Monday, December 30, 2013

REBUILD


HOUSINGWIRE MAGAZINE—December 2013
What’s the Big Deal?

By: Brena Swanson
Sometimes it is just easier to start over, and the Slavic Village Recovery Project does just that. 
The Slavic Village is a loose collection of house on the south-east side of Cleveland, Ohio that symbolize the problems of the financial crisis. 
While the crisis has long passed, the houses still whisper the silent stories of troubling times. 
Putting those memories to rest, the recovery project plans to complete the renovation of 200 homes in the area. 
Construction on the first two-story, two-bedroom homes broke ground in July and received a complete face-lift. 
The recovery team outfitted the house with a new furnace, carpeting, cabinetry and roof, leaving the shambles of the original house behind. 
The newly finished home is expected to sell for $56,900, making the monthly mortgage payment approximately $450, including taxes and insurance.
“This home is living proof that renovated, quality affordable housing can be created in today’s economy,” said Robert Klein, project partner and founder and chairman of Safeguard Properties.
The Slavic Village recovery project is a private, nonprofit partnership, initiated in direct response to community blight and the needs of the area.  Forest City enterprises, RIK Enterprises, Slavic Village Development and Neighborhood Progress created an alliance to head the project. 
“With the support of our partners, lenders, elected officials and the local community, new residents and first time homebuyers will call Slavic Village home very soon,” Klein said.

 

 
 
3672 East 54th St., Cleveland, OH 44105
Value:                                  $56,900*
Footprint:                           2 Acres*
Bedrooms/Baths:            2 bedrooms, 1 bathroom*
Style:                                    Two-story Victorian*
Features:                             With most lots in the neighborhood being 35 x 12, it is a significant feature to have 70 feet of frontage.*   
*Source:  Slavic Village Recovery


Friday, December 6, 2013

Problem Solving with Code Enforcement Officials


Code enforcement officials cover a lot of ground both in both small towns and large cities.  Whether it is enforcing guidelines that support health and safety rules or uphold housing standards, their primary function is to ensure compliance with local policies to ultimately protect the communities they serve.  In my world, I work closely with officials who are tasked with dealing with housing issues, more specifically, homes that are vacant or have been abandoned.  Coming from all parts of the Nation, they have various challenges when enforcing housing codes but they all share one common goal and that is to protect the interests of their community.  Because of that singular goal and dedication to their community, it is of the utmost importance that we include this group of experts in their own right, in industry conversations on how we can combat blight. 

It goes without saying that for the better part of the last decade, the crash of the housing market has made the demands of code enforcement officials unrelenting.  As vacant and abandoned properties piled up in America’s cities and towns so did the code violations.  With limited budgets and few tools to track down the party responsible for these violations, enforcement officials found themselves at a loss.  To remedy this they spoke up and made their voices heard.  They used their direct connection with these communities to solve major enforcement problems.  However I believe we still have a major challenge with our ability to effectively communicate with this segment of the industry, especially when discussing community blight. 

One of the most important things we have learned through this crisis is that when creating solutions our whole is more than the sum of our parts.  While our ability to collaborate has come a long way, it is my opinion that if we did a better job of bringing code enforcement officials into conversations with lenders, servicers, and property preservation organizations, we could more easily create effective solutions. Code enforcement officials offer an exclusive perspective on blight that we are not able to take on in an empathetic kind of way.  Their first-hand experience in communities with unique challenges and problems is vital to policy making. 

Having these individuals in the room will not only make us smarter, it will make our solutions smarter.  Let’s remember that the next time we sit down to solve problems.  Working independently maybe we can solve one or two of our problems, working together we can solve industry problems. 

 

Monday, December 2, 2013

Cuyahoga County Land Bank: Slavic Village Recovery Project brings Big Changes to the Historic Neighborhood



Check out the Slavic Village feature in this month’s Cuyahoga County Land Bank Newsletter.

http://us5.campaign-archive1.com/?u=65f042f92febba3b6d03cd2cb&id=8306c847e5&e=%5BUNIQID%5D

In 2007 Cleveland’s Slavic Village neighborhood saw the highest rate of foreclosure nationally, not so affectionately becoming known as the “ground zero” of the foreclosure crisis. Despite nearly 30 percent of the local homes standing vacant or abandoned the Slavic Village Recovery Project (SVR), a local non-profit/private partnership, has accepted the challenge to help this neighborhood reclaim its glory days as a thriving blue-collar community.

The goal of the SVR is to redevelop the historic neighborhood by taking a holistic approach to community revitalization. The first of its kind, the strategic collaboration is a diverse alliance between Forest City Enterprises, Robert Klein of RIK Enterprises, Slavic Village Development, and Cleveland Neighborhood Progress (formally Neighborhood Progress Inc.).

The focus of the partnership is to acquire vacant and abandoned homes at little or no cost for rehabilitation and resale. The project aims to steady market volatility, stabilize the larger community and match home-buyers with a stress-free home at a good price. The holistic approach that targets several properties at a time, using both demolition and rehab, is being viewed nationally as a case study for the creation of an affordable housing model that can be replicated in communities around the Country.

In order for the concept to be successful, the SVR relies heavily on servicers and the Cuyahoga Land Bank to turn over the vacant and abandoned homes for rehabilitation. Since June, the Cuyahoga Land Bank has contributed 11 homes to support the effort and expects to provide additional properties as progress is made.

“Communities are increasingly seeing the value of using land banks as a way to recover and repurpose vacant properties,” said Robert Klein, the SVR partner who developed the project model. “And servicers with surplus real estate owned properties are recognizing the value in donating to land banks and organizations such as SVR.”

To date the partnership has achieved measureable success beginning in July when over 70 volunteers participated in the first ever Slavic Village Community Day to clean-up nearly 70 vacant homes in the project area. Recently, they have also made public the first home to be rehabilitated at 3672 East 54th Street. The two-story, two bed-room home that began construction in mid-July received a complete internal renovation and external face lift, including a new furnace, carpeting, cabinetry, and new roof. They expect to sell the home at $56,900, making the monthly mortgage payment approximately $450, including taxes and insurance.

The SVR has completed two additional homes since and expects to complete up to five more in the coming months. Interested homebuyers should contact SVR Project Director, Jeff Raig at 216.641.2586 or email
JeffR@slavicvillage.org.

Friday, November 29, 2013

The New Mortgage Collections Environment


Collection efforts for mortgage collections that worked well in times of easy credit may not be appropriate today. The factors changing the collection environment include tight credit, high collection volume, complexity in the mortgage industry and underwater mortgages. Many consumers have to choose which debts they resolve. It takes skill to keep mortgage debt in the priority category. In some cases, such as underwater mortgages, consumers are tempted to walk away from the debt.

New Regulations
The Servicer Alignment Initiative (SAI) effective October 1, 2011 and the Home
Affordable Modification Program (HAMP) implemented in 2009, help homeowners modify mortgages to stay in their homes. Added to this is the highly publicized robo-signing of foreclosures by major banks and it’s a new world for mortgage collections.

The FNMA (Federal National Mortgage Association), FHLMC (Federal Home Loan Mortgage Corporation) and SAI are targeted to align servicing requirements in four areas: (1) borrower contact (2) delinquency management practices (3) loan modifications (4) foreclosure timelines. 
 
As detailed at:
https://www.efanniemae.com/sf/guides/ssg/annltrs/pdf/2011/svc1108.pdf, the FHLMC almost mirrors these guidelines. The differences are based on the interpretation of their respective servicing initiatives. Borrower contact is specified and may be a pre-cursor of things to come with the updating of FDCPA on the part of the new Consumer Financial Protection Bureau (CFPB).

Strategic Default      

Despite the negative publicity of robo-signing, foreclosures and problems with HAMP, the facts reveal that half of underwater homeowners walk away from homes without notifying the loan servicer. This has created a new area referred to as strategic default.

“It is largely based on the individual’s (conducting strategic default) financial savvy,” said Kevin Lateko, a mortgage servicer in a collection division in Texas. “The debtor either purposely defaults on debt to improve his debt-paying ability instead of paying on his mortgage or is in a negative equity scenario and the market value of the property is below loan value. Either way the borrower lacks the motivation to pay on a worthwhile debt.”

Lateko provided an example when he spoke with Collection Advisor: “Take an individual who defaults on his/her mortgage payment since it is his/her largest debt. Let us presume the mortgage payment is $3,000 and his/her total monthly household net income is $5,000 with $2,700 in expenses each month; thus making the disposable income negative $700 monthly. By circumstance they live in a State in which the standard foreclosure timeline is seven months from date of default (or nine months from last paid installment). Imagine what you could do with the “extra” disposable income you have: pay off your other outstanding debts or even save up for a deposit on a new property that is in a negative equity scenario. Now the debtor can pay for an investment that has a higher equity potential. Fairly similar, but I believe the defining characteristic between the two is either for default or hardship. Some had to “strategically” default due to job loss to ensure the welfare of their family.”

Foreclosure Timeline:
4 – 19 Months


In 2009 the Home Affordable Modification Program (HAMP) was revolutionary. According to Laketo: “It came during a period where the focus on assisting the homeowner was very rare with banks and servicers. Although the qualifications for borrowers and the implementation of the program are continually changing, it’s largely unsuccessful. The mentality of banks or servicers is not readily able to adapt to changes in the program and loss mitigation must be conducted.”

Each State has a specific foreclosure timeframe that certain investors and guarantors require servicers to adhere to, due to the potential loss acquired while in the foreclosure process. FNMA’s “maximum number of allowable days” between referral to attorney (or trustee) and foreclosure sale date ranges from 120 days in Missouri to a maximum of 570 days in New York City. FNMA’s suggested foreclosure time lines can be found at the following link:https://www.efanniemae.com/sf/guides/ssg/relatedservicinginfo/pdf/foreclosuretimeframes.pdf.

“These maximum allowable days to foreclose can slow or hinder any given property from being foreclosed on,” Laketo suggested. FNMA incentivizes or penalizes mortgage servicers based on their performance since FNMA takes the loss.”

No Rush To Foreclose

Unfortunately, somewhere along the line, the general perception came about that mortgage companies are in a rush to foreclose on defaulted homeowners.

“Nothing could be further from the truth,” according to a mortgage collection attorney. “More vacant properties exist because of homeowner abandonment than as a result of foreclosure actions against homeowners in occupancy. Foreclosure is the last resort when loan modifications, short sales, and other efforts to help borrowers are not viable.”

The Mortgage Bankers Association of America (MBA) reported that in 2010 more than 1.5 million homeowners received loan modifications. During that same period, RealtyTrac reported that one million homes were foreclosed. The estimate by MBA as of December 1 is that 11-12% of all mortgages in the U.S. are past due.

“There is a reason why 50 percent more homeowners received loan modifications than experienced foreclosure,” the mortgage collection attorney explained. “It is in everyone’s interest to keep borrowers in their homes. Occupied properties are safer and maintain their value better than vacant ones. Unfortunately, all too often, homeowners in default simply abandon their homes, without ever making contact with their loan servicers to attempt a modification, short sale, or other resolution.”

“The highest level of property preservation services cannot protect a vacant property to the same degree that an occupied property is overseen,” according to Robert Klein, CEO of Safeguard Properties. “As long as a property is in default and prior to foreclosure, the rights of the servicer to maintain that property are limited. The rights remain in favor of the homeowner, even one who is no longer there. That is why collecting on past due mortgage payments is so important.”

“Until that property can move through the foreclosure process, servicers winterize properties to prevent pipes from freezing; they cut the grass and discard yard debris,” Klein said. “They remove hazardous materials and food items, as well as address pest infestations, roof leaks, basement flooding, and other issues that can be harmful to the structure and surrounding properties. Each property costs servicers thousands of dollars for continued inspections and maintenance until the property moves through the foreclosure process. During that time, he property will lack proper heating or ventilation to protect the structure from extreme weather. Even though the home will be secured and inspected regularly, without an occupant it will be more susceptible to squatters, vandals, and teens looking for a place to party.”

The foreclosure process can take over a year to conclude, and regulators haven’t created a mechanism to distinguish between occupied and vacant properties. Unless this happens, requirements will simply be tightened across the board, increasing the likelihood that the most vulnerable properties will remain at risk for longer periods. To date, Colorado is the only state that differentiates between vacant and occupied properties.

 A point often overlooked in the robo-signing controversy has been the fact that the delinquency status of the loans was never in question. Rather, the issues concern whether servicers had the proper documentation and standing to foreclose. This is a significant point, because tighter standards aren’t likely to result in fewer foreclosures. Instead, they could create another unintended consequence: a delayed housing recovery.

Collection Strategy

Heavy–handed collection techniques that alienate the consumer are a bad idea when you are competing with other creditors for the consumer’s limited resources. So, what do you need to do differently? Here are three general principles:

 - Be creative in the collection process to identify and contact the right customers at the right time.

- Maintain a constructive relationship with the debtor during the collection process.

- Empower your collectors to work effectively based on the most recent customer data available in your databases.

Some campaigns will require your most experienced collectors, while others may be candidates for proactive SMS notification and IVR interaction. Be sure to match agent skill sets, create scripts, and design the overall call routing and strategy for the best results.

For example, a company specializing in mortgage collections reaches out to customers when they are as little as three days late with a payment. This gives them time to assess the customer’s financial situation and intentions and explore options.

Another strategy is to segment customers by the collection effort involved and design specific campaigns and strategies for each group. For example, divide collection accounts by size and use different strategies for each. For accounts with smaller balances, use predictive dialing, so the collector sees the customer record only when the call connects. The collector is then able to work through considerable volume, with up to 50 minutes of talk time per hour.

For accounts with higher balances, leverage more skilled collectors and progressive dialing, which gives collectors the chance to review the customer information and prepare before speaking with the customer.

Collections Is A Difficult Job

Collector turnover is common, which increases collection costs because more time and effort is required to train new collectors. To reduce turnover, utilize scripts, supervisor monitoring and regularly update training to support your collectors and help them develop their skills.

For job variety, blend inbound and outbound calls which lets you shift collectors to inbound when volumes are high and to outbound when volumes are lighter. Outbound collection calling is more stressful. Therefore, mixing in inbound calls gives collectors a chance to work with customers who are willingly calling in to resolve their debt. In mortgage collections, blending helps make agents more interested in their work. The result is higher collector retention.

In today’s mortgage collection environment, you may be one of several creditors competing for a debtor’s limited financial resources. It is more important than ever to have higher skilled collectors manage riskier debts. Because customers are taking longer to settle their debts, a debtor who has to interact with several different collectors loses any trust or understanding he may have established with a skilled collector. A debtor who works with the same collector throughout the collection process benefits from a closer, “consultative” collection process designed to deliver higher success rates in this economy.

Debtor Choices

You want to be able to interact with the debtor when and how they want to pay such as by e-mail or Web chat options. In addition, self–service options for debtors to make payments are effective when debtors are embarrassed to speak with an agent. Offering payment options through the Web or an IVR lets these customers clear debt without talking to anyone. Data research company, Gartner Inc., estimates that the cost of the average Web self–service session is $1.10 per query, compared to $6–$10 for a call.

When it comes to mortgage collect-ions today, when everyone’s collection volumes are up and you are competing with other creditors for your debtor’s goodwill and limited resources, it all comes down to call routing, outbound dialing technologies and happy, skilled collection professionals.



 

Monday, November 25, 2013

National Property Preservation Conference 2013

 



I had the pleasure of joining my esteemed colleagues at the Safeguard National Property Preservation Conference this month to discuss the State of the Property Preservation Industry.  I always enjoy the chance to discuss pressing industry issues and learn from with this group. 

I also have the opportunity to sit with an equally impressive group to discuss how prior and new regulatory mandates are shaping the industry’s expectations and driving best practices for all aspects of the business.

Check out the summaries below and visit the conference website to learn more. 

State of the Industry

Moderator
Ed Delgado, Five Star Institute

Panel
Colleen Hernandez, Homeownership Preservation Foundation
Robert Klein, Safeguard Properties
Jack Konyk, Weiner Brodsky Kider
Rick Sharga, Auction.com
Ann Thompson, Consumer Financial Protection Bureau
Session Overview
During this session the panelists provided a high-level overview of the most current issues within the mortgage servicing industry. Ed Delgado led a dynamic conversation on topics such as regulatory oversight, homeownership, the role of the property preservation industry, and the industry’s future.

Regulatory Oversight
The panelists began by discussing government oversight on the mortgage servicing industry and how policymakers formulate rules and regulations. They explained that new laws are created by a group of well-intended legislators that are not necessarily housing experts, often leaving regulatory bodies to figure out how to implement guidelines. Increased directives can result in confusion and in the end make it more difficult for the average homebuyer to purchase a home.

The panelists examined how foreclosure timelines vary from state-to-state and short sales can be problematic in various ways. The panel also discussed that foreclosure practices in use prior to the housing crisis were not modified to deal with the volume in today’s market. As the number of foreclosures has grown and timelines become longer, property preservation companies have created new procedures to deal with the increase.

Homeownership
The behavior of homeowners has changed in the aftermath of the housing crisis. Panelists described the financial stress that homeowners feel is due to a variety of factors, from credit card debt to underemployment and the growing need to drive consumer attitudes towards living within their means. To solve this issue it is necessary to work with homeowners to examine all financial limitations that extend beyond mortgage difficulties.

Role of Property Preservation
Panelists pointed out the important role property preservation plays when efforts like financial education and loan modifications fail. They emphasized that first and foremost the goal is to keep consumers in their homes, but those efforts do not always succeed and there must be a plan in place to deal with vacant and foreclosed properties.

The panelists discussed how the property preservation industry has changed in response to the housing crisis over the last five years. The industry had to adjust, putting controls and measures into place to deal with an increased volume. Today the property preservation industry continues to evolve and works to support community stabilization.

Industry’s Future
Panelists shared their thoughts on what the future holds for the industry and homeownership. Some of the ideas were that single family rentals will be a large part of the housing market because home ownership may not increase, Americans must strive to overcome their debt that prevents them from becoming homeowners, and homeownership demand will return, but not without challenges.


The Regulatory Environments Impact to Property Preservation

Moderator
Linda Erkkila, Safeguard Properties

Panel
Nickie Bigenho, Mortgage Contracting Services
Dennis Gierula, JPMorgan Chase
Rob Hicks, Lender Processing Services
Robert Klein, Safeguard Properties
Matt Martin, HUD
Michael Merchant, City of Chicago
Ann Thompson, Consumer Financial Protection Bureau

Session Overview
With the increased scrutiny placed on clients and servicers today, the regulatory environment is constantly changing and having a large impact on the industry as a whole. The panel discussed how prior and new regulatory mandates are shaping the industry’s expectations and driving best practices for all aspects of the business.

Compliance Management Systems (CMS)
A CMS is how a “supervised entity” handles its compliance responsibilities, from implementing, internally communicating, and measuring performance, to taking corrective action and making updates as needed. The panel stated that the most common weakness identified among financial institutions is deficient periodic monitoring and independent compliance audits. Risks should be identified and timeframes should be determined as appropriate for industry needs and business structure.

Background Checks
Background checks are not specifically required of third party providers, but they are recommended as part of overall risk management and mitigation. The panel noted that the industry needs to better define background check requirements and determine what level of scrutiny is appropriate. It is important to maintain a process that does not interfere or jeopardize the contractor’s status as a non- employee, and there is also the fundamental concern of the Fair Credit Reporting Act requirements as well.

 
Audits
Audits have become more thorough and complex over time. Historically audits were relatively short scripted. Today’s audits are much more thorough. They may happen quarterly, with advance requests for data, while lasting several days and possibly including IT audits as well. Audits will continue to evolve. Audits can be intrusive, but their purpose is to identify risk and resolve potential or identified issues before they escalate or become the focus of regulators. Regulators coordinate to ensure there is consistency and no conflicts, though there may be varying levels of control required in some cases. The panel addressed the possibility for centralized audits in the future, as the process is still being defined. It was acknowledged that the challenge of third party audits is the question of, “Who audits the auditors?”

Fast-Track Foreclosure and Anti-Blight
The panel agreed that fast-track foreclosures have a positive impact on communities and the process should be used more, as such initiatives are anti-blight and anti-crime initiatives. However, they acknowledged that the process can be challenging because of conflicting time constraints.
Vacant building ordinances have also made a positive impact on blight. Panelists agreed that Chicago’s ordinances should be a model for other communities, as it is balanced and clear. It was suggested that servicers should work to keep regular communication with code officials to remain aware of big issues in the community.

In Conclusion
The increase in regulatory oversight requires the entire industry to adjust processes and procedures, but there are many tools available to facilitate these new requirements. Industry leaders can and should work together to define best practices and succeed in this new environment.

About the National Property Preservation Conference
In 2004, the National Property Preservation Conference was established by Safeguard Properties Founder and Chairman Robert Klein to provide leaders and servicers from across the mortgage industry an opportunity to gather and focus solely on preservation. Each year, pressing issues in the industry are discussed and solutions are developed. The conference has become a forum for strengthening partnerships, cooperation, and support throughout the industry, which is imperative to the continued success of all involved in mortgage servicing.

Tuesday, November 12, 2013

Revitalizing Ohio’s Vacant Properties Conference: Policies to Transform Communities


 
A joint conference of Greater Ohio Policy Center and Western Reserve Land Conservancy’s Thriving Communities Institute. 

October 22-23, 2013

Columbus, Ohio
Targeting Resources to Redevelop Neighborhoods—the Slavic Village Model
Wednesday, October 23, 2013
 Participants:

Robert Klein, Chairman and Founder, Safeguard Properties
Justin Fleming, Director of Real Estate, Cleveland Neighborhood Progress
Jeff Raig , Project Director, Slavic Village Recovery, LLC

On Wednesday, October 23, Robert Klein joined the Revitalizing Ohio’s Vacant Properties Conference to raise awareness on the holistic community revitalization model that is being utilized in the Slavic Village Recovery Project (SVR).  Attended by over 300 community stakeholders from across Ohio, the conference provided a forum for discussion on a myriad of topics pertaining to vacant properties and community revitalization. Joining Klein was Justin Fleming of Cleveland Neighborhood Progress (an SVR partner) and Jeff Raig, SVR Project Director. 

Klein kicked-off the discussion by describing how he initiated the private for profit/non-profit partnership in response to the need for a holistic solution for community revitalization.    Klein explained that the Slavic Village Recovery project came together to rehabilitate Cleveland’s historic Slavic Village, a neighborhood where between 23% and 30% of the homes are vacant.  Klein developed the project to target several properties at a time to bring large scale change to the neighborhood.  The holistic approach, using both demolition and rehab, is being viewed a case study for the creation of an affordable housing model that can be replicated in communities around the Country. The goal of the SVRP is to acquire homes at little or no cost from the local land bank and lenders for rehabilitation and resale for a price up to $60,000.  Klein emphasized that one of the most important premises being utilized in the Slavic Village Recovery Project is that the public/private partnership should be operated like a business to support productivity. 

While the project does not use public funds, it has great support from the City of Cleveland, as well as local stakeholders, Klein said, emphasizing that local stakeholders and servicers are vital to the success of the project.  Klein stressed that mortgage services have been invaluable in acquiring homes in the area and are overwhelmingly supportive.  Justin Fleming gave greater detail on the nuts and bolts of the process utilized to acquire homes from lenders, homeowners, and the local land bank.  Fleming stressed the importance of utilizing available data to determine the time frame for acquisition and the quickest route for acquiring homes in the target area.    

Jeff Raig, who is responsible for overseeing the project on a daily basis, wrapped up the presentation with a virtual walk-through of the Slavic Village neighborhood, providing attendees with a visual of the how far the community has come with photos of the target area.  Raig also illustrated the importance of community engagement to the success of the project by sharing stories of local homeowners taking a new found pride in maintaining their homes. 

About Greater Ohio Policy Center
Greater Ohio Policy Center (GOPC) is a non-profit, nonpartisan organization based in Columbus and operating statewide. GOPC champions revitalization and sustainable growth in Ohio, advocating policies and practices that enhance its metropolitan regions as economic drivers and preserve Ohio’s open space and farmland. For more information about GOPC and our independent research, public education, technical assistance, coalition-building, and advocacy activities, please visit:
www.greaterohio.org.

About Thriving Communities Institute
The Thriving Communities Institute, a program of Western Reserve Land Conservancy, works with communities and organizations regionally to transform vacant and unproductive properties into new opportunities to attract economic growth, add green space to cities and support safe, beautiful neighborhoods. The Thriving Communities Institute is based in Cleveland, Ohio. For more information, visit:
www.thrivingcommunitiesinstitute.org/.

 

Friday, November 1, 2013

Hope Now Quarterly Fly-In

Last week I had the chance to join some of my colleagues in the housing industry at the HOPE NOW Quarterly Fly-In.  I cannot say enough good things about this organization that works to keep Americans in their homes. 

To learn more about HOPE NOW and our discussion last week, check out the summary below. 

Moderator:  Laurie Maggiano, Servicing and Secondary Markets Program Manager, Office of Research, Markets, & Regulations, Consumer Financial Protection Bureau

Speakers: 
Robert Klein, Chairman and Founder, Safeguard Properties
Peter Skillern, Executive Director, Reinvestment Partners
Margo Geffen, Twin Cities Community Lank Bank LLC
Margaretta Lin, Esq., Department of Housing and Community Development, City of Oakland

On Thursday, October 24, Robert Klein joined a group of experts at the Hope Now Quarterly Fly-In to discuss vacant and abandon properties.  HOPE NOW is an alliance between counselors, mortgage companies, investors, and other mortgage market participants. This alliance is designed to maximize outreach efforts to homeowners in distress to help them stay in their homes and create a unified, coordinated plan to reach and help as many homeowners as possible. The members of the alliance believe that by working together, they will be more effective than by working independently.

 Joining Klein was Peter Skillern, Margo Geffen, and Margaretta Lin whom individually discussed how vacant and abandon properties impact their communities and described the solutions they have implemented in their regions. 

 Klein opened his remarks by discussing the devastating effects of blight on communities nationwide and steps that must be taken to combat this issue.  Drawing on his extensive experience as the former CEO of Safeguard Properties, Klein emphasized the need for vacant and abandon properties to be fast-tracked through the foreclosure process in order to prevent them from become a burden in their communities.   Klein cited that some states have already implemented laws supporting this process while several others are taking similar legislation under consideration.  Klein noted that implementing this type of law on a statewide scale supports the idea of taking a holistic approach to revitalizing America’s communities.  To support this concept, he pointed to the Slavic Village Recovery Project underway in Cleveland, Ohio. 

Klein described Slavic Village as a blue collar neighborhood, built by immigrants that once was a vibrant community.  Like many communities across the country, Slavic Village was devastated by the national housing crisis and continues to struggle in the aftermath of economic decline. After having the highest rate of foreclosure in the nation in 2007, Klein called rehabilitation efforts futile in the face of hundreds of vacant and abandoned homes.  This led Klein to develop the concept on which the current project is based on. 

Klein described the Slavic Village Recovery Project as a private for profit/non-profit partnership formed to redevelop the historic Slavic Village neighborhood by taking a holistic approach to community revitalization. The first of its kind, this strategic collaboration is a diverse alliance between Forest City Enterprises, RIK Enterprises, Slavic Village Development, and Cleveland Neighborhood Progress. 

Klein’s coalition has partnered with lenders, servicers, and public entities in the area to acquire large numbers of blighted, at risk, or vacant properties concentrated in the target area of Slavic Village. The holistic approach, using both demolition and rehab, is being viewed a case study for the creation of an affordable housing model that can be replicated in communities around the Country.  The project does not use public funds but has support from the City of Cleveland, as well as local stakeholders. 

Brad Dwin, Hope Now Director of Communications offered the organization’s support of the Slavic Village Recovery Project, “Since 2007, HOPE NOW has been instrumental at facilitating partnerships between the mortgage industry, the non-profit community, federal agencies and state level partners, for the benefit of finding viable mortgage solutions for homeowners,” said Dwin.  “Over the past several months, we have noticed a real need to analyze the challenge of abandon properties and bring these same partners to the table to discuss the issue and formulate a thoughtful plan for addressing the issue. We are focused on nurturing public-private partnerships to the fullest in order to meet this goal. HOPE NOW supports all efforts that promote stable communities, and we applaud Robert Klein’s work with Slavic Village.”

 

Monday, October 21, 2013

A Note on Compliance


By Robert Klein

Virtually every job in America requires potential employees to undergo a preliminary background check, many require a drug test, and some may even mandate candidates to submit to a credit check.  In the property preservation industry, employers preform rigorous background checks to protect the interest of their business, the clients they serve and the consumers they may impact.  The Consumer Financial Protection Bureau and the Office of the Comptroller of Currency have established various background check regulatory guidelines to mitigate the risk involved with vendors securing and maintaining homes.  The National Association of Mortgage Field Servicers has even gone as far to establish a standard for industry background checks. 

In the aftermath of the housing crisis, the regulatory requirements on the financial industry – already one of the most highly regulated in the country – have become more stringent than ever.  Not only for servicers, but for vendors and partners in the field. The importance of complying these regulations lies in the reason they were implemented in the first place:  to protect consumers.  Backgrounds checks are just one of the quality control measures put into place to protect the interest of not just servicers but the consumers they serve, as well.  We prevent future problems by looking to the past. 

What many people outside the industry do not realize is that these reviews are generally far more preclusive that your average employer background check.  Whether that is a good or bad thing, I will let you be the judge.  These individuals are responsible for going into the homes of people they have never met and that task should be met with caution when selecting employees. However, the next time this issue comes up, remember that the vendors who are selected to remove trash from abandon homes and trim the grass, went through a rigorous background check to do those jobs that stabilize communities and fight blight.  They are hard working men and women—just like you and me—and they have earned this job through a very thorough vetting process. 

 

 

 

Wednesday, October 9, 2013

Americatalyst Conference 2013 "Renting the Future"

Last week I had the chance to join a panel at the Americatalyst Conference.  We had a very productive conversation on community revitalization.  To learn more about the discussion read the summary below. 




You Can Fix a House, but can you fix a neighborhood?
Leading initiatives in neighborhood and community revitalization. 

Participants:
Moderator: Toni Moss, AMERICATALYST LLC
Co-Moderator: Julia Gordon, Director, Housing Finance and Policy, CENTER FOR AMERICAN PROGRESS
Ethan Handelman, Vice President for Policy and Advocacy, NATIONAL HOUSING CONFERENCE     
Robert Klein, Chairman, SAFEGUARD PROPERTIES and Chairman, RIK ENTERPRISES    
Craig Nickerson, President, NATIONAL COMMUNITY STABILIZATION TRUST
Tom Deyo, Vice President, NEIGHBORWORKS AMERICA
 
The initial promise of single-family rental was the large-scale renovation of foreclosed properties to stem the tide of neighborhood decline resulting from the crisis. Institutional investors have, for the most part, focused entirely on individual properties, leaving it to the non-profits to revitalize neighborhoods. The need for community redevelopment is so great that today, non-profits are increasingly partnering with for-profit firms with surprisingly profitable outcomes. This panel discussed some of the more unique opportunities, initiatives, and cutting-edge projects that make a crucial difference in distressed communities around the country.

Craig Nickerson began the discussion by talking about the group of individuals who were hit the hardest by foreclosure crisis and how they continue to be affected.  Low to moderate income families were hit in two waves with subprime mortgages and now do not qualify for loans.  Their only option is to rent  There is a lot of research that says the primary people who want to invest in these neighborhoods are the people who already live there.  Inevitably,  the same residents are opponents of rental markets in these communities. 

Toni Moss built on Craig’s thoughts and asked the panel where can NSP funds be utilized under these circumstances and what is the current status of the $7 billion allocation.  Ethan Handleman responded to this question by addressing the challenges around the use of these  and the associated timelines.  The money had to be spent in a very subsidy intensive way. NSP served as a capacity creator and generated a lot of lessons for non-profits who have become more sophisticated as a result.  What we are seeing now is a real recognition that the work that needs to be done goes well beyond $7 billion dollars.  Robert Klein asserted that NSP did not create a sustainable model for revitalization.  Tom Deyo added that NSP taught us the value of non-profits and brought us to place an emphasis on the history these organizations have in their communities.  It ultimately led us to understand what non-profits are good at and realize the importance of public private partnerships.  Craig Nickerson posed the question to the panel, where do we go from here? What we have today Is a realization that public private collaborations are necessary and we increasingly see these types of partnerships. 
 
To provide a real picture of how of how non-profits and private organizations can work together in this manner, Robert Klein discussed a concept he has developed and is implementing in Cleveland’s Slavic Village. Klein explained that the Slavic Village Recovery project is a private/non-profit partnership coming together to fight blight by rehabilitating a neighborhood where between 23% and 30% of the homes are vacant.  This project is unlike any other because it targets several properties at a time to bring large scale change to a neighborhood.  The holistic approach, using both demolition and rehab, is being viewed a case study for the creation of an affordable housing model that can be replicated in communities around the Country.  The project does not use public funds but has support from the City of Cleveland, as well as local stakeholders.  The goal of the SVRP is to acquire homes at little or no cost from the local land bank and lenders for rehabilitation and resale for a price up to $60,000.  Klein emphasized that one of the most important premises being utilized in the Slavic Village Recovery Project is that the public/private partnership should be operated like a business. 

Craig Nickerson added another perspective and spoke about the role investors can play in community revitalization.  Nickerson explained that there can be misconceptions about who investors really and the perception that these individuals do not have an interest in community stabilization.  Nickerson said that there is a need to change the perception on who these investors are and how they can revive a single-family rental market. Robert Klein responded by explaining that investors would not be successful with a home by home approach in helping to rebuild a community and empathized that a revitalized rental market would require several properties to be rehabilitated.  This approach also discourages the flipping of homes. 

The panel concluded with the participants agreeing that it is necessary to embrace the spirit of collaboration and the idea that not every investor is harmful to a community when reviving a single family rental market.

 

 

Tuesday, October 8, 2013

Slavic Village Recovery Unveils First Rehabilitated Home

We have a lot of exciting things happening in Slavic Village!



Slavic Village Recovery Unveils First Rehabilitated Home
First of 200 Properties to Undergo Renovation

FOR IMMEDIATE RELEASE
October 2, 2013

Slavic Village Recovery (SVR) has revealed the first home to be rehabilitated in its initial target area this week.  Hosting an open house on Tuesday, September 24, SVR welcomed local residents and interested parties to view its first completed home at 3672 East 54 Street in Slavic Village.  The two-story, two bed-room home that began construction in mid-July received a complete internal renovation and external face lift, including a new furnace, carpeting, cabinetry, and new roof.  SVR expects to sell the home at $56,900, making the monthly mortgage payment approximately $450, including taxes and insurance. 

“This home is living proof that renovated, quality affordable housing can be created in today’s economy,” said Robert Klein, project partner and Founder and Chairman of Safeguard Properties. “With the support of our partners, lenders, elected officials and the local community new residents and first time homebuyers will call Slavic Village home in the immediate future.”   
 
Before 
 
After
 
 
 
This is the first of 200 homes that SVR expects to renovate in the area to support the transformation of Slavic Village.  Interested homebuyers should contact SVR Project Director, Jeff Raig at 216.641.2586 or email JeffR@slavicvillage.org

About Slavic Village Recovery
The goal of the Slavic Village Recovery Project is to redevelop the historic Slavic Village neighborhood by taking a holistic approach to community revitalization.  The SVRP is a private/non-profit partnership, initiated in direct response to community blight and housing market needs in Cleveland's Slavic Village neighborhood. The first of its kind, this strategic collaboration is a diverse alliance between Forest City Enterprises, RIK Enterprises, Slavic Village Development, and Neighborhood Progress, Inc., each having decades of experience in their respective fields.  The SVRP aims to steady market volatility, stabilize the larger community and match home-buyers with a stress-free home at a good price.


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Contact:  Holly Stutz, RIK Enterprises, Director of Marketing and Communications.  216.990.8767

 

Monday, September 30, 2013

Vacant Property Registration


Vacant Property Registration
The Need for Statewide Guidelines

By Robert Klein
Cities across America are now using vacant property registration laws as a tool to catalogue properties in their communities and locate the responsible party for a home.  In 2008, I prompted the creation of the vacant property registration committee for the Mortgage Bankers Association where the concept for this type of ordinance was fully developed. I led the committee in bringing together industry representatives to discuss the impact of these rules on the property preservation world, and recommend more workable alternatives for both cities and servicers.  Over the last five years the property preservation industry has watched as these laws have evolved for the better and for the worse. 

For the better we have seen local governments taking steps to craft smarter laws and work with servicers to more easily achieve compliance.  For the worse we have seen cities use these laws as a tool to pad struggling municipal budgets.  From big cities to small towns we see fees for each vacant property from $10 to $500, with penalties reaching up to $1,000 a day or more for failure to comply with ordinance requirements. 

While there is no doubt that this is troubling, it is not the biggest challenge we face when it comes to registration guidelines.  For servicers the biggest obstacle in complying with these ordinances from city to city is the lack of uniformity.   With an estimated 35,000 municipalities in America, today we are aware of about 1,500 different municipal ordinances.  Those numbers tell us there is potential for thousands more.  A tool that would remedy this problem would be for each state to establish a statewide vacant property registration law.  It would permit each state to consider their local needs when crafting the legislation and give them a better tool to fight blight on a large scale.  This would also allow for servicers to follow 50 different sets of guidelines rather than 1,500 and ultimately support greater compliance. 

Local governments and municipalities have a lot on their plate as they struggle to make ends meet and I believe the statewide law of this nature could alleviate some of that stress.  Not to say that our states are not feeling the same pressure, but I know that this implementation would make our efforts to fight blight more effective and help our struggling communities. 

 

 

Monday, September 16, 2013

Fast-Tracking Foreclosures: Legislators Join the Conversation


Fast-Tracking Foreclosures:  Legislators Join the Conversation

By  Robert Klein

There are many theories on what needs to be done at local levels when it comes to jump starting statewide economies and reviving housing markets.  In states that utilize a judicial foreclosure process legislatures are increasingly turning to fast-tracking vacant and abandoned properties as a solution. Although this concept is not new to our industry, we now find that local governments are beginning to realize the devastating long term effects that a lengthy foreclosure timeline on vacant and abandoned properties can have on communities.  This leads me to believe that those of us with boots on the ground experience are doing a better job of communicating this problem with audiences outside of our universe, namely legislative bodies that have the ability to affect this type of change. 

Governor Pat Quinn of Illinois signed a fast-tracking bill into law that was debated and negotiated for over two years in the state's general assembly.  The law decreased the Illinois foreclosure timeline from anywhere up to 600 days to just 3 months.  The bill even went so far as to indemnify servicers from trespassing charges when entering homes for preservation purposes.  

The state of New York followed suit this summer when they approved a similar bill hoping to free up foreclosure dockets that are more than three years behind.  Effective this July, Nevada put into place an expedited process for the foreclosure of abandoned properties. Connecticut crafted legislation that expedited the foreclosure process and provided support for homeowners through the mediation process.

Ohio has introduced a bill in the House of Representatives that would fast-track abandoned properties and proposes extinguishing homeowner's redemption rights.  The bill also establishes a protocol for properties to be donated to local land banks if the circumstances permit. 

These are just a few examples of legislative victories.  While no two laws are the same state to state, the goal remains the same: shorten the time period the properties stand vacant and minimize the impact on communities where they are located.  More broadly, halt the perpetuation of blight created by these properties.  This goal should not overshadow the fact that this type of legislation simultaneously acts to help homeowners.  First, it eliminates legal delays that can be costly to homeowners and often causes them to abandon their properties. Second, it prevents expensive and avoidable penalties and makes settlements in reach for struggling homeowners.

The aforementioned successes are no doubt the fruits of an industry raising awareness around this issue.  Expedited or fast-tracking foreclosures for clearly vacant and abandoned properties is a critical component in addressing urban blight and ultimately reversing the effects of the housing crisis.  This axiom that was once known only to our narrowly framed universe is now making its way into the mainstream and the appropriate audiences are taking note. Despite this progress there is still much work to be done in judicial foreclosure states that have yet to raise the fast-tracking issue.  States like Illinois, Nevada, New York and Connecticut are just the tip of the iceberg.  Now more than ever it is important that this conversation continues to evolve and local legislatures see the value in making these changes to provide for its communities today and tomorrow. 

Law and Order

Law and Order
Ohio city attracts plaudits for tackling foreclosure blight, but major challenge remains

By Robert Klein

In many ways, Youngstown, Ohio, serves as a comeback model for similar cities around the country that have lost jobs and population since the industrial decline that began in the late 1970s.

Thanks to forward-thinking leaders who have cultivated a supportive business environment, Youngstown has become one of the most improved economies in the country, according to an analysis by the Brookings Institution. A growing energy market has sparked a manufacturing resurgence. A vibrant technology scene is attracting startup companies, warranting mention by President Barack Obama in his State of the Union address earlier this year. And Youngstown
s downtown is springing back to life as an entertainment destination.

Unfortunately, like other cities across the country, Youngstown has also suffered in the aftermath of the housing crisis, with vacant and abandoned properties straining city resources, hurting neighborhoods and driving out residents. It
s understandable that city leaders would want to take action to preserve neighborhoods, protect the safety of its citizens and help maintain the momentum of economic recovery.

However, their decision to enact what is being viewed as one of the most onerous vacant property ordinances as a solution to the problem may actually do more harm than good. The ordinance has a number of possible ramifications, with three apparent major drawbacks in particular some deem worthy of rumination.

Good Guys Pay, Bad Guys Don
t
The first concerns the fact the ordinance requires the owner of a vacant property to post a cash bond of not less than $10,000 to assure the continued maintenance of the property until it either moves through the foreclosure process and is sold to a new owner, or is demolished. The definition of an owner has been broadened to include the person in title, the entity that holds the mortgage and even authorized agents and vendors of the mortgage company who have direct or indirect control of a property.

Here is the sad irony: Irresponsible owners who let their properties deteriorate in the first place aren
t likely to comply with the ordinance. Code enforcement officers and other officials will waste precious time chasing ghosts, with nothing to show for it.

On the other hand, the vast majority of mortgage companies and their agents who already secure and maintain properties abandoned by homeowners could be penalized by the ordinance and forced to pay, even though their properties aren
t causing problems.

Lienholder Conflict
Second, until mortgage companies take legal title to a property, their rights are limited—even when homeowners abandon properties. Prior to an actual foreclosure sale, banks can only perform services to prevent code violations and protect the collateral value of the property in the absence of an occupant. In other words, the requirements of the Youngstown ordinance will most likely conflict with laws limiting a bank
s rights prior to foreclosure.

The expanded definition of a homeowner in the Youngstown ordinance actually sets up the city for potentially expensive and protracted legal actions. In fact, two years ago, the city of Chicago considered similar language in their ordinance, defining lienholders as homeowners prior to foreclosure. Ultimately, they removed the language after listening to the concerns of the mortgage industry in this regard.

It Doesn
t Fix the Problem
Third and finally, the worst enemy of a vacant property is time, and the Youngstown ordinance seems to do nothing to address this. If the city of Youngstown really wants to protect the condition of vacant properties and make banks responsible, the answer might be to help them take possession more quickly. That requires a change in state law to accelerate vacant properties through foreclosure.

In Ohio, the foreclosure process can take two years or longer, whether the property is occupied or abandoned. Even with the billions of dollars the mortgage industry spends annually across the country to inspect and maintain vacant properties, these homes will deteriorate as they await foreclosure. Many will be vandalized, losing value, becoming neighborhood nuisances and negatively impacting surrounding properties.

When a property is deemed vacant and abandoned, accelerating foreclosure would allow banks to obtain title while the property is still in good condition so that it can be sold and reoccupied more quickly.

For some, accelerated foreclosure is a far better alternative to vacant property ordinances. It can reduce the burden on city code enforcement officials and first responders to address nuisance issues. It can protect the condition and value of vacant properties, especially those in fragile neighborhoods. And, perhaps most importantly, it can help maintain viable housing for families, especially first-time home buyers and lower income people.

Youngstown
s leaders have demonstrated a progressive attitude toward rejuvenating their city. There is a strong argument that says they should continue to lead the way to protect homes and neighborhoods across Ohio by promoting legislation designed to accelerate the foreclosure process for vacant and abandoned properties.

Key Concepts

ü  Mortgage companies and their agents who already secure and maintain abandoned properties could be penalized by a new Youngstown, Ohio, ordinance and forced to pay.

ü  The requirements of the Youngstown ordinance will most likely conflict with laws limiting a banks rights prior to foreclosure.

ü  If the city really wants to protect the condition of vacant properties and make banks responsible, the answer might be to help them take possession more quickly.

Fighting Blight

Fighting Blight
Stakeholders Should Word Together

By Robert Klein
There is not a community in America that is immune to the national blight epidemic.  While there is not a silver bullet to cure this devastation, I do believe there are innovative solutions, as well as common sense measures that can be taken to ease the burden on communities, homeowners, and local governments. This takes a multifaceted approach that uses a combination of resources to breathe life back into hard hit communities.  Rehabilitation and fighting blight cannot be done in a silo. It requires bringing stakeholders to the same table and thinking creatively to produce a solution. 

This method is currently being tested at what is called the “ground zero” of the foreclosure crisis in Slavic Village of Cleveland.  Slavic Village is the story of a private-philanthropic partnership coming together to fight blight by rehabilitating a Cleveland neighborhood where between 23% and 30% of the homes are vacant. The focus of the partnership formed between Slavic Village Development, RIK Enterprises and Neighborhood Progress Inc. is to obtain properties from lenders, mortgage servicers, and the local land bank in order to renovate the homes to sell or rent.  This process removes bureaucratic obstacles and also has the ability to bring large scale improvement to a community in a relatively short amount of time. 

In Slavic Village homes beyond repair were identified immediately to support the overall redevelopment.  One of the most important steps in rehabbing a community is identifying what cannot be salvaged. Unfortunately, there are often challenges in getting the demolition process underway as the permit process can be both costly and time consuming.  This proves that greater education is necessary on the need for demolition and its associated benefits. 

While many may consider demolition as a last resort, it is in fact a vital step in a comprehensive approach.  It is impossible to cultivate development and garner interest from investors if homes that cannot be saved are still standing. If the proper steps are not taken to remove a nuisance property then rehabbing efforts are futile.  There are also several benefits in demolition including stabilizing property values and eliminating older homes that contain dangerous substances such asbestos.  Additionally, many of the materials from demolished properties can be recycled. 

Land banks are a great tool in getting rid of nuisance properties.  Centralizing vacant and abandon properties is a highly effective way to fight blight.  Land banks can make the process for starting demolition more efficient and increase the effectiveness of property preservation.  Communities are increasingly considering the possibility of land banks as a way to recover and repurpose vacant properties, and servicers with surplus real estate owned properties are recognizing the value in donating to land banks.

Property preservation is the bottom line in maintaining home values, avoiding extreme rehabbing or demolition and ultimately fighting blight.  I believe one of the best tools at our disposal in this battle is a new innovative product that secures vacant properties, preserves home values, and increases neighborhood safety.  SecureView is an alternative board-up system that is designed to look like traditional windows providing clear views, letting in natural light. This is revolutionary way to secure vacant and abandoned properties without exposing their vacancy. By utilizing SecureView rather than traditional methods for securing homes, both marketability and safety are enhanced. SecureView is the only product that allows first responders to see inside a vacant property in the event of an emergency.

Made from 100% recycled materials, it is virtually unbreakable, which means it has the wherewithal to protect property from intrusion, and reduce the crime and squatting so often associated with plywood and steel board ups.  SecureView can be modified to fit any window, and is quickly and easily installed using a simple but effective compression bolt system. This is truly an effective solution to the issue of blight, increasing a property's value due to improved curb appeal, which in turn helps to stabilize the entire neighborhood.

There may not be a silver bullet in fighting blight but this is a close second. Although the Nation has begun to climb out of an economic recession, this industry will continue to rebuild communities facing the aftermath of a housing crisis. 

If we can recognize our collective resources and take a step back to think outside the box a little, we can help these communities join the rest of America on the road to recovery. 

It is my hope that Slavic Village, the “ground zero” of the foreclosure crisis, will be looked at as a model for rehabilitation rather than a reminder of devastation. 

Published in the June 20013 Edition of HousingWire Focus Magazine