Tough Choices for Servicers After Tenant Foreclosure Law Expires

On February 5, National Mortgage News published an article discussing potential issues facing mortgage servicers after the expiration of the federal Protecting of Tenants at Foreclosure Act at the end of 2014.

Tough Choices for Servicers After Tenant Foreclosure Law Expires

Mortgage servicers are bracing for a potential public relations nightmare: scores of renters and their belongings on curbs across America, after evictions from foreclosed properties.

Consumer advocates expect a rash of evictions in the coming months on properties entering foreclosure following the expiration of the federal Protecting Tenants at Foreclosure Act.

That 2009 law upheld existing leases and required that tenants in foreclosed properties be given 90 days’ notice before being evicted. It was originally set to expire at the end of 2012, but a provision of the Dodd-Frank Act extended the law until the end of 2014.

Wells Fargo, the nation’s largest mortgage servicer, said it is no longer following the guidelines prescribed by the federal law, while JPMorgan Chase, Citigroup and Nationstar are voluntarily following its rules. Bank of America said it is in the process of reviewing its policy.

With the law’s expiration, mortgage servicers will have to maneuver a patchwork of state and local regulations. Just nine states and Washington, D.C., currently offer the same protections as the expired federal law, while 17 states have no specific tenant protections or allow servicers to evict immediately following a foreclosure sale.

“I expect to see more evictions in the coming months,” said Kent Qian, a staff attorney at the National Housing Law Project in San Francisco. “Some renters are going to be left out in the cold.”

Roughly 30% to 40% of properties in foreclosure have tenants or renters, said Linda Couch, a senior vice president for policy and research at the National Low Income Housing Coalition.

“One of the reasons Congress decided to act in the first place is that foreclosure affects a large number of renters,” said Couch.

Bills to make the law permanent failed last year. Now that Republicans control both houses of Congress, making the law permanent “is not in the cards,” Couch said. But consumer advocates are still looking for some housing policy legislation that might reenact the law.

Banks are servicers on many foreclosed properties, which may be held on their own books or serviced on behalf of investors in securitizations. In the past, when a property became real estate-owned following a foreclosure, the tenant lost his deposit and no longer had the right to occupy the home unless the new owner offered him a new lease. Mortgage servicers typically do not want to be landlords, so most tenants were required to move.

Evictions may be in the financial interest of investors when tenants fail to pay rent. Often when a home goes into foreclosure, the existing tenant does not know who to send the rent to and simply stops paying.

But a flood of evictions could play poorly with a public already angry at mortgage servicers.

“Any bank that is going to continue with the same criteria that the government imposed (with the federal law) is doing so to reduce the reputational risk, that’s all,” said Cary Sternberg, a default servicing expert.

“On the other side, these banks and servicers represent trusts and investors, and now they are going to expose themselves to financial risk if investors come back to them saying, any time you give a tenant three months’ notice, they could be losing money,” he added.

Mortgage servicers that do not voluntarily adhere to the federal law’s requirements have gauged that the financial risk they face from investors is greater than the potential reputational risk from tenants, Sternberg said.

To be fair, many servicers, including Wells Fargo, offer relocation assistance to tenants in foreclosed properties. And both Fannie Mae and Freddie Mac will continue to follow the law for their respective REO inventories. The Federal Housing Administration typically requires that properties be vacant when they are turned over to the agency after a foreclosure.

So far, consumer advocates have not seen much fallout yet because properties with foreclosure sales dates in December are still covered by the federal law.

Though home prices have rebounded significantly from the depths of the 2008 financial crisis, there are still millions of distressed properties languishing in some state of the foreclosure process — or heading there — affecting many, many tenants.

There were 820,000 properties stuck somewhere in the foreclosure process in December that had not yet been liquidated through a foreclosure auction or by a bank taking legal title to the property, according to Black Knight Financial Services.

Servicers have long complained that laws like the Protecting Tenants at Foreclosure Act delay a REO property’s sale after an already lengthy foreclosure process. It now takes an average of 1,010 days — or nearly three years — for a delinquent loan to move through foreclosure, according to Black Knight.

In many states, a foreclosure terminates the rights of a tenant. So without the federal law, a mortgage servicer or purchaser of an REO property does not have to file a separate eviction notice to remove a tenant.

“In traditional foreclosure states, you get the right of possession when the foreclosure is completed so the owner would just get a sheriff to go to the property,” to evict the tenant, said Qian.

In non-judicial foreclosure states, where foreclosures are not processed by a court, an owner would have to file a separate eviction notice, he said.

There is confusion because some state laws provide tenants with the notice of the foreclosure itself, while others require a notice period after a foreclosure, but before an eviction can proceed.

A few states including Massachusetts, New Jersey and Rhode Island have “just cause” laws, where a foreclosure is not considered a valid reason to evict a tenant.

Jeremy Bergstrom, a senior staff attorney at the Sargent Shriver National Center on Poverty Law, said bank servicers still might adhere to the federal law because of the added expense of complying with the hodge-podge of state laws.

“These tenants are truly the innocent victims of foreclosure because they didn’t fall behind on the mortgage, and are current on their rent and could be evicted through no fault of their own,” Bergstrom said.

Please click here to view the article online.

About Safeguard 
Safeguard Properties is the mortgage field services industry leader, preserving vacant and foreclosed properties across the U.S., Puerto Rico, Virgin Islands and Guam. Founded in 1990 by Robert Klein and headquartered in Cleveland, Ohio, Safeguard provides the highest quality service to our clients by leveraging innovative technologies and proactively developing industry best practices and quality control procedures. Consistent with Safeguard’s values and mission, we are an active supporter of hundreds of charitable efforts across the country. Annually, Safeguard gives back to communities in partnership with our employees, vendors and clients. We also are dedicated to working with community leaders and officials to eliminate blight and stabilize neighborhoods. Safeguard is dedicated to preserving today and protecting tomorrow.  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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CHIEF 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, 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, 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.

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Assistant Vice president of Application Development

Steve Goberish

Steve Goberish, is the assistant vice president of application development for Safeguard. He is responsible for the maintenance and evolution of Safeguard’s vendor systems ensuring high-availability, security and scalability while advancing the vendor products’ capabilities and enhancing the vendor experience.

Prior to joining Safeguard, Steve was a senior technical architect and development manager at First American Title Insurance, a publicly held title insurance provider based in southern California, in addition to managing and developing applications in multiple sectors from insurance to VOIP.

Steve has a bachelor’s degree from Kent State University in Ohio.