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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, Mr. 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 Mr. 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 Mr. 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.
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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.
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"This is a homeowner's worst nightmare," Ms. Madigan said in an interview on Friday, noting that her office had received more than 400 complaints about Safeguard.
Diane R. Fusco, a spokeswoman for Safeguard, said that the company had not received the lawsuit.
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 homeowners, 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, homeowners 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.
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.
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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, Ms. Fusco said, closely monitors its contractors and takes "corrective action if we find that policies have been violated."
It is a precarious time for big lenders. State and federal authorities are taking aim at banks for failing to police third-party contractors — an issue at the heart of a $26 billion settlement last year to resolve claims that banks relied on outside lawyers to churn through mountains of foreclosures without vetting them for accuracy. Ultimately, Ms. Madigan said, the responsibility for oversight falls to the banks, which have "failed to supervise these firms."
Under the terms of the National Mortgage Settlement, reached between five of the nation's biggest banks and 49 state attorneys general, mortgage lenders are required to increase oversight of third-party vendors. The lenders said that they diligently monitored Safeguard's performance — an argument that is echoed by Safeguard's spokeswoman. "Our mortgage servicing clients routinely and thoroughly audit our policies and procedures," Ms. Fusco said.
In the Illinois lawsuit, Ms. Madigan portrays Safeguard and its subcontractors as something of bullies with a singular mission: get homeowners in foreclosed homes out, and quickly, even before the banks have a legal right to seize the properties. Winning a reprieve, according to interviews with dozens of homeowners, can take a herculean effort.
(Read more: )
Mr. Tatum, the homeowner in Chicago, said he called Safeguard over several months to inform the company that his home was occupied. Still, Mr. Tatum received 12 separate notices affixed to his door. The determination, according to copies of the documents reviewed by The Times, was that the property was vacant. Safeguard declined to comment.
Sometimes Safeguard and its contractors duped struggling homeowners into believing that they no longer had a right to occupy their homes, according to the Illinois suit and interviews with homeowners. To homeowners enmeshed in a grueling foreclosure process, those statements can be debilitating, threatening to sap their remaining desire to fight. Such tactics could violate laws requiring lenders to obtain a court order before evicting homeowners.
For lenders, the process of winning such a court order is mired in delays, aggravated by a flood of older foreclosure cases. In Illinois, the process took 817 days as of the second quarter of this year, up more than 62 percent from the same period two years earlier, according to RealtyTrac. In the 27 states where lenders can foreclose outside the courts, the pace is slowed.
Even some homeowners who never missed a mortgage payment have collided with the property-management firms.
Linda Haddad, 55, bought her home last June in Garden City, Mich., after JPMorgan Chase repossessed the foreclosed home from the previous owner. Ms. Haddad said she was shocked when two months later she got a call from her neighbor.
"He told me an agent from Safeguard was emptying the contents of the place and changing the locks," Ms. Haddad said.
Frantic, she contacted the Safeguard agent, who, she said, advised her "to straighten it out" with the bank, which had told Safeguard to cease work on the property. By the time she did, though, Ms. Haddad said Safeguard had done tens of thousands of dollars' worth of damage to her property.
—By Jessica Silver-Greenberg of The New York Times