USDA Buyers Stuck in Limbo as Shutdown Hurts Housing

On October 8, BloombergBusinessweek published an article titled USDA Buyers Stuck in Limbo as Shutdown Hurts Housing: Mortgages.

USDA Buyers Stuck in Limbo as Shutdown Hurts Housing: Mortgages

Jacob Smith, a 25-year-old Florida firefighter, wasn’t paying much attention to the U.S. government shutdown until it threw his move to a new three-bedroom home near Daytona Beach into limbo.

Smith was ready to complete the purchase Oct. 1, the day the closure began. Now he has to wait until the Department of Agriculture reopens its mortgage business. For now, Smith’s landlord is allowing him to stay in his one-bedroom rental, crammed with boxes and furniture meant for the larger property. His builder, Adams Homes of Gulf Breeze, Florida, said it has about 10 other customers on the east coast of the state with purchases also on hold.

 “It’s pretty ridiculous,” Smith said. “It seems rare that what you see on the news is directly affecting you. Hopefully it will end soon.”

USDA loans account for about 132,000 mortgages a year in areas designated by the agency as rural, according to the Mortgage Bankers Association. While they make up just 1.4 percent of the U.S. mortgage market, the product is one of the few available that allow zero-down payment loans and are an early warning of how the government’s first partial closing in 17 years could put a drag on the wider housing market.

“This is going to be devastating for people in the middle of getting USDA loans and for the communities that rely on the loans to support their housing markets,” said Camden Fine, president and chief executive officer of the Independent Community Bankers of America. “Everything has ground to a halt until the agency opens for business again.”

Budget Stalemate
The shutdown resulted in hundreds of thousands of federal workers being furloughed, the closure of national parks and Internal Revenue Service call centers, suspension of clinical research trials at the National Institutes of Health and a halt to grants that fund Head Start, which offers educational programs and health care for 967,000 children whose parents live below the poverty line.

The budget stalemate centers on opposition by some House Republicans to President Obama’s healthcare law. Other consequences include lenders being blocked from verifying Social Security numbers and accessing Internal Revenue Service tax transcripts to confirm the validity of documents borrowers provide. The process also may lengthen the wait for borrowers seeking approval for mortgages backed by the Federal Housing Administration because its fulltime staff is now less than one-tenth of its normal size.

Soft Recovery
“The last thing we need is anything that shakes the confidence in a softly recovering housing market,” David Stevens, chief executive officer of the Mortgage Bankers Association and former head of the FHA, said in a telephone interview last week.

Home prices, which have climbed 21 percent nationally since hitting a post-recession low in March 2012, are still 21 percent below their June 2006 peak, according to the S&P/Case-Shiller index of property values in 20 cities.

“If it’s a short-term shutdown, it’s a story about these employees put out of work. If it’s long term, it’s a broader story about the adverse impact to the economic recovery,” Stevens said.

If the shutdown continues for more than two weeks, it will begin to “have an immense adverse impact,” on the economies of rural communities, according to a USDA September report detailing contingency plans for a shutdown. Fifteen percent of the nation’s population, or 46.2 million people, live in rural counties that account for 72 percent of the U.S. land base, according to a May report from the USDA.

Void Filled
The USDA’s Rural Housing Services that administers the mortgages has its roots in the Great Depression in the 1930s, when it was established to aid farming communities including central areas devastated by drought that became known as the Dust Bowl. After the subprime mortgage collapse of the last decade, the program filled a void in lending products for first-time buyers.

The zero-down payment mortgages are for borrowers with incomes of as much as 115 percent of an area’s median pay. USDA borrowers pay an upfront fee equal to 2 percent of the borrowed amount and an annual insurance fee of 0.4 percent.

In addition to farm states such as Iowa and Ohio, the agency’s definition of eligible communities includes areas in western Massachusetts, New York’s Long Island, and other places that residents may not consider rural. The program extends to towns and cities with populations of up to 25,000 that the agency designates as “rural” if they are not suburbs and if their loans are used to purchase homes that are “modest in design, size and cost,” according to the Office of the Comptroller of the Currency.

Chain Reaction
About 6 percent of mortgages last year were USDA loans in Louisiana, Wyoming and Arkansas, the states with the largest shares, according to the Mortgage Bankers Association.

The loans account for about 1 percent of the Florida market, according to the Mortgage Bankers Association. Their use is more concentrated in areas of central Florida, said Rob Nunziata, co-Chief Executive Officer of FBC Mortgage LLC in Orlando.

The USDA delays will cause a chain reaction in rural housing markets that reaches sellers, mortgage brokers, Realtors, movers and builders, Nunziata said.

Smith, who is buying the new house in Port Orange, Florida for $162,000, said his original purchase date at the end of September was delayed because the USDA was already backed up. Now the 4.1 percent rate he locked in 90 days ago has expired and it will cost him to lock it in for another 30 days. The rate offered by his bank is now about 3/8 of a percentage point higher.

“It has taken longer than it was supposed to already,” Smith said. “Everything is in boxes and I’m ready to go.”

Longer Delays
His builder, Adams Homes, which also works in Alabama, Mississippi, Georgia, Tennessee, South Carolina and North Carolina, has cash tied up in these transactions that could be deployed in other projects, said Keith Clarkson, regional manager for the Florida east coast division of Adams Homes. The agency normally takes 15 to 20 days to provide letters of commitment, which are necessary for purchases to close, and the delays will likely be much longer when the agency begins issuing them again, he said.

“The whole company has a ton of USDA-eligible areas,” Clarkson said. “We take out construction loans or sometimes we build out of our own cash. Either way, we’re going to have a home tied up and won’t be able to get this house turned over to the new buyer.”

The immediate effect of the government shutdown won’t be felt beyond the disruption to home-sale transactions currently in the works, Jaret Seiberg, a senior policy analyst with Guggenheim Securities LLC’s Washington Research Group, said. Longer term, the value of real estate in rural communities will decline without USDA mortgages, he said.

Buyer Backlog
“Over time, you’re going to have a backlog of buyers and borrowers who are hoping to get the loans, and in those rural markets that’s going to matter,” Seiberg said. “It’s going to put downward pressure on home prices in those rural areas and it’s going to bring the market to a standstill.”

Many states with economies dominated by agriculture escaped the housing crash, registering small gains as prices were plunging in much of the rest of the country. Since the crash, prices in Iowa and Nebraska have gained about 5 percent, reaching records in the second quarter.

The USDA closed down its website and telephone calls to its headquarters in Washington and its mortgage servicing center in St. Louis, Missouri, aren’t being answered. For now, a skeleton staff is working to process mortgage payments, administer escrow accounts and preserve foreclosed properties.

“USDA is the be-all and end-all for some of these communities,” said Fine, of the community bankers group. “People in most rural areas are culturally very comfortable dealing with the USDA, so it’s natural they would rely on it for mortgages.”

To view the online article, please click here.

About Safeguard 
Safeguard Properties is the largest mortgage field services company in the U.S. Founded in 1990 by Robert Klein and based in Valley View, Ohio, the company inspects and maintains defaulted and foreclosed properties for mortgage servicers, lenders,  and other financial institutions. Safeguard employs approximately 1,700 people, in addition to a network of thousands of contractors nationally. Website: www.safeguardproperties.com.

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CHIEF EXECUTIVE OFFICER

Alan Jaffa

Alan Jaffa is the chief executive officer for Safeguard, steering the company as the mortgage field services industry leader. He also serves on the board of advisors for SCG Partners, a middle-market private equity fund focused on diversifying and expanding Safeguard Properties’ business model into complimentary markets.

Alan joined Safeguard in 1995, learning the business from the ground up. He was promoted to chief operating officer in 2002, and was named CEO in May 2010. His hands-on experience has given him unique insights as a leader to innovate, improve and strengthen Safeguard’s processes to assure that the company adheres to the highest standards of quality and customer service.

Under Alan’s leadership, Safeguard has grown significantly with strategies that have included new and expanded services, technology investments that deliver higher quality and greater efficiency to clients, and strategic acquisitions. He takes a team approach to process improvement, involving staff at all levels of the organization to address issues, brainstorm solutions, and identify new and better ways to serve clients.

In 2008, Alan was recognized by Crain’s Cleveland Business in its annual “40-Under-40” profile of young leaders. He also was named a NEO Ernst & Young Entrepreneur of the Year® finalist in 2013.

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Chief Operating Officer

Michael Greenbaum

Michael Greenbaum is the chief operating officer for Safeguard. Mike has been instrumental in aligning operations to become more efficient, effective, and compliant with our ever-changing industry requirements. Mike has a proven track record of excellence, partnership and collaboration at Safeguard. Under Mike’s leadership, all operational departments of Safeguard have reviewed, updated and enhanced their business processes to maximize efficiency and improve quality control.

Mike joined Safeguard in July 2010 as vice president of REO and has continued to take on additional duties and responsibilities within the organization, including the role of vice president of operations in 2013 and then COO in 2015.

Mike built his business career in supply-chain management, operations, finance and marketing. He has held senior management and executive positions with Erico, a manufacturing company in Solon, Ohio; Accel, Inc., a packaging company in Lewis Center, Ohio; and McMaster-Carr, an industrial supply company in Aurora, Ohio.

Before entering the business world, Mike served in the U.S. Army, Ordinance Branch, and specialized in supply chain management. He is a distinguished graduate of West Point (U.S. Military Academy), where he majored in quantitative economics.

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CHEIF INFORMATION OFFICER

George Mehok

George Mehok is the chief information officer for Safeguard. He is responsible for all strategic technology decisions, new systems deployments and data center operations supporting a national network of more than 10,000 mobile workers.

George has more than 20 years of leadership experience dedicated to high-growth companies in the mobile telecommunications and financial services industries, spanning startups to global industry leaders.

George played a senior role in the formation of Verizon Wireless, leading the IT product development and strategic planning team. He led the integration planning for the Verizon merger including: GTE, Vodafone-AirTouch, Bell Atlantic Mobile and PrimeCo.

As chief information officer at Revol Wireless, a VC-backed CDMA wireless communications network operator, George’s team implemented an integrated technology infrastructure and award-winning business intelligence platform.

George holds a bachelor’s degree in political science and economics from Eastern Michigan University and an M.B.A. from The Ohio State University. He is a board member of Akron University’s School of Business Center for Information Technology, in addition to an advisory board member for OHTec.

In 2013, George won the Crain’s Cleveland Business CIO of the Year award for his team’s work in completing a major acquisition and technology transformation at Safeguard. In 2015, George’s team was recognized by InformationWeek’s annual Elite 100 ranking of the most innovative U.S.-based users of business technology. The mobile inspection technology developed at Safeguard was selected as InformationWeek’s “One of the top 20 ideas to steal in 2015”.

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General Counsel and Executive Vice President

Linda Erkkila, Esq.

Linda Erkkila is the general counsel and executive vice president for Safeguard, with oversight responsibilities for the legal, human resources, training, compliance and audit departments. Linda’s broad scope of oversight covers regulatory issues that impact Safeguard’s operations, pro-active risk mitigation, enterprise strategic planning, human capital and training initiatives, compliance and audit services, litigation and claims management, and counsel related to mergers, acquisition and joint ventures.

Linda’s oversight of the legal department along with multiple compliance and human capital focused departments assures that Safeguard’s strategic initiatives align with its resources, leverage opportunities across the company, and contemplate compliance mandates. Her practice spans almost 20 years, and Linda’s experience, both as outside and in-house counsel, covers a wide range of corporate matters, including regulatory disclosure, corporate governance compliance, risk assessment, executive compensation, litigation management, and merger and acquisition activity. Her experience at a former Fortune 500 financial institution during the subprime crisis helped develop Linda’s pro-active approach to change management during periods of heightened regulatory scrutiny.

Linda previously served as vice president and attorney for National City Corporation, as securities and corporate governance counsel for Agilysys Inc., and as an associate at Thompson Hine LLP. She earned her JD at Cleveland-Marshall College of Law. Linda holds a degree in economics from Miami University and an MBA. In 2017, Linda was named as both a “Woman of Influence” by HousingWire and as a “Leading Lady” by MReport.

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Chief Financial Officer

Joe Iafigliola

Joe Iafigliola is the Chief Financial Officer for Safeguard. Joe is responsible for oversight of the Control, Quality Assurance, Accounting and 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.