CCP Reclaiming Vacant Property Conference Summary

November 22nd, 2010

On October 13-15 2010, Safeguard Properties participated in the CCP Reclaiming Vacant Properties Conference in Cleveland, Ohio.

Reclaiming Vacant Properties Conference

The Intersection of Sustainability, Revitalization, and Policy Reform
Cleveland, Ohio
October 13-15, 2010

Life of an REO

Moderator
Craig Nickerson, National Community Stabilization Trust

Panel
Robert Klein, Safeguard Properties
Peter Wayman, Freddie Mac
Yves Mombular, Chase
Frank Alexander, Center for Community Progress

Session Overview

To a standing-room only group of over 80 colleagues from the arenas of housing and community development including, but not limited to, non-profit administrators, municipal and government officials, code enforcement professionals, and institutional representatives, this diverse panel shared their individual perspectives regarding the status of Real Estate Owned properties within communities across the nation.  The discussions touched on the various impacts from policies, approaches, procedures, and responses on a broad, national scale.

National Trends & Status

As the calendar flipped from 2009 to 2010, roughly 3.3 million borrowers were accounted for as being at least 90 days late with their mortgage payments.  Today, that number has grown to 4.4 million and even more are expected when we welcome in 2011.

Two years ago the entire foreclosure process took an average of 292 days; while today the typical wait is 478 days.  Twenty percent of homeowners vacate their properties prior to the completion of the foreclosure process, leaving these properties abandoned for extended durations.  Although action is limited prior to a property transferring into their REO inventory, for which the portfolio currently holds 72, 000 properties, efforts are exhausted by Freddie Mac to retain occupancy, be that of the tenant or the former owner. 

Moratoria
In light of recent activities by servicers and the national attention that they have garnered, moratoria  have been enacted throughout the country.  It was noted that this unprecedented time in modern history offers the industry an opportunity to repair a broken system, to identify and explore many fundamental questions and issues related to lending and servicing practices, general operations, and loss mitigation efforts and strategies in judicial states.   The question was asked if this crisis and current circumstance is a painful means to a positive end, and the response was that the result could generate a win-win situation for all - the industry, communities, and borrowers, alike.

The limitations and hazards of enforcing blanket moratoriums that include vacant properties are damaging to both the industry and communities. Robert Klein confirmed that extending the length of the foreclosure process directly influences and amplifies the property's rate of deterioration, thereby causing blight, a reduced value of the asset, declining property values for the surrounding homes, and a wedge in neighborhood stabilization.

It is anticipated that foreclosure filings and proceedings will resume in the near future, following extensive exercises in due diligence by all parties involved.  The analogy that this crisis parallels that of peeling back the layers of an onion only to discover yet another layer was made; the issues that lie on the horizon will be discovered and addressed as part of this exercise.  Servicers speculate that the short term effects of moratoria will likely be minimal; however, the long term may project a different and unknown story.  Caution was made to the unintended national consequences of the “flood gates” opening and producing a surging volume of new filings, vacancies, and REO inventories.

Tools for Property Retention, Disposition and Acquisition
The country is ripe for a variety of new and enhanced programs that may be tailored to targeted segments of qualifying troubled borrowers. Short refinance programs were mentioned as one opportunity.

There are multiple parties and issues involved with executing a short sale.  It was reported that approximately 50% of these sales fall through as a result of the buyer walking away from the transaction.  This outcome may be attributed to lengthy timeframes, inefficient processes, and burdensome requirements. 

Communities and non-profits expressed grave frustration regarding the challenges and convoluted processes associated with accessing properties of interest within their strategic areas targeted for redevelopment and with the investment of Neighborhood Stabilization Program funding.  In addition to NCST, Craig noted that there are other opportunities for leveraging resources and tools in the toolbox available for identifying properties and aligning them for acquisition, specifically the REO Clearinghouse.  The legal limitations of servicers to dispose of properties while in pre-sale was noted as an obstacle for non-profits seeking to acquire such identified properties that are supportive of the group's strategies for redevelopment.  With an outcome that carefully balances neighborhood recovery with taxpayer benefits, Freddie Mac confirmed that they work directly with non-profits to acquire properties for which an interest has been expressed.  Finally, the approaches regarding one-off transactions as opposed to bulk purchases were noted.   Successful outcomes for the non-profit include the submission of offers that are systematic and mathematically founded, taking into account the net present value of today versus the uncertainty of tomorrow.

About Safeguard
Safeguard Properties is the largest privately held field services company in the country. Located in Cleveland, Ohio and founded in 1990 by Robert Klein, Safeguard has grown from a regional preservation company with a few employees and a handful of contractors performing services in the Midwest, to a national company with over 800 employees. Safeguard is supported by a nationwide network of subcontractors able to perform any requested superintendence, preservation, and maintenance functions, as well as numerous ancillary services in the U.S., the Virgin Islands, and Puerto Rico.