Good business for bad times: Mortgage field services

Safeguard Properties uses a nationwide network of contractors — this one is in Columbus, Ohio — to maintain and clean up foreclosed properties.

From behind the desk in his spacious office, Robert Klein sees a foreclosure crisis in full swing.

Outside his door, a sea of cubicles fills the 75,000-square-foot nerve center that is Safeguard Properties, the company he founded. On a recent workday, hundreds of employees monitored the thousands of contractors who look after millions of homes around the country in various stages of foreclosure.

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“In the business that we’re in, we see the devastation that this does to families. We actually see what it does, where people are uprooted,” says Klein, 59. “It’s a monster of a problem.”

That monster problem, as it turns out, has been a major boon for Safeguard. Few businesses have flourished as much during the housing crisis as the one headquartered inside this ordinary office park in a leafy suburb 15 miles south of Cleveland.

Klein, who grew up in Brooklyn and drove a taxi for five years, moved to the area in the 1970s to run a produce company he bought from his uncle. He eventually sold that business and started Safeguard Properties in 1990 with a single employee.

What began as a small regional firm has become the largest privately held mortgage field services company in the nation, with more than $600 million in income last year. It has 900 employees and 10,000 contractors operating in all 50 states, the Virgin Islands and Puerto Rico.

Safeguard completes an average of 1.2 million work orders a month, doing such things as mowing the grass, replacing windows, cleaning out vacant houses after an eviction or fixing them up to prepare for resale. That’s nearly double the pre-crisis volume for the company, which bills itself as a one-stop shop.

Klein and his colleagues grow sheepish when talk turns to the success they have reaped in the wake of economic collapse. They note that the business had grown steadily before the financial calamity.

But even Klein acknowledges that the national wave of foreclosures has boosted his bottom line. “A lot of people say, ‘Robert, you must be doing great. The foreclosures, the timing. . . . ’ And they’re right.”

Even so, the question troubles him, he says. He explained it this way in a speech to vendors this summer: “Doing the right things for clients means serving their best interests. In fact, our company’s mission is ‘safeguarding our clients’ interests.’ It isn’t ‘grow business from a housing crisis.’ ”

Given the recent boom in business, particularly while so many others are suffering, Klein could have quietly enjoyed the profits and kept the company under the radar. Instead, he has maintained a high profile, speaking and writing frequently about housing issues. Safeguard sponsors national conferences, such as one in Washington next month dedicated to property preservation and featuring industry executives, municipal officials and employees from government-backed mortgage giants Fannie Mae and Freddie Mac.

Along the way, Klein has become a powerful figure in the mortgage world. And also something of a paradox:

He has butted heads with local officials angry about the blight in their communities and frustrated by abandoned properties and unresponsive banks. And yet he has invested in expansive databases to track vacant property ordinances and aid code enforcement officers. He has been called a shill for the banks whose mortgage abuses helped create and exacerbate the crisis. And yet he has brought together disparate groups in search of constructive ways to end it.

Those sometimes contradictory roles have led to mixed reviews.

“He’s an apologist of the first order” for mortgage servicers, says Kermit Lind, a housing expert and former Cleveland State University professor. “And why not? They are the ones who are making him rich.” But, Lind adds, “To his credit, he’s tried to position himself as a mediator between the banks and the public. Sometimes it works, sometimes it doesn’t.”

Joe Schilling, associate director of the Metropolitan Institute at Virginia Tech and a founding member of the National Vacant Properties Campaign, says Klein sometimes promises more from his company than he can deliver on the street level.

“You have to give Robert credit for being out there; that’s certainly a risky environment,” Schilling says. “At the same time, sometimes by overselling what they can do, by over-promoting, that causes some frustration from local government officials.”

Like others, Schilling says Klein has been “a forceful advocate for the [mortgage servicing] industry.” But he credits Klein with seeking out diverse opinions and playing “a pivotal role as the liaison between industry and local governments.”

Klein says that banks and servicers have been overwhelmed themselves by the magnitude of the crisis and that they have limited legal ability to work on homes until a foreclosure is finalized. He insists they have every incentive to take care of the foreclosed properties on their books, because it makes simple business sense to prevent collateral from deteriorating.

“We’re not perfect; our clients aren’t perfect,” he says. “Things fall through the cracks. I’m not saying it’s forgivable; I’m not saying it’s justified. But I will tell you, for every vacant property that’s sitting over there with no windows, no doors, with grass and graffiti all over the place, I will show you a thousand that are being maintained.

“You don’t hear about those. All you hear about are the exceptions.”

Klein wades out into the cubicles in Safeguard’s headquarters and has employees pull details of individual properties. Each file includes scores of photographs that contractors are required to send of their work — patched windows, mowed lawns, winterized pipes, secured pools.

“Rule of thumb: If I can’t see it, you didn’t do it,” Klein says.

Those pictures used to arrive as daily truckloads of Polaroids. Now, about 36 million digital images are stored each month on a bank of servers in a climate-controlled, fireproof room. Klein says the elaborate documentation he demands for each property and his focus on technology — he maintains a 40-person IT staff — have helped maintain the company’s quality control even has its workload and workforce have skyrocketed.

“Our clients do hold us accountable,” he says. “I don’t want to leave you with the impression that everything is perfect. Everything is not perfect. We have a big problem on our hands. [But] I think we’re doing a decent job. The industry would not be doing the kind of job it does without companies like us.”

Klein turned over the chief executive reins to his son-in-law last year but remains Safeguard’s chairman. He advocates for more loan modifications for struggling homeowners, for a strong set of best practices in the foreclosure industry and for moving vacant homes off the market more quickly to help the economy recover. He also continues to act as a middle man of sorts between local officials and industry executives.

“Head to head, nobody wins,” Klein says. “I think we’ve opened the dialogue in communities around the country, where we’re actually sitting down and talking to each other. Although we might not have the answers 100 percent, I think we’re moving in that direction.”

Klein knows that as the economy heals and the number of foreclosures shrinks, Safeguard’s business will wane. Already, he is putting the national network of contractors he has built to use in different ways, such as working with insurance companies on inspections and repairs and exploring commercial property management. “We’re branching out,” he says.

Even so, the man who can see the foreclosure epidemic unfolding outside his office door doesn’t see it ending anytime soon.

“I think you’ve got at least five or 10 years before this actual crisis calms down,” he says, “because nobody has yet come up with a silver bullet.”

 
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