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The Industry Call held on April 1st, 2008 focused on issues pertaining to the various vacant property registration ordinances being enacted or enforced throughout the country.
Call Summary
Overview
There are numerous vacant property registration ordinances that have been enacted in recent years. While these ordinances have been on "the books" for several years, they have not typically been aggressively enforced. Recently, there have been similar activities in other jurisdictions throughout the country where either similar ordinances have been enacted or are under consideration. (Current list being monitored by Safeguard is available by clicking here).
Each ordinance has unique characteristics that provide logistical difficulties for servicers to monitor and comply with, including:
- Timeframe for registration (i.e. initial discovery/knowledge of vacancy, initial default, post-sale etc.)
- Registration responsibility (i.e. owner, trustee, mortgagee in possession etc.)
- Required maximum distance from subject property for responsible party
- Applicable fees
- How a party is removed once the property goes to sale.
Specifically, the following provides examples of these unique requirements of various ordinances include:
- Fees - Wilmington, DE - $500.00; Binghamton, NY - $500.00; Newburgh, NY - $720.00; Kalamazoo, MI - $50.00 monthly; St. Peters, MO - $150.00 semi-annually
- Timeframe to Register - Milwaukee, WI - Post Sale only; Cincinnati, OH - 30 days from receipt of a notice from the City; Columbus, OH - Immediately upon receipt of a notice from the City; Boston, MA - within 7 days from the initiation of the foreclosure process
- Responsible Party Proximity Requirements - Desert Hot Springs, CA - Local Mgmt. Co. within 5 miles of subject property; Dover, DE - Local Mgmt. Co. from Kent County; Boston, MA - Local Mgmt. Co. within 20 miles of subject property
- How to be Removed from Registration - Most cities require the buyer to notify the City, with the following exceptions: Indio, CA; Santee, CA; Salisbury, MD; Palmdale, CA; Milwaukee, WI
Issues
It was generally agreed that vacant REO properties should be registered.
There are potential legal concerns with registration of pre-sale properties, including:
- Does the registration constitute acknowledgement of mortgagee in possession?
- Is registration different than securing the property in regards to mortgagee in possession, especially in states like Michigan that have redemption periods?
- What additional liability does the servicer incur, especially once the property is sold 3rd party and the registered servicer is no longer the owner?
- What effect does it have on insurance requirements/notification in light of US Bank vs. Tennessee Farmers ?
Many ordinances state that the intent is for identification of the parties responsible (for maintenance and upkeep) and any fees are utilized to offset the costs associated with maintaining the registration database.
The servicing industry has developed strong working relationships with local Code Enforcement officials throughout the company. This resulted in the recent creation of the MBA Property Preservation Resource Center which is widely utilized by Code Enforcement throughout the country and has generated increased good will. Generally, when open lines of communication exist, Code Enforcement realizes and appreciates the efforts and expenditures by the servicing industry to address the hundreds of vacant properties in their communities and address the exceptions as they arise. However with increased media attention on foreclosures and abandoned properties, local legislators have increasingly utilized these ordinances as an indicator to their respective constituents of the proactive measures they are utilizing to fight vacant blight in the community. It appears that the issue has escalated from a "ground-level" code enforcement issue to a political issue.
Solutions
While many of the ordinances could be challenged (specifically on the inclusion of "Trustees" as being required to register or if there was selective enforcement against the servicer) it was agreed that it would not be feasible to litigate each local ordinance.
In general it was the consensus of the industry to try to comply with the local ordinances until a plan is developed to deal with the issue on a national level.
Investors on the call (HUD, VA, FNMA and FHLMC) agreed that the servicers should follow local ordinances. Laurie Maggiano indicated that for FHA insured properties, servicers are to submit over-allowable requests to the respective M&M's for the registration fees, and these amounts will apply to Total P&P. With several fees having a high dollar amount, the impact on total P&P and the bidding process will be significant. HUD will review the current guidelines.
Discussions centered on a long-term national strategy that needs to be developed in order to standardize approaches across the country. This would include a "best practices" ordinance that would satisfy the municipalities concerns regarding identification and servicer concerns for uniform protocols that would ease the logistical issues. A vehicle is needed to broach this concept on a national level. It was suggested utilizing the US Conference of Mayors to reach a broad audience of local mayors. The US Conference sent a representative to the 2007 National P&P Conference and Vicki Vidal recently presented at their annual meeting. Any outreach to the US Conference of Mayors could include a tutorial type presentation on the servicing world which would provide a factual basis and background (context) for the suggestion/presentation of a "national ordinance"
Concerns were raised whether approaching the US Conference of Mayors (or The American Association of Code Enforcement) may generate additional exposure to the issue resulting in many more ordinances being passed.
Follow Up Action Plan
A survey will be sent to the attendees for comments and review (see below).
Once the survey is received, a working industry group can be established to address the issue on a national level.
Please send your response to Vacant.Prop.Registration@safeguardproperties.com
Vacant Property Registration Survey
Respond “yes” or “no” to the following:
Vacant Property Registration Ordinances:
1. Do you believe that this issue is best handled individually (by each servicer)?
2. Do you believe that this issue is best handled by taking an industry approach?
3. Do you support approaching the U.S. Conference of Mayors or other trade associations regarding the issue of communities requiring vacant property registration?
a. Do you see benefit to presenting a Best Practices approach to the U.S. Conference of Mayors (or other trade associations) utilizing with industry representatives?
b. Would you support developing a model ordinance to be presented to the U.S. Conference of Mayors or other trade associations?
Brief Comments:
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 450 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.
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