Illinois Sues Property Preservation Provider for Foreclosure Practices
Safeguard Properties, the nation’s largest property preservation provider, is being sued by the state of Illinois alleging that the company violated the Consumer Fraud Act by illegally dispossessed occupants from their homes without proper jurisdiction.
According to the lawsuit filed in Cook County Circuit Court, Illinois attorney general Lisa Madigan claimed that Safeguard Properties locked homeowners out of their housing units even though they weren’t supposed to, removed personal property from homes, and shut off all utilities despite clear evidence that homes were legally occupied.
Under Illinois law, homeowners in default on their mortgage payments have the right to remain in their home until the foreclosure process has been completed and an order of possession has been entered against the homeowner.
Additionally, those who reside in foreclosed buildings can continue to live in these housing units during, and, often, after the judicial foreclosure process has been completed.
“Safeguard or its subcontractors often deem property to be vacant despite clear signs that the property is not vacant, such as a barking dog inside the home, a car in the driveway, garbage cans placed outside for pickup, a neighbor’s statement that the property is occupied or even the actual presence of a legal occupant in the home when the subcontractors arrive at the property,” the lawsuit stated.
The Illinois attorney general’s office is aware of over 200 complaints from state residents against Safeguard concerning the removal of personal property.
As an extra protection for occupants of properties in foreclosure, Illinois requires that even before taking possession of an abandoned property, parties must obtain a court order allowing them to take possession of the asset.
“Despite these protections, Safeguard has ignored and severely curtailed the rights of occupants of at-risk properties, properties in foreclosure, and REO properties by illegally breaking into homes, removing occupants’ personal property, locking out occupants, turning off utilities for legally occupied property, refusing to allow re-entry into these properties, and making coercive and deceptive representations to legal occupants,” the lawsuit said.
Robert Klein, founder and chairman of Safeguard Properties, told National Mortgage News that the company sends two individuals who are not affiliated with one another to determine whether a property is occupied: an inspector and a contractor.
“The inspector goes out there and does an inspection. He doesn’t do any changing of the locks and has nothing to gain by saying the property is vacant,” Klein stated. “Once the inspector says the property is vacant, we’ll send out a contractor. They will verify the property is vacant and then we do whatever field service work that needs to be completed.”
Safeguard has contracts set up with several mortgage lenders and servicers to provide property inspections and preservation services for housing units whose owners are delinquent or have defaulted on their mortgages. Through these contracts, Safeguard agrees to determine the occupancy status of the property and provides field services such as boarding up doorways, changing the locks, winterizing the home, and removing debris from an unoccupied property.
Klein added that 23% of the inspections Safeguard performs are vacancies before they go to sale. He believes this lawsuit is targeting the Valley View, Ohio-based property preservation firm because they are the “800-pound gorilla” that performs 2 million inspections a month.
“This is an industrywide issue. Every field service company follows the same exact procedures and processes and has the same problems,” Klein continued. “We are going to fight this lawsuit.”
Allan Jaffa, chief executive officer of Safeguard Properties, said in an email statement that there is a public misunderstanding about a mortgage company’s right to protect a property believed to be vacant prior to the foreclosure sale. He said Safeguard plans to raise awareness about both the important role of the mortgage industry to protect and preserve properties and the challenge of doing so as the company plans on defending these allegations.
“Defaulted borrowers and plaintiff’s attorneys challenge the right of a servicer to enter a property preforeclosure, while cities across the country levy stiff penalties against mortgage companies for failure to do so,” Jaffa continued. “We require background checks of all contractors and crews, carefully monitor the performance of our inspectors, and take immediate corrective action if policies are violated. We take instances of error, damage and loss seriously and not only work to correct and resolve those issues with homeowners, but fully investigate the matter internally to identify and address the root cause.”