All mortgage servicers managing delinquent loans are faced with increased exposure to property damage or deterioration when properties are abandoned by borrowers in default.  Properties with special high-risk conditions may be even more likely to suffer damage: they may become vacant suddenly, suffer damage that progresses unusually quickly, or sustain frequent damage by vandalism or other means that are not typical at properties without such high-risk circumstances or indicators.  This increased exposure to damage means increased liability and potential losses for the servicer.
 
Safeguard Properties therefore considers any services we can offer to minimize our clients' exposure to risk and reduce their losses to be among the most important and valuable services we can provide.  With that in mind, Safeguard has devoted substantial resources over the past couple of years to developing our High Risk Department, which is dedicated to assessing, reporting, and responding to any circumstances that would increase the level of risk for a property in one of our clients' portfolios.  This memo offers a summary of several of the process and procedures we have implemented to identify and protect our clients' high-risk assets. 

Our High Risk Department now monitors approximately 20 city web sites and publications that maintain lists of properties in violation and/or on a condemned/demolition list.  Each city's list is then cross-referenced with all properties in the SPI system.  Any matches are immediately brought to the client's attention, flagged as high-risk as explained above, and escalated as needed for timely attention and resolution.
 
Safeguard is also firmly committed to continuing to build relationships with city code enforcement departments around the country.  Our High Risk Department takes a proactive approach to forging new relationships, fostering existing ones, and working closely with the cities to assure that safety and security issues are promptly and effectively addressed.

As part of our ongoing relationship development with code enforcement departments, Safeguard also makes routine contact at least once per month with more than 100 code and building officials in 30-plus cities across the US.  The High Risk staff regularly touches base with all of these industry contacts, just to ask how things are going, whether there are any property issues that need to be addressed, if there are any new issues/concerns in the city that Safeguard should be aware of, and if there are any other areas where Safeguard can be of assistance.
 
The High Risk Department heads have also started a program of traveling to various cities to meet with the code enforcement contacts we've made, to make new contacts, and to improve communication about and understanding of each city's primary concerns.  These visits also afford Safeguard the opportunity to talk with the city representatives about our clients' concerns, including limits on the servicer's rights at a property, the legal liabilities servicers are faced with, investor regulations and servicers' responsibilities thereunder, etc.  So far we've found that these visits yield immediate benefits in improved communication and faster resolution of problems.
 
Safeguard internally flags and monitors properties that have been deemed High Risk.  Following a number of categories of property conditions that warrant flagging a property as High Risk:

- City citations
- Building violations
- Susceptibility to flooding/dependence on sump pump
- Damage caused by flooding, roof leak, fire, mold, or environmental hazards
- High-risk location ("fast-track" or "hot-zone" areas, etc.)
- Other client-specified criteria

Clients may designate any criteria or conditions to define a high-risk category, and any property so identified will be flagged by SPI as a high-risk property.

By far the most high-risk identifications arise from reports by SPI's contractors and inspectors in the field.  On a daily basis, the High Risk Department reviews all messages from the internal staff advising of violations, citations, condemnations, and other high-risk conditions as reported by our inspectors and contractors. 
 
In each case where a high-risk condition is reported, the High Risk Department staff member will review the loan, send a message to the client identifying the issue, and flag the property in the system as a high-risk property.  If the staff member is unable to reach the appropriate contact at the client site, or if special instructions for remedying the problem situation are needed, the matter will be escalated to the High Risk Department Manager, and if necessary, to SPI's senior management, to coordinate with the client and resolve any outstanding concerns. 

The High Risk Department also runs internal High Risk Reports, populated by all properties flagged as high-risk, to track progress addressing high-risk concerns.  If a client's portfolio is found to warrant extra attention, the High Risk Report may also be used to follow up with clients on high-risk updates that have not been answered by the appropriate client contact. 
 
This valuable report is also available for our clients to run at their convenience or on a regular schedule, and it can be used for the client's own internal high-risk monitoring or simply as a means of coordinating with the High Risk Department at Safeguard.

If you have any questions or comments about the High Risk Department and our High Risk programs, please feel free to contact High Risk Manager Steve Meyer (steve.meyer@safeguardproperties.com, or ext. 1179) or High Risk Supervisor J Schwegel (nicholas.schwegel@safeguardproperties.com, or ext. 1123).