Midwest Metro shuts door on foreclosure business

It's fair to say the Nelsons knew something about hard times.

Anne and Charles Nelson, co-owners of Nixa-based Midwest Metro, made a living by assisting the owners of foreclosed properties.

Founded in 2001, the business worked with national clients such as CoreLogic, Safeguard Properties and MFI Field Services to secure and maintain foreclosed properties - work that escalated as the housing bubble burst in pockets across the country.

Three years ago, Midwest Metro posted $9.4 million in revenue and had just wrapped up 159 percent revenue growth between 2008 and 2010. Springfield Business Journal honored Midwest Metro as the third-fastest growing company in its 2011 Dynamic Dozen Awards.

With 2012 revenue projections of more than $10 million, Midwest Metro also was a finalist for the Springfield Area Chamber of Commerce's W. Curtis Strube Small Business Award the last two years. The chamber award honors small businesses for such factors as "staying power, response to adversity, innovative products or services, business philosophy and contributions to the community," according to SpringfieldChamber.com.  

Now, the Nelsons have fallen on hard times and are in the process of winding down their business operations.

Charles Nelson said the one-two punch of an improving economy and a large industry merger sealed his company's fate. He said the 2012 acquisition of the firm's largest client, BAC Field Services, marked a change in the business climate that Midwest couldn't overcome.  

According to real estate market analytics and services firm CoreLogic (NYSE: CLGX), there has been a steady reduction of foreclosures recorded the last three years.

In a January report, CoreLogic said foreclosures in Missouri fell 32 percent during a 12-month period to 13,334 foreclosures recorded. Nationally, there were more than 607,000 foreclosures in the 12 months ending in January, down 33 percent from nearly 805,000 in the same 12-month period ending in January 2013. In the 12 months prior, there were 860,000 foreclosures recorded in the U.S.

"We made the decision to close at the end of last year," Nelson said, adding the company was still tying a few loose ends in mid-March, but it hadn't taken on any new business this year. We made every effort to make it work, but it just didn't work."

In fall 2012, Valley View, Ohio-based Safeguard Properties, which served as a vendor for BAC Field Services, a division of Bank of America, bought the company for an undisclosed amount, making it one of the largest field-services firms in the nation.

Safeguard Properties Director of Public Relations Diane Fusco said Safeguard today has a presence in all 50 states. "There's probably not a ZIP code we don't touch," Fusco said, adding Safeguard performs hundreds of thousands of work orders for mortgage lenders every month.

For Midwest Metro, it meant business was changing.

"It was in many ways a seminal event that sent ripples through the entire industry," Nelson said. "Pricing was reduced. Term times were reduced. In essence, we were expected to do more for less, and it was not a formula that we could make work."

He said more than half of the company's revenue came from BAC, and with less work and more restrictions coming from Safeguard, Midwest Metro turned to contract labor.

Nelson said revenue was cut in half last year. Midwest Metro reached a high of 37 employees on the payroll and more than 130 contract workers before it began laying off and losing workers.

"Safeguard was looking for a different business model than we had," Nelson said. "Its influence in the marketplace greatly decreased revenue opportunities. It sets the pace for the industry. If they go to a bank and say, 'We've got guys that will do it in fewer days and for less money,' then that put price and time pressure on its competitors."

Between layoffs and attrition that took place throughout 2013, the company only had a handful of employees left when the decision to close was made in December.

Fusco, who said the industry has consolidated with economic improvements, declined to disclose details of its business relationship with Midwest Metro beyond confirming Safeguard had hired the company as a vendor.

"Every company has its own model of doing business. When mergers and acquisitions occur, it is not unusual for business relationships to change," Fusco said. "Safeguard's business model is to utilize a network that comprises more local companies. What that means is we utilize a network of small and midsize companies.

"We feel that allows for more direct communication between us and the contractors who are the boots on the ground and performing the services on our behalf and on behalf of our clients."

Fusco said Safeguard employs several thousand vendors across the country and has a network that includes the Springfield area.  She declined to name any companies or contractors with which it regularly works.

Alyson Austin, a spokeswoman for Irving, Calif.-based CoreLogic, said the company has had a relationship with Midwest Metro for years, but it wasnÕt impacted by the closure.

"We have hundreds of vendors that work for us," Austin said. "There are many other companies that do what Midwest would do, and we would just find another third-party contractor."

She declined to disclose any local vendors the company works with.

"There are a lot of people who do this," Austin said. "You could be a homebuilder and provide these services. You could be an appraiser. Many people branch out into this."

During the past two years, at least three local field-services companies have opened their doors: Collins Property Preservation LLC, Preferred Property Preservation Management and Partner's Property Cleanout.

Jon Hulsizer, owner of Branson-based Preferred Property Preservation and a real estate agent, said he launched the company two years ago. While finding its niche locally, he said revenue doubled to $65,000 the second year of business, and heÕs projecting to double sales again in its third year.

He said he doesn't work with Safeguard, but works with several smaller national companies such as Five Brothers, Spectrum Field Services Inc. and Mortgage Contracting Services that similarly employ a network of vendors.

"When the real estate crash happened, there was an influx of people who went in to doing this kind of work. But I think they are slowly but surely leaving the industry," Hulsizer said. "There are less foreclosures, and it isn't easy work. I think we'll be able to pick up where they are leaving off."[[In-content Ad]]