Industry Focus: Boots on the Ground Collaboration

The crisis has turned field service providers—often called the servicers’ boots on the ground—into a primary liaison that is helping improve a crucial dialogue between the servicing industry, local code enforcement officials and foreclosure prevention entities nationwide.

Industry veteran Robert Klein, Safeguard Properties’ founder and chairman of the board, told this publication that given millions of vacant homes nationwide it is going to be “very, very difficult” to ensure these properties are properly maintained and do not cause blight for their communities. It is their biggest responsibility going forward as the number of foreclosures and real estate owned inventory creeps up.

What is critical at present “and will be even more critical in the future” is to open new lines of communication between lender-servicers and local communities where these distressed properties are located, a practice national field servicers like Safeguard came to develop over the years. It means cooperating with local REO code enforcement officials whose job is to ensure servicers comply with county, state and federal requirements.

Klein says the sooner everyone realizes that when it comes to REOs field servicers are the main point of contact for servicers, the better.

Field servicers are the boots on the ground, but so are the local code enforcement officials. “So there are two types of boots on the ground, and if we work together and we keep the dialogue open, it’s going to help solve the problem.”

Years of working experience, Klein says, have shown that having local code enforcement officers communicate with field inspectors who regularly inquire whether the grass is being cut and everything is okay with the neighbor’s house, for example, always helps improve both maintenance results and the servicers’ bottom line.

If embraced by servicing shops large and small in a “that is how things should be done” fashion, this approach can positively change the dynamic of the field servicing industry.

This “on the ground” effort, which may not have been very popular a decade ago, has naturally evolved because of the crisis. It is the way into the future that already has many supporters.

Over the past few years more intensive communication between the two parties has helped open the dialogue and educate code enforcement officers about the role of field servicers. Catering to that need Safeguard established a code enforcement department dedicated to establishing open dialogue and long term relationships with code enforcement departments around the country.

Until the situation stabilizes everyone’s efforts are focused on keeping people in their homes.

“We don’t know what the end result will be for this foreclosure crisis,” Klein says.

“Our role is to keep a lid on it, make sure vacant properties don’t deteriorate.”

And among others, that is the goal of code enforcement officials as well.

Klein, who over the years built a so far very successful field services firm, finds the most efficient, market tested strategy in dealing with REO management challenges is to establish a proactive working relationship with the local communities, and for a good reason, because local officials do not always understand the role of servicers and field servicers.

“Our job is to avoid or correct the problems,” he says.

So while all servicers tend to apply the same property management practices on the ground, what makes a difference is whether they manage to keep open the lines of communication.

It helps if when problems arise code enforcement officials know that their primary point of contact is the field servicer.

“The biggest problem code enforcement officials have had over the years is that they did not know who to call when they had a problem.”

However, only mutual interest can keep open that kind of dialogue and collaboration. It took a major economic crisis to facilitate the interaction.

If field servicers are by design interested in communicating with local code enforcement officers, the crisis created an equally strong incentive for these entities.

According to Klein for years it used to be “us against them.”

Now the attitude is, “Let’s work together. Let’s see what can we do together,” which is part of the solution. “We’re both there to accomplish the same thing, save these neighborhoods.”

In his opinion the biggest step towards solving the REO inventory problem is an efficient partnership between field service providers with servicers and other entities.

“We don’t have the solution yet, because the problem is way too big, but at least we’re on our way to putting our heads together and brainstorming to find a solution,” he says. “Servicers rely on us to keep that dialogue open. I think that’s the biggest thing that has happened in the past year, year and a half.”

In 2011 his hope is to see that close collaboration intensify even more at the state level since many REO management issues are affected by state-level legislation.

For example, it can take anywhere from 18 to 19 months to foreclose on a vacant property “and allow the servicer to take some action on the property.”

And if in the cases where properties in foreclosure are occupied that extension “is a good thing,” he agrees.

In such cases everything should be done to keep the family in the home. But since it takes as long and longer—sometimes two to three years to foreclose on a vacant property in some judiciary states—it means that servicers’ hands are tied.

It is a well-known fact that servicers cannot properly maintain, repair on a regular basis, or otherwise manage their preservation so they are ready for sale when a buyer shows at the door, unless and until the foreclosure process is closed.