U.S. Department of the Treasury Prepared Remarks of Monique Rollins

Investor Upate
February 29, 2016

As prepared for delivery
LAS VEGAS –  For most of its history, private label securitization (PLS) has served as a valuable part of the housing finance market.  It helped expand access to credit for many qualified Americans, who did not meet the underwriting criteria or conforming loan limits of Fannie Mae or Freddie Mac or qualify for Federal Housing Administration (FHA) insurance.  However, the 2008 financial crisis exposed huge structural deficiencies in PLS that led to tremendous losses and severely damaged the trust of market participants.  The pre-crisis PLS market was rife with conflicts of interest, inadequate investor protections, overreliance on credit ratings, contractual enforcement failures and a lack of transparency.  We therefore believe that, while the PLS market can provide a channel for mortgage financing that is responsible and not reliant on a taxpayer-backed guarantee, its return must happen in a reformed and sustainable way.  A reformed PLS market complements the Administration’s efforts to support the housing recovery on numerous fronts by improving access to credit and helping homeowners.  While we do not see the PLS channel as a total panacea, it is one of a number of channels that can responsibly improve access to credit and strengthen the housing recovery.
In 2014, Secretary Lew announced a Treasury-led effort to help catalyze the private label residential mortgage-backed securities (RMBS) market through engagement with market participants and other stakeholders, which we will refer to as the PLS Initiative. Treasury published a Request for Information in the Federal Register seeking public input on the challenges facing the market.  We facilitated a credit rating agency exercise to provide greater transparency into post-crisis rating methodologies for residential mortgage loans.   And, observing a collective action problem, we believed Treasury was well positioned to facilitate a dialogue among market participants whose trust had been badly damaged.  So, we brought together institutional investors, issuers, servicers, ratings agencies, due diligence firms and other key stakeholders and provided an open and neutral forum for engagement.  As we have heard from these stakeholders firsthand over the past year and a half, in order to rebuild investor confidence, establish a resilient, sustainable transaction architecture, and bring back significant capital to the non-agency housing market in a responsible way, significant structural reforms are needed. 
Early on in the process, Initiative participants explored the potential for a so-called benchmark transaction, which could have become a de facto standard that other market participants could replicate in order to grow issuance volumes and create liquidity.  But given the complexity of the issues at hand and the lack of favorable market conditions, their focus shifted toward addressing a set of specific structural reforms, and here they have made significant progress. 
I will now review some highlights from these discussions.  Please keep in mind that this summary does not represent consensus recommendations from the group but rather reflects ideas that were raised by participants and explored extensively within the Initiative.  I would also like to note that in facilitating discussions, Treasury did not and does not seek advice or recommendations for any federal government policy, decision or activity. 
Initiative Summary
The group focused on three main topic areas with the objective of identifying potential improvements to the structural weaknesses of the PLS market: 1) the concept of a “Deal Agent”; 2) servicing activities and oversight; and 3) origination representations and warranties. 
Deal Agent
The investor-proposed addition of a new “Deal Agent” transaction party was the reform idea that was discussed most extensively, with many investor participants indicating that it would be key to enhancing their confidence in the PLS market.  For those of you who would like more detail on a proposed Deal Agent framework, I encourage you to take a look at the “Proposed Deal Agent Agreement Key Principles” published this morning.  This document is not endorsed by Treasury or all PLS Initiative participants, but the fact that this substantive reform proposal has emerged is an encouraging sign that these conversations among various market participants are making meaningful progress.  
Intended to improve upon the current structure of special purpose vehicles, the inclusion of a Deal Agent would allow a “thinking” entity to make decisions in both routine circumstances, and importantly, in response to unforeseen events. In this regard, participants who favor this Deal Agent framework believe that the Deal Agent should act in a fiduciary-like capacity subject to duties of care and loyalty. This would mean that the entity is expected to act in the best interests of the trust, have no conflicts of interest with other transaction parties, and refrain from placing the interests of one class of bondholders over another, doing away with the concept of a controlling class of investors.  
In defining the scope of a Deal Agent’s responsibilities to the securitization trust, participants identified several key categories, such as the review of representations and warranties, enforcement of representations and warranty breaches, servicer oversight (including servicing transfer, if necessary), the reconciliation of cash flows going into and out of the trust, and bondholder communication.  Discussions also included important considerations related to a Deal Agent role: indemnification by the trust, caps on liability, the potential for liability insurance, and how to develop a viable compensation framework.
Participants also identified a number of practical challenges.  While investors felt it was imperative that a Deal Agent agreement should include a fiduciary duty, others felt that the standard of care should be defined in a more circumscribed way.  Some noted that there was substantial overlap between the proposed responsibilities of a Deal Agent and those of existing transaction parties.  Though some rating agency participants have commented publicly that the inclusion of a Deal Agent could potentially be credit positive, a number of participants wondered whether ratings agencies would “give credit” to transactions with a Deal Agent by requiring lower credit enhancement.  Several participants also raised important questions about how oversight by a potential Deal Agent would work in practice.  
While many agreed that the inclusion of a Deal Agent could potentially add value to a transaction by providing enhanced transparency, oversight, and enforcement, some participants expressed concern about justifying the additional fee and indemnification expenses to the trust, particularly for transactions with pristine collateral.  Some suggested that this framework could be better suited and make more economic sense for transactions with riskier loan attributes, or reperforming or nonperforming loans, and that it could potentially facilitate access to credit for borrowers who are underserved by other financing channels. 
In discussing structural reforms related to both servicing and underwriting, participants focused on creating a framework in which errors could be caught early and fixed quickly, with an emphasis on compliance with all applicable laws and regulations. The investor participants in the Initiative expressed a strong interest in strengthening minimum servicing standards by requiring servicers to maximize the value of collateral to the trust as a whole, as well as improving the alignment of interests between servicers and the trust (and thereby investors).  Alternative compensation models were also discussed, with many investor participants advocating for a model that would better match the timing of revenues with expenses.  An oversight mechanism based on defined measures, or key performance indicators, which could facilitate servicer termination and transfer in the event of nonperformance or underperformance was also examined. 
Several potential ways to improve alignment of interests were raised, including trust ownership of mortgage servicing rights, restrictions on securitizations of loans with second liens, checks and balances pertaining to affiliates, and automatic stop-advance triggers for principal and interest.  Some participants advocated for increased standardization and transparency for net present value (NPV) models and decisions pertaining to loss mitigation, recoverability, and reimbursement of advances.  Others emphasized the need for further industry work on improving the processes related to cash flow reconciliation between primary and master servicers.   Investors also expressed a desire to be represented at bank and servicer settlement negotiations and advocated for a prohibition against the use of trust modifications to fulfill settlements.
Representations and Warranties
Many Initiative participants emphasized that another key to enhancing investor confidence in PLS is ensuring the enforcement of contractual terms for all transaction parties.  Contractual provisions related to representations, warranties and repurchase enforcement were among the biggest concerns for investors and issuers alike and therefore constituted a key area of focus for Initiative participants.  Given the ongoing work to propose an industry standard for representations and warranties in other fora, notably through the Structured Finance Industry Group’s RMBS 3.0 Initiative, participants directed their discussion toward improving the disclosure and repurchase enforcement mechanism.  Some investor and rating agency participants expressed an interest in improving disclosures through requiring that deviations from a standard slate of representations and warranties be clearly highlighted in transaction documents.
As Secretary Lew said in his 2014 announcement of the PLS Initiative, “we believe that an expanded role for the PLS channel can responsibly broaden access to mortgage credit for qualified borrowers who are not being served today, while helping protect taxpayers by shrinking the government’s footprint in the housing market.”  Initiative participants have taken an important step toward understanding how structural reforms could help the PLS channel expand responsibly.   We are now at a transition point for the PLS Initiative, where some market participants can start moving from a principles-level discussion to contractual negotiations.
The reform ideas that I’ve summarized today do not represent one uniform path forward for the PLS market.  We recognize that there is no “one-size-fits-all” solution to complex legacy issues, particularly given the differences in the business models of, and regulations applicable to, different market participants.  Issuance volumes also remain low, in no small part due to the relatively weak economic incentive for securitization of non-agency mortgage pools in the current market environment for many issuers.  But it’s clear that many of you see multiple ways for a reformed PLS market to meaningfully return and we have been impressed by the considerable time and resources that you have devoted to our Initiative and other reform efforts.  We encourage you to build on this momentum and continue to engage directly with each other, with industry associations, think tanks and other stakeholders.
In closing, Treasury remains committed to seeing a reformed PLS market emerge, broadening access to mortgage credit for qualified borrowers who are not being served today.  We look forward to our continued engagement with market participants, policymakers and the public.

Source: U.S. Department of the Treasury



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.


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.



Sean Reddington

Sean Reddington is the new Chief Information Officer for Safeguard Properties LLC. Sean has over 15+ years of experience in Information Services Management with a strong focus on Product and Application Management. Sean is responsible for Safeguard’s technological direction, including planning, implementation and maintaining all operational systems

Sean has a proven record of accomplishment for increasing operational efficiencies, improving customer service levels, and implementing and maintaining IT initiatives to support successful business processes.  He has provided the vision and dedicated leadership for key technologies for Fortune 100 companies, and nationally recognized consulting firms including enterprise system architecture, security, desktop and database management systems. Sean possesses strong functional and system knowledge of information security, systems and software, contracts management, budgeting, human resources and legal and related regulatory compliance.

Sean joined Safeguard Properties LLC from RenPSG Inc. which is a nationally leading Philintropic Software Platform in the Fintech space. He oversaw the organization’s technological direction including planning, implementing and maintaining the best practices that align with all corporate functions. He also provided day-to-day technology operations, enterprise security, information risk and vulnerability management, audit and compliance, security awareness and training.

Prior to RenPSG, Sean worked for DMI Consulting as a Client Success Director where he guided the delivery in a multibillion-dollar Fortune 500 enterprise client account. He was responsible for all project deliveries in terms of quality, budget and timeliness and led the team to coordinate development and definition of project scope and limitations. Sean also worked for KPMG Consulting in their Microsoft Practice and Technicolor’s Ebusiness Division where he had responsibility for application development, maintenance, and support.

Sean is a graduate of Rutgers University with a Bachelor of Arts and received his Masters in International Business from Central Michigan University. He was also a commissioned officer in the United States Air Force prior to his career in the business world.


General Counsel and Executive Vice President

Linda Erkkila, Esq.

Linda Erkkila is the general counsel and executive vice president for Safeguard and oversees the legal, human resources, training, and compliance departments. Linda’s responsibilities cover regulatory issues that impact Safeguard’s operations, risk mitigation, enterprise strategic planning, human resources and training initiatives, compliance, litigation and claims management, and mergers, acquisition and joint ventures.

Linda assures that Safeguard’s strategic initiatives align with its resources, leverage opportunities across the company, and contemplate compliance mandates. Her practice spans over 20 years, and Linda’s experience covers 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.


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.


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.


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.


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.


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.


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.


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.