Surmounting the Roadblocks to FHA Conveyance

Editorial
October 31, 2017

The inability to adopt and revise procedures that bog down the conveyance process will undoubtedly cost servicers millions of dollars in non-reimbursable expenses.

A recent survey of mortgage servicers completed by the Collingwood Group and Five Star Institute, the Mortgage Industry Outlook Report, revealed that 39% of respondents from various levels of the housing finance industry named fulfillment of Federal Housing Administration (FHA) property preservation and conveyance requirements as their biggest FHA servicing challenge.

The survey explained that “FHA’s program rules are different from Fannie Mae’s and Freddie Mac’s, requiring servicers to dedicate additional resources to property maintenance from the time of foreclosure until the property is conveyed to FHA – a time period that varies depending on the situation. In some markets, preserving and protecting properties for an extended period requires aggressive and diligent surveillance that is expensive and difficult. The additional demands on the servicer are costly and introduce opportunities for noncompliance that don’t exist in the GSE servicing space, where properties are conveyed to the GSEs immediately following foreclosure.”

At the time the survey was distributed, FHA servicers were experiencing an increase in reconveyance letters and mortgagee neglect denials citing foreclosure delays from the U.S. Department of Housing and Urban Development (HUD) and its mortgagee compliance management (MCM) vendor. Undoubtedly, these sudden increases in reconveyances, and the costs associated with them, are factors reflected in the survey results.

Reconveyances are one of the biggest challenges mortgage servicers face. Coupled with constant changes in leadership, guidelines, HUD vendors and the interpretations of regulations, servicers face some significant hurdles with FHA loans. While these revisions to regulatory requirements keep the servicing and property preservation industry on their toes, the resistance and/ or inability to efficiently make changes within the organization tend to halt progress and affect the timely conveyance of properties to FHA.

Partnerships lead to better policies

There are many reasons that organizations resist change – risk, costs, and uncertainty. As is human nature, it is always easier to “do things the way we have always done them.” With recent guidance from FHA prohibiting reimbursement of property preservation and inspection costs incurred after the convey due date, the inability to adopt and revise procedures that bog down the conveyance process will undoubtedly cost servicers millions of dollars in non-reimbursable expenses. Partnering with your property preservation vendor and adopting best practices communicated by FHA staff and their MCM vendor is crucial in reducing or eliminating out-of-pocket expenses.

To reduce the costs of servicing FHA loans and conveying in a timely fashion, policies regarding personal property removal, the repair of insurable damages, and waiting for bid approval from the MCM are in need of re-examination. Servicers need to adjust their operating policies to complement the expectations of HUD in order to avoid conveyance delays. Additionally, pre-foreclosure-sale FHA loans have historically taken a back seat to the management of post-sale assets within servicers’ shops. Servicers could realize significant cost savings from taking another look at the prioritization of pre-sale assets – specifically in the areas of personal property, insurable repairs, servicing rules and insurance claim settlements.

Personal property matrix

Removing personal property following the foreclosure sale is one area where costs can rise and conveyances can experience delays, but procedures already exist to manage this issue. According to the most recent eviction matrix published by the USFN, the vast majority of states do not prohibit servicers from self-help to remove abandoned property following foreclosure sale. Despite this, the majority of servicers do not utilize the FHA allowable to remove and store these items following foreclosure sale.

With the release of HUD ML 2010-18, servicers were required prior to HUD conveyance to remove all debris and personals, and place properties into broom-swept condition. This was a significant change from prior conveyance requirements and sparked debate between HUD and servicers with regard to shifting liability and risk of an increase in litigation from borrowers citing missing personal property.

HUD reacted quickly with the release of a frequently asked questions (FAQ) providing servicers with a $300 allowable for reimbursement to store abandoned personals in lieu of disposal. The FAQ provided guidance to follow local laws with regard to the removal, disposal and/or storage of abandoned personals. This guidance afforded servicers the ability to pursue self-help and remove the items in effort to convey the property to HUD more quickly. Despite the accommodation from HUD, the allowable and guidance are not common practice even today, seven years after the new requirement for broom swept condition.

Alternatively, servicers seek guidance from counsel as to whether or not to pursue an eviction of personal property on a case-by-case basis. This delays conveyance and leaves the property subject to new damages, complaints from neighbors and potential code violations. The absence of a clear, consistently executed matrix regarding the removal, disposal or storage of abandoned personal property leads to unnecessary bids submitted to HUD, ambiguity in the definition of possession, and confusion surrounding the calculation of the conveyance due date.

Establishing a personal property matrix and providing guidance to your property preservation vendor to execute is a prerequisite for timely conveyance. Likewise, a well-researched, defined policy serves as a defense if legal complaints ensue.

Insurable repairs

Delaying repair of insurable damages until after foreclosure sale is another missed opportunity for timely conveyance. When I joined the industry in 2001, it was standard practice to hold insurance proceeds in escrow and not commence repairs until after the foreclosure sale. Following several industry working group discussions in 2011 and 2012 and a reevaluation of the FHA servicing regulations, HUD staff and their MCM vendor effectively instituted parameters and expectations for servicers to commence repairs upon receipt of insurance funds and not wait for foreclosure sale.

The MCM vendor continues to deny extension requests submitted for more time to repair when supporting documentation does not support repairs commencing immediately upon settlement of the insurance claim. Furthermore, most insurance policies require repairs to be initiated within six months of settlement for recoverable depreciation to be paid to the insured party. Recoverable depreciation ranges from 10% to 33% of the cost to repair the property. Initiating repairs upon insurance claim settlement will improve the approval rates for extensions of time to convey and will improve the ability to recoup repair costs through recoverable depreciation.

Servicing rules

Servicing rules within organizations also can stall the conveyance of files in an effort to obtain written approval of expenses to avoid out-of-pocket costs. This is true in waiting for the insurance company to issue a check, as well as waiting for MCM approval of over-allowable requests.

While some files deserve prudent review and follow-up for large expenses, many files can efficiently move through the process with the establishment of a standard cost-benefit analysis. We have worked with several clients to establish standard cost forms that account for unpaid principal balance, cost of repairs for conveyance condition, pending insurance funds, possibility of HUD reimbursement, and expenditures-to-date. Utilization of a standard template can empower front-line staff to make decisions faster and avoid bottlenecks of management reviews required within the servicing shop.

HUD staff have verbalized the expectation that maintenance services and the over-allowable processes are independent functions, and thus, the need for over-allowable approval is not required to proceed with work necessary for conveyance condition. The over-allowable process may be prudent for exceptional cases, where the repairs are extensive and/or may exceed the outstanding principal balance or demolition may be in order. However, the vast majority of over-allowable requests are for routine property preservation items often approved by the MCM. Awaiting HUD approval for routine property preservation expenses leads to new vandalism, newly dumped debris, and even neighbor and code officer complaints. HUD staff recommends completing necessary work and asking for over-allowable approval as an independent function, which will lead to more timely conveyance.

Insurance claim settlements

Another missed opportunity for timely conveyance is awaiting insurance claim settlement before repairing to conveyance condition. While exceptions may be at play, it is highly recommended to file the insurance claim and grant access to the insurance adjuster and then commence repairs for conveyance condition.

Your property preservation vendor should be utilizing the same insurance tools to estimate the costs of repairs and photos of repairs in progress and of completed repairs. This will expedite the supplemental process, if needed. Additionally, commencing repairs immediately following the adjuster’s inspection will inhibit further deterioration for many perils, including storm damage, roof damage, sewer back-up, sump pump failure, etc. – ultimately leading to a cost savings. Servicers should establish a standard for perils, costs and timelines for their preservation vendors to utilize as delegated authority to repair to conveyance condition, further reducing the number of exceptions their leadership needs to review and approve.

Servicers should reevaluate the time frames of when to begin management of post-foreclosure sale files. With the expansion of the Claims Without Conveyance of Title (CWCOT) program, allowing servicers to bid market value at the scheduled sale, appraisals are requested well in advance of the scheduled sale and properties reviewed for inclusion in the CWCOT program.

This is the time to review the file for outstanding impediments to conveyance condition and status of over-allowable requests, in addition to hazard insurance recovery or repairs. The single largest driver of denied over-allowable requests from HUD is missed due diligence time frames causing the property to be overdue for conveyance.

Assessing the property conditions and denied over-allowable requests 60 days prior to scheduled foreclosure sale and providing authorization to your property preservation vendor will result in 20 or more days shaved off the time frame to place in conveyance condition and greatly reduce out-of-pocket costs associated with missing the due date for conveyance.

Adoption of change is often a lengthy and difficult process when significant dollars are at stake. However, as President Bill Clinton once said, “The price of doing the same old thing is far higher than the price of change.” Implementing the best practices verbalized by FHA staff and their MCM vendor and partnering with your property preservation vendor is crucial in reducing or eliminating out-of-pocket expenses related to FHA conveyances. In doing so, we can tackle the other challenges we face as an industry.

Kellie Chambers is the assistant vice president of business development and investor relations for Safeguard Properties, the mortgage field services leader in the U.S. She can be reached at kellie.chambers@safeguardproperties.com.

Source: Servicing Management ( Surmounting the Roadblocks to FHA Conveyance PDF)

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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.