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. 

 

 

 

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.

 

 

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.

Like us on Facebook: https://www.facebook.com/SlavicVillageRecoveryProject?ref=br_tf

-30-

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

 

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. 

 

 

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 bank’s 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

http://magazine.housingwire.com/i/135775/2