Barry Tatum returned to his home in Chicago in December to find that his front and back doors had been torn from their hinges, leaving his possessions exposed to the frigid winds that whipped through his neighborhood.
Terrified that he had been robbed, Tatum, who had fallen behind on his Bank of America mortgage, raced inside only to discover an unlikely source of the break-in, he said: a subcontractor for a property-management firm hired by the bank.
A letter from the subcontractor informed Tatum that the bank had the right to enter and secure the property, according to a copy reviewed by The New York Times.
“It’s the most depressing thing,” said Tatum, who ultimately got the management firm, Safeguard Properties, to replace the doors.
Faced with more than 10 million foreclosures that have piled up since the start of the mortgage crisis, the nation’s largest banks are turning behind the scenes to property-management firms, with the Ohio-based Safeguard the largest, to help them navigate the wreckage, determine the occupancy of the troubled properties and preserve them until the homes can be resold.
But the firms are coming under fire for using questionable and possibly illegal tactics. The scrutiny threatens to ensnare JPMorgan Chase, Bank of America, Citibank and other lenders that depend on the firms. Legal aid offices in California, Nevada, Florida, Michigan and New York say calls about Safeguard’s aggressive tactics rank among the top complaints.
On Monday, Illinois became the first state to take on the property-management firms legally, contending in a lawsuit that Safeguard wrongfully dispossessed hundreds of homeowners in the state. In suing Safeguard, Lisa Madigan, the attorney general, contends that the company broke into homes despite stark evidence that homeowners still lived in them, bullied tenants into leaving even though they had no legal obligation to do so and, in some instances, damaged the very homes they were sent to protect, according to the suit.
“This is a homeowner’s worst nightmare,” Madigan said in an interview Friday, noting that her office had received more than 400 complaints about Safeguard.
Diane Fusco, a spokeswoman for Safeguard, said that the company had not received the lawsuit.
Defense of firms
Safeguard, she said, follows a rigorous system to determine whether a property is vacant before starting any work. “We adhere to the highest standards in the industry and are proud of our record of quality,” she said, adding that the firm takes errors seriously.
“Not only do we work quickly to correct and resolve the issue with the homeowner, we fully investigate the matter to identify and address the root cause,” she said.
Banks have defended the firms, which the lenders say are carefully monitored, arguing that maintaining properties is an important check on vandalism, crime and plummeting property values.
But complaints from home-owners, as well as information included in the Illinois lawsuit, suggest that Safeguard through its subcontractors ignored clear signs of occupancy like “a barking dog inside the home, a car in the driveway” or “a neighbor’s statement that the property is occupied,” the lawsuit said.
Even before the Illinois action on Monday, homeowners across the nation have lodged complaints with state regulators and filed lawsuits of their own, contending that Safeguard tried to forcibly drive them from their homes in a campaign of fear that involved damaging possessions, changing locks and shutting off electricity.
In North Carolina, home-owners said that they had returned to find their houses padlocked and their personal property, including family photographs, destroyed. In Bedford Corners, N.Y., Susan Salzberg Rubin said Safeguard broke into her property multiple times and tampered with the alarm system. In Bethel Park, Pa., Alexandra Hlista said she was forced from her home after multiple break-ins.
Deluge of work
As part of the alliance with the banks, the property-management firms are dispatched to guard against the problems endemic to vacant properties, like weather damage, mold and vandalism, by winterizing the properties, changing the locks and performing other critical maintenance tasks. In turn, the firms hire lower-paid smaller companies to handle the deluge of work.
Once a homeowner is more than 45 days late on mortgage payments, lenders typically send out the maintenance firms to determine whether the properties have been abandoned. As of June, more than 800,000 properties were in foreclosure or owned by banks, according to RealtyTrac, a real-estate data provider. Safeguard alone has had about 14 million work orders this year.
Lawyers for homeowners in foreclosure say the business arrangement — in which subcontractors at the end of the chain are typically paid a flat fee for a variety of services — contributes to problems because homes declared as vacant, rightfully or not, make the subcontractors more money. In one example outlined in the Illinois suit, Safeguard’s subcontractors took medical supplies.
“There seems to be a financial incentive to find a vacant home even when it might not be because there is more work to be done at that point,” said Adam Taub, a lawyer in Michigan who represents homeowners in cases pending against Safeguard.
Safeguard, Fusco said, closely monitors its contractors and takes “corrective action if we find that policies have been violated.”