Conference Planning Committee • Leslie Bromer, HUD
• Sarah Martin, HUD
• Kim Hobson, Freddie Mac
• Carrie Ehinger, Countrywide
• Rob Rybarczyk, Bank of America
• Kim Krakoviak, Citi
• Tracy Hager, First American
• Caroline Reaves, MCS
• Lorne DuFour, MCS
• Nickie Bigenho, MCS
• Robert Shekell, ZC Sterling
• Erica Unger, Safeguard Properties
• Greg Robinson, Safeguard Properties
• Vicki Vidal, MBA
• Mike Frueh, VA
• Carl Wasson, VA
• Deb Oakley, National City
• Jane Rhoades, Midland Mortgage
• Jack Evans, Chase
• Ann Lewis, HSBC
• Candace Fraley, Hooks Van Holm
• Sherilee Massier, Wells Fargo
• Kellie Beyer, Safeguard Properties
• Mary Stewart, LPS Field Services
• Jason Behrs, Superior Home
• Robert Klein, Safeguard Properties
Conference Topics
• Industry challenges
• Foreclosure prevention
• Asset collateral preservation
• REO disposition
• Property preservation costs
• REO statistics
• Brokers vs. national property preservation providers
• Initial services and ongoing preservation work
• REO best practices
• REO repairs
• Marketability enhancement
• Lendable condition
• Violations and ordinances
• Neighborhood stabilization
program
• Protecting our communities
• Vacant property registration
• MERS initiative
Agenda - Day 1
Time Session
8:45 - 9:00 Opening Remarks: Mr. Vance Morris, HUD Director of Single
Family Asset Management
9:15 - 10:15 Industry Update
10:15 - 10:30 Break
10:30 - 12:00 Investor Update - HUD
12:00 - 1:15 Lunch
1:30 - 2:45 Investor Update - HUD (continued)
2:45 - 3:00 Break
3:00 - 3:45 Investor Update – VA/FNMA/Freddie Mac
3:45 - 5:30 REO
5:30 - 6:30 Servicer Roundtable (Cabinet Room)
Industry Update Moderator:
Deb Oakley, SVP Homeownership Preservation
National City Mortgage
Panelists:
– Vicki Vidal, MBA Senior Director
– Laurie Maggiano, HUD Deputy Director, Office of Single Family Asset Management
– Mike Frueh, VA Assistant Director for Loan Management
– Rob Caire, Fannie Mae Vice President for Credit Loss Management Operations
– Kim Hobson, Freddie Mac Senior Default Specialist
– Joe Schilling, VA Tech Professor and Director of Research and Policy: National Vacant Properties Campaign
– Caroline Reaves, MCS President and COO
– Robert Klein, Safeguard Properties CEO
Session Overview
Industry leaders discuss critical issues faced
as foreclosures mount and public
and governmental scrutiny increases
Industry Challenges
• Key initiatives and activities that the
industry is deploying to address:
1. Foreclosure prevention
2. Maintaining asset collateral value (pre- and post-sale)
3. REO asset disposition
• Increase borrower contact (HOPENOW
Alliance)
• Expand outreach efforts to include:
– collections
– foreclosure
– customer service
• Simplify loan modification/workout process
Outreach and Counseling
Protecting and Preserving Asset
Values
• Pre-sale/post-sale maintenance of vacant and
abandoned properties
• Investor compliance (HUD, FNMA, VA,
Freddie Mac)
• Code compliance
REO Disposition
• Neighborhood Stabilization Grant Program ($3.9 billion)
– Developing action plans
– REO gifting, communicating with CDCs, and creating land banks
• Alternative disposition
– Auctions
– Bulk sales
• Neighborhood stabilization tools
– Vacant Property Registration
– Code enforcement
– Maintaining neighborhood values
– Alternative disposition methods
• Potential impact from federal bailout
Snapshot: YTD P&P Costs
Estimated Spending on Pre-Sale Properties $334 million
Estimated Spending on REO Properties $899 million
Total Spending (through 9/30/08) $1.23 billion
* Numbers are based on an estimated average inventory of 2.8 million pre-sale properties and 608 thousand REO properties.
** Data represents preliminary estimates based on the results from an MBA property preservation expense survey.
Total Annualized Spending $1.64 billion
Snapshot: YTD Pre-Sale
Property Inspection Costs
* Numbers are based on an estimated average inventory of 2.8 million pre-sale properties.
** Data represents preliminary estimates based on the results from an MBA property preservation expense survey.
Est. Spending on Pre-Sale Inspections (through 9/30/08) $167 million
$222 million Total Annualized Spending on Pre-Sale Inspections
Moderator:
Leslie Bromer
HUD Senior Housing Policy Specialist
Panelists: – Marlene Robinson, HUD Principal GTR
– Jack Evans, JPMorgan Chase Operations Manager
– Sherilee Massier, Wells Fargo P&P Manager
– Robert Klein, Safeguard Properties CEO
– Kellie Beyer, Safeguard Properties P&P Operations Manager
– Caroline Reaves, MCS President and COO
– Tracy Hager, First American VP of Client Initiatives
Investor Update - HUD
HUD’s Top 10 P&P Issues
1.) Requiring bids for nominal amounts
– Mortgagee Letter 2008-31 provides that bids not
be requested for items that are $250.00 or less.
2.) Original signatures
– Mortgagee Letter 2008-31 now provides that
extension and overallowable requests may be
submitted via email, but must include a full audit
trail
3.) Winterizations
– ML 2008-31: plumbing and heating systems must be
drained in a manner sufficient to prevent freeze and/or
other damage
– Actual damage must occur for demand letter to be issued
4.) Vacancy Issues
– Property is not occupied, but has a For Sale sign
– Property is not occupied, but there appears to be
personal property inside the structure
– First Time Vacancy (FTV)
8.) Extension and OA requests
– Incomplete submissions
– Duplicate submissions
– Multiple submissions of different OA items for the
same property
– Misdirected submissions
Servicers’ Top 5 HUD Issues
1.) Turnaround times
– Calendar vs. business days
– Timely response to overallowable and extension
requests
– Escalation process for non-responsiveness
2.) Bid Requirements
– Bids required for published allowables if total cost has been exceeded (grass cuts, boarding, winterizations)
– 2nd bids requested even if initial bid provided in accordance with HUD pricing matrix (more than 6 tires, oversized pools)
– Debris allowable limited by cubic yard measurement (bricks, swing sets)
– Guidelines require re-glazing, but no published allowable defined
– Bid approval after the fact for non-emergencies
3.) Denials and Appeals
– Mortgagee vs. mortgagor neglect
– Detailed reasoning of denied overallowable/cut bids
– Bids denied for technical non-compliance not impacting
property condition
– Appeal process does not provide for time extension
denials
– M & M response delays and extension requests
4.) Property Damages – Insurance claims required for damages even if below
policy deductible
– Mortgagee neglect needs to comprehensively defined and uniformly applied across regions
– Servicer held responsible for damages caused by mortgagor neglect
– Is mortgagee responsible for completing unfinished renovations prior to conveyance?
Break
2:45 p.m. – 3:00 p.m.
Coming Up:
Investor Update – VA/FNMA/Freddie Mac
Sponsored by Safeguard Properties
Moderator:
Robert Klein
Safeguard Properties CEO
Panelists: – Elonda Crockett, FNMA Asset Recovery Manager
– Carl Wasson, VA Supervisory Loan Specialist
– Kim Hobson, Freddie Mac Sr. Default Specialist
– Sherilee Massier, Wells Fargo P&P Manager
– Caroline Reaves, MCS President and COO
– Tracy Hager, First American VP of Client Initiatives
Investor Update: FNMA,VA,
and Freddie Mac
Fannie Mae Update
• Improving communication with servicer and
field service partners
• Release of new overallowable guidelines and
reference guide
• Web-based technology Home Telos
(HomeTracker) to streamline bid approval
process
• Requirements for submitting 1095 request
• Are expenses reimbursable if OA approval is
not received?
• Are the costs for services reasonable and in
line with items to be completed?
• Hazard insurance filing/recovery
VALERI
• VA Loan Electronic Reporting Interface
– More loss mitigation incentives
– Less VA intervention
– Servicer control over timeframes
– No buy downs, just write-offs
VALERI: Electronic Reporting
• Mostly transparent
• Full file reporting
• VA event interpreter translates
• Occupancy status change automatic
• Some events reported in servicer Web portal
• Claims data semi-automated
VA P&P Issues
• VALERI fees & cost schedule
• Interior inspections on abandoned properties
• Access to vacant properties for appraisals
• New PM contractor
Freddie Mac
• Hurricane Ike foreclosure moratorium in
federally-declared disaster areas
• Loss mitigation efforts
• P&P issues
- Enhanced over allowable expense thresholds
- Vacant property inspections
REO Moderator:
Robert Klein, CEO
Safeguard Properties
Panelists:
– Jay Kingsley, HSBC
– Marc Hinkle, PHH
– Elonda Crockett, FNMA
– Sherilee Massier, Wells Fargo
– Kathy Cogan, Safeguard Properties
– Caroline Reaves, MCS
– Mary Stewart, LPS
REO Filings by QTR
0
20,000
40,000
60,000
80,000
100,000
120,000
4th
Qtr 05
1st
Qtr 06
2nd
Qtr 06
3rd
Qtr 06
4th
Qtr 06
1st
Qtr 07
2nd
Qtr 07
3rd
Qtr 07
Quarter
To
tal
Existing Home Sales by Region - Seasonally Adjusted
800000
1800000
2800000
3800000
4800000
5800000
6800000
Date
An
nu
al
Rate
of
Sale
s
U.S.
Northeast
Midwest
South
West
2004 2008 2009 2007 2006 2005
Seriously Delinquent (90 days + FC inventory) Prime Loans
0
0.002
0.004
0.006
0.008
0.01
0.012
4Q-05 1Q-06 2Q-06 3Q-06 4Q-06 1Q-07 2Q-07
Date
Rate
in
%
Seriously Delinquent (90 days + FC inventory) Prime Loans
Seriously Delinquent (90 days + FC inventory) Sub-prime
Loans
0
0.01
0.02
0.03
0.04
0.05
0.06
0.07
0.08
0.09
0.1
4Q-05 1Q-06 2Q-06 3Q-06 4Q-06 1Q-07 2Q-07
Date
Rate
in
%
Seriously Delinquent (90 days + FC inventory) Sub-prime Loans
Brokers vs. National
Preservation Providers
• Separation of responsibilities
• Streamlining and centralizing processes
• Communication
• Quality control measures
• Turnaround times
• Cost factors
Initial Services
• Securing
• Trashout and maid services
• Initial grass cut and landscaping (curb
appeal approach)
• Winterization
Maid Services
• Wiping down counters, window sills,
cabinets
• Mopping hard-surface floors
• Vacuuming carpets
• Cleaning bathrooms
• Goal is to have the property in
“marketable condition,” ready to be shown
to potential buyers
Ongoing Property
Management Services
• Bi-monthly grass cuts to maintain curb appeal
• Monthly maid refresh to ensure optimal
presentation to potential buyer
• Re-securing and debris removal (if necessary)
• Winterizations and de-winterizations
• Snow removal as needed
REO Best Practices
• Open Communication Communication between broker and field services provider imperative to
ensure success
• Marketable Condition and Curb Appeal Maid services and upgraded landscaping services are essential to ensure
competitive positioning of an REO property comparable to traditional homes for sale in the neighborhood
• Marketability Enhancement Cost effective upgrades that greatly enhance the value of the property and
provide reasonable return on investment (paint, floor covering, counter tops, appliances)
Repair or Sell As-Is?
• Several key determining factors
– Market value
– Local competition
– Investor preference
Cosmetic Repairs
• First impressions make or break sales
• Cost effective interior items like new paint or
carpeting greatly add to marketability
• Cost effective exterior items like painting,
mulching, new plantings, etc. greatly improve
curb appeal
Marketability Enhancement
• Focuses on investment in properties to ensure
comparability to competitive properties in the
community
• Includes investment options for property refresh:
– painting
– carpeting and flooring
– landscaping
• Enables clients to target investment with
properties where there is a reasonable return on
investment for the activities
• Provides opportunity to upgrade homes at a cost
effective investment for the purpose of shortening
the sales cycle
Lendable Condition
• Impact to sales price
• Impact to market time
• Decision-maker on whether to rehab (broker,
asset manager)
• Quality of materials used
Code Violations and City
Ordinances
• Building relationships with code enforcement
offices and officers
• VPR initiatives
Thank You
Servicers, please join us for the Roundtable
Discussion at 5:30 p.m.
Everyone, please join us at 6:30 p.m. for
our evening reception.
Dinner is at 7:30 p.m., followed by entertainment
provided by extraordinist Craig Karges!
Agenda - Day 2
Time Session
8:45 - 10:15 Community Impact
10:15 - 10:30 Break
10:30 - 12:00 Vacant Property Registration
12:00 - 1:30 Lunch
Conference Adjourns
Community Impact Moderator: Deb Oakley
National City Mortgage Senior VP Homeownership Preservation
Panelists: – Vicki Vidal, MBA Senior Director
– Sherilee Massier, Wells Fargo P&P Manager
– Doug Leeper, City of Chula Vista
– Joe Schilling, VA Tech Professor and Director of Research and Policy: National Vacant Properties Campaign
– Dave Gatton, US Conference of Mayors Director
– Dion Irish, City of Boston Assistant Commissioner
– John Cascardo, City of Dearborn
– Dan McLaughlin, MERS, Inc. EVP Product Division
– Robert Klein, Safeguard Properties CEO
Session Overview
As the country faces challenges brought on by
the increase in vacant properties, Industry and
Community leaders discuss initiatives in place
to address vacant blight
NSP Overview
Authorized under the Housing and Economic Recovery
Act of 2008
Provides emergency assistance to state/local governments to acquire and redevelop foreclosed properties that might
otherwise become sources of abandonment and blight within their communities
September 2008 announcement of $ 3.92 Million allocated
to cities eligible for direct funding
(pending approved application)
Permitted Use of Funds
Acquire land and property
Demolish or rehabilitate abandoned properties
Provide down payment and closing cost
assistance to low- to moderate-income
homebuyers
Key Requirements
Applications for funding must be submitted to HUD
by December 1, 2008
Following approval of the application, cities will
have:
• eighteen (18) months to obligate the funds
• four (4) years to spend the funds
US Conference of Mayors Survey Results –
Use of Federal Funds
61% said they would use the funds to acquire vacant/ abandoned properties
56% would clean up land or rehabilitate structures on properties
54% would demolish structures on properties
42% would maintain already acquired properties
29% would establish land banks
20% would establish financing mechanisms for purchase and redevelopment of
vacant and abandoned properties
Source: US Conference of Mayors 2008 Vacant and Properties Survey and Best Practices
Protecting our Communities
The Industry is committed to preserving properties and maintaining neighborhoods in the interests of our
communities and in support of local code enforcement officials
Servicer Benefit
Protects their mortgage collateral from damage or destruction
Preserves the mortgage holder’s and its investor’s financial and legal interests in the properties
Prevents potential code violations, avoiding costly citations or fines and the loss of goodwill
Community Benefit
Prevents decreases in neighborhood property values as a result of property deterioration
Ensures timely compliance with local code requirements
Protects neighborhoods from nuisances, vandals, and other dangers associated with vacant properties
Initiatives
Create Transparency
– Code Enforcement/Community Contacts (MBA Website)
Coordinate
– Work with local CDC’s and city officials to build productive relationships to benefit all affected parties
Educate
– Servicers to understand and appreciate the impact of vacant/blighted properties on community resources
– Code Enforcement to understand the guidelines servicers must follow in managing vacant/blighted properties
Vacant Property Registration
• Municipalities throughout the country are enacting new ordinances, or enforcing existing ones, centered around the registration of vacant properties.
• Registration ordinances require owners of properties that have become vacant or abandoned for a certain length of time to register formally with the local government.
• As a response to the foreclosure crises, many cities struggling with new inventories of vacant homes are creating ordinances to help mitigate damage to communities and recover costs incurred.
• Disparate non uniform VPR ordinances have been challenging for the Industry to comply with
VPR Industry Challenges
• Distinguishing between pre-sale and post-sale registration
• Pre-sale ordinance requirements sometimes raise potential conflicts with other laws and regulations (i.e. requirement to remove personals, re keying of all access doors)
• Definition of Vacancy Status not uniform
• Local Contact requirements are challenging for those utilizing National Field Service vendors
• Penalty provisions in some ordinances were considered to be confusing and potentially costly
– Example: some require maintaining property in accordance with building codes
• De-registration of properties
• Securing requirements sometimes unrealistic (metal doors)
• Signage requirements invite vandals
MBA VPR Committee
• National Vacant Property Registration Committee, consisting of cross-industry participants, was formed to reach out to cities and offer industry help, support and expertise.
• The foundation behind the committee’s efforts has been to identify key provisions that raise concerns and develop consensus on a set of recommendations to address those concerns.
• Key initiatives currently undertaken by the committee: – Educate communities nationwide as to what is
encountered in the field
– Creation of a “Model Ordinance” combining best practices from around the country as a starting point for cities to consider as they enact their own legislation.
– MERS (Mortgage Electronic Registration System) initiative
MERS Solution to VPR
• Created by the mortgage banking industry to streamline
the mortgage process by using electronic commerce to
eliminate paper
• Acts as nominee in the county land records for the
lender and servicer
• The MERS system will include contact information for
the servicer and field service/property
preservation company
MERS Solution - VPR
• iRegistration provides servicers with a cost-effective additional option to utilize the MERS system strictly for this initiative
• Municipalities will receive access and training at no cost to utilize the system to identify the property preservation contact
• Contact information including name, title, phone number and email
• Pilot program to begin in Boston MA, Stockton CA, St. Paul MN, Saint Louis County MO, and Chula Vista CA