REOMAC Fall Education Summit Summary

November 15th, 2010

On October 20-22, 2010, Safeguard Properties participated in REOMAC's Fall Education Summit in Hollywood, Florida.

REOMAC Fall Education  Summit
Hollywood, Florida
October 20-22, 2010

Lender Property Liabilities: Pre and Post Foreclosure  
 
Moderator
Robert Klein, Safeguard Properties

Panel
Frank Cassidy, Florida Association of Code Enforcement, City of Cape Coral
Cynthia Nierer, Rosicki, Rosicki & Associates
Ron Semich, NRT REO Specialists

Session Overview
To an audience comprised of servicers, field services representatives, and primarily REO brokers, who represented all regions of the nation, this diverse panel spoke on and interacted with attendees on ancillary topics far beyond those of the roles and responsibilities of of the industry during the pre and post sale phases of a foreclosure.  With the contribution of perspectives and supportive expertise from code enforcement, asset management and legal, Robert Klein led an engaging discussion that emphasized the value of relationships to effectively streamline disposition processes and expedite timelines, meet the end objectives of property compliance, and preserve values for both the asset and the surrounding community.

Set the Stage: Best Practices
To lay a foundation for the discussion ahead, Robert shared an overview of the best practices for property preservation and maintenance that are executed by servicers and are in full accordance with HUD’s guidelines and municipal standards.  Differentiation of the activities and legal authorities to preserve and protect the collateral interest during both pre and post foreclosure were clearly defined.   These diligent measures to properly maintain a vacant property during pre-sale, which comprises roughly 20% of the delinquent inventory, ensure that the condition of the asset is maintained and that it is marketable for when the broker enters the relationship.  During pre-sale, the field services company visits a property an average of 20 times.

Legal Risks
Cynthia Nierer further balanced the discussion by sharing her legal perspectives on the many risks servicers face during pre-sale while acting in pursuit of protecting their collateral interests.  Many times these include accusations of trespassing and theft.  Such threats and exposure to liabilities have resulted in caution, including obtaining a court order for services above and beyond exterior maintenance.

Value in Partnerships
The importance and effectiveness of establishing relationships among all parties involved with or responsible for a property was a recurring message shared by all members of the panel.  Ron Semich indicated that asset managers rely on brokers to streamline the disposition process and attribute them to being the “glue” in these partnerships.  As few historic details typically accompany the assignment of a property, he further stressed the benefits of including and collaborating with all parties involved so that information can be shared that will help expedite disposition.

Preventing a Broken Window, Code Enforcement
Frank Cassidy affirmed that voluntary compliance is the objective sought from municipal Code Enforcement.   Officials have adopted and practice under the “Broken Window” philosophy, which follows the doctrine that a single broken window escalates into many broken windows.  The goal of the Code Enforcement community is to prevent that first window from ever breaking. 

Robert noted that partnership and collaboration between the industry and municipalities developed and was nurtured through outreach in response to the growing number of Vacant Property Registration Ordinances (VPR).  Although originally enacted to obtain direct points of contact for resolving property preservation issues, multiple variations within the language and requirements have made compliance challenging.  Frank confirmed that many times VPR's are crafted as simply a knee jerk reaction to the growing number of vacant and abandoned properties.  Cities may be producing more harm than good by creating obstacles for those parties responsibly taking appropriate actions to maintain properties, or when using this tool with the expectation of it being a revenue generator.  Frank emphasized that these and other similar actions instituted by municipalities may not have arisen if relationships and working partnerships were in place.  

Property compliance and preventing neighborhood complaints are deeply rooted priorities of the industry.  An example of a symbol of good corporate citizenship has been the implementation the Good Neighbor Door Hanger program, which invites neighbors to contact the property preservation company directly to expedite the resolution to any concerns.

Property Liens
After reviewing many approaches for compliance, Frank attested that the assignment of liens is not effective in achieving compliance.  In response to a question regarding the mitigation of liens, it was noted that although jurisdictions vary, there may be a willingness to negotiate amounts under the assurance that issues will be abated and the property will continue to be maintained.  Negotiated amounts will be exclusive of any costs directly incurred by the city as those expenditures must be recaptured.  Standing relationships between the city and the industry will assist mitigation efforts, a circumstance supported by members of the audience.

Emergency repair liens and fees from violation notices can be problematic and delay closings; however, they may also present obstacles within the realm of evictions.  Cynthia confirmed that fees can be avoided if servicers carefully follow and adhere to legal and procedural timelines.  Many statutes include provisions to accommodate feasible schedules for both the servicer and occupant.

Home Owner Associations
The questions and difficulties regarding addressing and maintaining vacant properties within an HOA were noted by multiple brokers and attorneys.  In addition to the assignment of maintenance responsibilities, achieving access, and dwindling reserves were also noted.  Although the HOA may be maintaining the property during pre-sale, post-foreclosure activities can be expected to be under the guidance of the servicer.  

Cash for Keys
A majority of brokers attending the session confirmed that they use and are pleased with the outcomes from Cash for Keys.  Although amounts offered vary according to specific markets and conditions, efforts by states to dictate minimum thresholds were noted.  Trends indicate that there has been an overall increase in the amounts offered to vacate a property, which may be attributed in part to servicer liabilities.  It was advised that to avoid delays or disruptions, ensure that proper paperwork is in place and that all necessary steps have been taken prior to execution.

Marketing and Selling Delinquent and Foreclosed Properties
In response to a question regarding procedures for marketing vacant properties during pre-sale, Robert confirmed that all efforts are made to provide full and ongoing access to the broker.

Although successful in various markets within California, brokers from other regions commented on the difficulties with marketing and selling occupied properties during both pre and post-foreclosure.  Manipulating pricing impacts the value of the collateral and the surrounding community.  However, benefits do exist with extending occupancy as it prevents threats of vandalism and deterioration, and offers the advantage of an established revenue stream, an enticing factor for third party investors. 

Brief mention was made of the increased willingness of servicers to engage in and entertain short sales.   It is anticipated that occurrences of and preferences for this disposition option will escalate in light of extensions to already lengthy foreclosure timeframes.  GSE guidelines have been reviewed and are being implemented to further streamline the short sale process.

In Conclusion
Very pleased with the level of participation and dialogue that ensued between the panel and audience, Robert noted that the broad spectrum of topics and issues discussed illustrates the multiple impacts imposed by foreclosures and reinforces the need for partnership and collaboration.  Brokers play an instrumental role in contributing to and solidifying these relationships. 
 
REOMAC® is a national non-profit trade association for the mortgage default industry, including default service providers and loss mitigation officers and directors, that is uniquely dedicated to the professional development and advancement of its lender/servicer, outsourcer, affiliate and agent/broker members.  Safeguard Properties is proud to be a long-standing member of REOMAC, as well as an ongoing supporter, exhibitor, and speaker at both the Spring and Fall Educational Summits.

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.