Updated Final CFPB Rules Increase Servicer Liability

Investor Update
January 16, 2017

(Editor’s note: This select print feature originally appeared in the January 2017 issue of DS News)

On August 4, the CFPB announced expanded consumer foreclosure protections. Cast as “rule clarifications,” the updated final rules do contain a large number of new, additional requirements that are already being discussed and digested by the servicing industry.

Much of this discussion has, justifiably, focused on expanded protections, such as: new life-of-loan loss mitigation (loss- mitigation protections now extended to each consumer delinquency over the life of a loan); communication and loan-handling requirements during servicing transfers; and broadened definitions on successors in interest and how to handle relations with those individuals.

The Fine Print

The updated rules, however, bury the lead with a new slant on an already-existing protection-enhanced servicer liability for potential dual-track violations. In these updated rules, the CFPB makes explicitly clear that a mortgage servicer is legally responsible for the conduct (or inaction) of its hired counsel for any dual tracking violations during a foreclosure action.

The Mortgage Servicing Executive Summary, released on August 4, states, “The servicer must not move for a foreclosure judgment, move for an order of sale, or conduct a foreclosure sale, even where a third party conducts the sale proceedings, unless one of the specified circumstances is met (the borrower’s loss mitigation application is properly denied, withdrawn, or the borrower fails to perform on a loss mitigation agreement). Absent one of the specified circumstances, conduct of the sale violates Regulation X. Additionally, the servicer must instruct foreclosure counsel not to make any further dispositive motion, to avoid a ruling or order on a pending dispositive motion, or to prevent conduct of a foreclosure sale, unless one of the specified circumstances is met. Counsel’s failure to follow these instructions does not relieve a servicer of its obligations not to move for foreclosure judgment or order of sale, or conduct a foreclosure sale.”

The onus this puts on mortgage servicers and their law firms cannot be understated. Already, the industry had seen a recognizable rise in both class-action and loan-level litigation since the January 2014 RESPA changes. Consumers and their counsel have already commenced or threatened countless new lawsuits against servicers for alleged failures to sufficiently and respond in a timely way to Notices of Error and Requests for Information.

Practical Problems and Dilemmas

The CFPB has itself acknowledged the need for some foreclosures to move forward, and it is sometimes an impending milestone like judgment or sale, which pushes parties into action—something that only exacerbates potential problems. Avoidance of these problems can best be achieved through ACTing, or actively communicating in a timely manner. Servicers and their counsel must ACT together in order to avoid these potential violations.

The need to ACT underscores the importance of written policies and practices at both the servicer and counsel levels to avoid potential violations. Even though the dual tracking violations really speak only to two milestones (foreclosure judgment and judicial sale), those milestones can each really be broken down into two types: a prohibition against asking a court to move past the next milestone and a requirement for preventative action when either milestone is already pending.

Compliance is always less difficult when the servicer and its counsel are in full control of a situation. Thus, it is far easier to prevent a request for judgment or for an order of sale while loss mitigation is pending than it is to impede the actions of a third-party from performing an authorized, empowered, and requested duty. Consequently, though it is extremely important to ACT before a request to move milestones is made, that onion has one less layer to be peeled.

So often, a potential violation happens because these dual tracks are proceeding parallel and independent of one another. To illustrate, the author’s youngest son is a budding, enthusiastic railroader at the tender age of four. He constantly has many trains in simultaneous motion weaving on and around his crisscrossing tracks, and all his freight and passenger trains chug merrily along until their paths inevitably cross in a collision of unfortunate timing. He can’t help it; he is just watching one train at a time and is paying no mind to the other trains he’d already sent in motion. He is, after all, only a preschooler who just loves trains.

Avoiding the Impending Crisis

It should not work this way for counsel and servicers, who are most definitely not young children incapable of skilled multi-tasking; the industry can ACT. As in life (and train-play), sometimes a collision proves inescapable: A loss mitigation application arrives at the servicer’s offices on the same morning in which a state court has set the foreclosure case for an afternoon hearing on the pending judgment application. Even though foreclosure counsel is working on the foreclosure while a servicer simultaneously solicits and receives financial information from a consumer for loss mitigation, these violent collisions do not have to be inevitable.

Perhaps they can be narrowly averted at the last minute. A phone call from a highly-trained servicer employee to an astute legal assistant in counsel’s office and a second call to appearance counsel might just avert this potential problem. It is likely that the CFPB would accept an after-the-fact cleanup of this unavoidable situation. In today’s technological age, it is often overlooked that a simple phone call can allow one to simultaneously convey to another a time-sensitive message, and then confirm actual receipt, delivery, and understanding of that message. People have become so used to emails and automated inboxes that the old-fashioned telephone is an afterthought but may still be a valuable tool in times of need.

Because Regulation X only hands out sticks and no carrots, no one will reward either party for this; ACTing is, unfortunately, an extremely necessary but largely thankless task.

Conversely, what the CFPB is unlikely to accept is a failure that occurs because an attorney does not tell the servicer in a timely fashion that a judgment has already been requested and/or that the judgment has been set for hearing (or that the court in question sets all pending judgments for a decision date), or because a servicer fails to tell its attorney at the right time that a loss mitigation package has been received. In those cases, the CFPB could find that a dual tracking violation occurred and that the servicer is liable for it regardless of the reason.

Navigating this issue will be inherently difficult for servicers and attorneys. Not all law offices in a servicer’s attorney network are created equal. Can a servicer trust that each of its firms will undertake an automatic file review when a hold request comes in from a client due to pending loss mitigation? Can a servicer rely on its firms to always notify it of a pending judgment or sale so that it might explicitly instruct the law firm to attempt to continue, cancel, or postpone the milestone?

Controlling the Outcome

What is clear is that the CFPB expects servicers and attorneys to ACT; and, unlike Jon Lovitz’s Master Thespian character, the industry cannot just proclaim “ACTing!” and be done with it. There must be real-time communication specifically meant to ensure that dual tracking violations are prevented. From an industry standpoint, that communication must necessarily derive from clear, written, and enforced policies at all ends to account for the very real possibility that the foreclosure and loss mitigation tracks might necessarily cross at a critical juncture. The industry cannot leave such communication to chance and hope that its employees remember everything, avoid all possible mistakes, and ACT at every opportunity.

For foreclosure counsel, there must be some acceptance that the CFPB has fundamentally altered both an attorney’s ability to practice law and to use one’s own judgment and training to navigate each situation in a way deemed most appropriate. Resistors to this concept should consider how recent FDCPA lawsuits and decisions have deeply changed the practice of creditor representation. Recent authority suggesting that even pleadings, wrought with legalese and terms of art, must rise above misinterpretation of the least-sophisticated consumer, illuminates the general lack of empathy within the judiciary.

For those in search of a silver lining, the bright side is that the new servicing rules may actually help prevent the discoverability of communications between a servicer and its counsel while jointly defending a consumer’s lawsuit for a dual tracking violation, since the inquiry should begin and end with whether the violation occurred (chalk it up to the baleful humor of a seasoned litigator). Anything further is between co-defendants and immaterial to a reviewing court. The industry, however, should ACT so that there is no need for a consumer lawsuit.

Source: DS News



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.