

Please click here to view the 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.

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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 the Control, Quality Assurance, Business Development, Accounting & 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.