How Servicers Can Minimize Code Violation Risks

MAY 25, 2012 10:24am ET
Comment (1)

With estimates that more than 10 million properties stand vacant across the country, growing numbers of cities have either enacted or are considering vacant property registration ordinances to combat the problems that vacant and abandoned properties cause. Safeguard Properties currently tracks almost 800 ordinances in effect across the country, each with its own rules, requirements, fee structures and penalties.

With more effective outreach to municipalities and better internal processes, servicers can minimize their risks of code violations and stiff penalties, and build stronger relationships with code enforcement departments to protect the condition and value of properties in their portfolios.    

Effective systems and processes

Internally, servicers should identify a single point of contact within their organizations for cities and community groups to address and resolve complaints quickly. Servicers also can utilize a code enforcement management system to streamline the management of large volumes of properties.

Safeguard’s Compliance Connections is such an example. An effective communications management system provides a portal for municipalities and servicers to post, manage, update and resolve code issues on large volumes of properties quickly and efficiently.  

Experience with code enforcement procedures

When code violations occur, it is critical that servicers have experienced negotiators who understand the code enforcement process and can communicate with municipalities to prevent fines from accruing and even work to reduce them. An advocate with knowledge of servicing standards and code requirements can be an important bridge with code enforcement officers to extend grace periods, suspend enforcement actions, and facilitate concessions that create mutual benefit for servicers and cities.

Proper documentation

Servicers must follow specific guidelines, schedules and delegated authority for loans serviced on behalf of government investors and government-sponsored enterprises. When guidelines do not include provisions for the code requirements of a specific municipality, servicers must seek prior approval to receive reimbursement. Servicers must implement a detailed records and documentation process to facilitate reimbursement decision-making and assure that they receive the highest levels of reimbursement for their services.

Outreach and dialogue

Despite their unique challenges, servicers and municipalities share a common goal to protect properties and neighborhoods. Outreach and dialogue between the mortgage industry and municipalities has helped each side understand the other’s struggles.

Through organizations such as the American Association of Code Enforcement and individual state code enforcement groups, Safeguard and other field service companies have helped to identify solutions to minimize code violations on behalf of their clients. Servicers as well have participated in sessions and roundtable discussions with state and local code enforcement officials.

By working as true partners, the mortgage industry and municipalities have come a long way in developing tools and systems that protect property values and communities. The dialogue must continue.

Comments (1)
This is an article that code compliance officials can appreciate. It recognizes that compliance with local ordinances protecting the public health, safety and welfare are compulsory. It also underscores the importance of cooperating with those exercising police powers to minimize the time, effort and costs of compliance. Law enforcers have legal requirements to deal with recorded title holders unless those title holders have designated a surrogate, such as a servicer. Since servicers do not record their relationship to the parcel in public records, the enactment of Vacant Property Registration ordinances by municipalities provides a legal tool to provide legally valid notice to title holders and their servicers when citations for noncompliance are issued. This supplement by municipalities to the local land record system to accommodate servicers should be matched by servicers universal recognition that full compliance with local ordinances is not optional and is in the best interests of investors who put millions of houses in their custody. Thanks for publishing this article.
Posted by Kermit L | Tuesday, May 29 2012 at 12:40PM ET
Add Your Comments:
Not Registered?
You must be registered to post a comment. Click here to register.
Already registered? Log in here
Please note you must now log in with your email address and password.
MultimediaSee All »