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Safeguard Properties, which specializes in the maintenance of vacant properties that are bank-owned or in foreclosure, says it will "vigorously defend" a lawsuit brought by the Illinois Attorney General (AG) alleging that the company's contractors illegally entered homes that were in the foreclosure process but still occupied by homeowners, in some cases causing damage or removing personal items.

The lawsuit, filed on Monday and covered in a New York Times article later the same day, claims Safeguard forcibly entered homes despite evidence that homeowners still lived in them, coerced tenants into leaving even though they had no legal obligation to do so and, in some instances, damaged the homes they were sent to maintain.

The suit, which reportedly springs from a number of homeowner complaints, highlights the challenging job property management firms face in attempting to secure and protect homes that are repossessed by banks through foreclosure. In some instances, homeowners are merely trying to buy as much time as possible before they are required to vacate a property - however they do have certain rights which allow them to remain in their homes during and even after the foreclosure process, depending on the state where the property is located.

In a letter to customers, Safeguard says it "will vigorously defend against this lawsuit, as this is an industry-wide issue, at the center of which is the very challenging public misunderstanding about a mortgage company's right to protect a property believed to be vacant prior to the foreclosure sale."

"In defending this lawsuit, we plan to raise awareness about both the important role of the mortgage industry to protect and preserve properties, and the challenges of doing so," Safeguard wrote in the letter. "We all know that the mortgage industry is 'between a rock and a hard place' when it comes to protecting and preserving vacant properties, particularly in presale status. Defaulted borrowers and plaintiffs' attorneys challenge the right of a servicer to enter a property pre-foreclosure, while cities across the country levy stiff penalties against mortgage companies for failure to do so."

The company claims that it didn't know about the Illinois AG's lawsuit until it received a call from a New York Times reporter on Monday seeking comment. Later the same day, the article was published in the New York Times.

"The New York Times article and the Illinois AG lawsuit reflect the common misperceptions of the public with regard to securing vacant properties," Safeguard wrote in its letter. "As a matter of policy and following industry best practices, we adhere to a rigorous procedure of checks and balances to verify occupancy prior to securing a vacant property. For example, at least two sets of eyes verify a property's vacancy status. The inspector reporting a property vacancy is different from the contractor who performs the securing and lock change."

Just as with other property management firms, Safeguard's contractors are often faced with situations where people are still living in homes that are in foreclosure, making the task of making repairs and performing maintenance challenging and costly. The company points out in its letter that it has a contractual obligation to be "vigilant" in securing properties that have been foreclosed on behalf of the banks. What's more it contends that it follows proper policies and procedures when carrying out property maintenance.

"As you are aware, we participate in thorough and regular audits to assure that our policies and procedures adhere to all regulatory requirements and the internal requirements of our clients," Safeguard says in its letter to customers.

"Additionally, we have made a significant investment in industry-leading mobile technologies for our inspectors and contractors to improve the accuracy and quality of the services they perform," the firm continues. "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 closely monitor all of our processes to continuously improve quality. 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."

The New York Times article cites complaints from homeowners who contend the company entered their homes, even though the foreclosure process had not yet been completed. The article, citing the lawsuit, claims that in some cases, Safeguard had engaged in "a campaign of fear that involved damaging possessions, changing locks and shutting off electricity" in an effort to force homeowners from their residences. In some cases, homeowners who had been away returned only "to find their houses padlocked and their personal property, including family photographs, destroyed."

What's more, Safeguard's bank customers could end up being dragged into the suit, the New York Times article claims, as they are under scrutiny from state and federal regulators for policing third-party contractors, as required under the terms of last year's National Mortgage Settlement. Illinois AG Lisa Madigan told the Times that the responsibility for oversight ultimately falls to the banks, which have "failed to supervise these firms."

Safeguard Properties, however, points out that the property preservation industry "plays an important role in protecting and preserving vacant and abandoned properties on behalf of the mortgage industry."

"We follow industry best practices in performing services on behalf of our clients and are proud of our record of quality," the firm says in a statement. "Our mortgage servicing clients routinely and thoroughly audit our policies and procedures, both for quality assurance, and to assure that we comply with all regulatory requirements that affect them."


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