In the past dozen or so years, one could easily get the impression that Mother Nature has become extremely vindictive against American homeowners. Natural disasters have taken on wider dimensions, creating extraordinary havoc levels that have never previously witnessed.
To discuss how the industry should respond to these disasters, in both a proactive and reactive manner,
National Mortgage Professional Magazine recently spoke with Jim Vaca, senior vice president of field services at Altisource, an integrated service provider and marketplace for the real estate and mortgage industries regarding these acts of Mother Nature and their impact on the housing industry.
Are natural disasters a problem unique to a few states along the East Coast, Gulf Coast and California, or is this a problem that can impact all 50 states?
California, Florida and Texas have suffered the brunt of the disasters during recent years, with California alone seeing in excess of $12 billion in damage claims during 2018. But excessive cold has also taken a toll in multiple states, while disasters related to tornados and excessive heat affected many other states, making diversity in geography a factor for servicers. In 2018, close to 40 states felt some impact from 14 separate $1 billion disaster events that occurred, according to the National Oceanic and Atmospheric Administration’s (NOAA) National Center for Environmental Information.
What proactive steps can servicers take to prepare for seasonal natural disasters, such as hurricanes or forest fires?
Mortgage servicers must have a structured disaster management program in place and take preventative measures ahead of destructive events. Proactive monitoring of potential disasters, combined with inventory management, is critical for collaboration with service providers.
This is why it is key to have an internal “SWAT” team that can be initiated immediately upon identification of a qualifying event. It’s also important to ensure that the field service provider has a similar team and plan in place and that their field vendors also have a planned response. Servicers can obtain data and updates from multiple U.S. agencies, such as NOAA, National Hurricane Center (NHC) and Federal Emergency Management Agency (FEMA). Information from state and local agencies will also be needed. After the disaster, servicers should follow best practices, such as loss draft inspections for handling the aftermath.
Should mortgage servicers be evaluating their current disaster relief strategies on a regular basis? If so, why?
Absolutely. While certain disasters may have a large number of similarities, each one has the potential for variances that will be a learning experience for the next event. In addition to maintaining a structured disaster management program, servicers need to review the portion of their portfolios that may be potentially impacted by a disaster so they are able to get an accurate picture of what their inventory looks like today to be able to compare it to the post-disaster situation.
Does the servicing industry have enough personnel to handle major disasters–say, a repeat of Hurricane Katrina? And, likewise, do ancillary industries like the appraisal industry have enough people to handle major disasters?
It’s not so much having enough personnel to handle major disasters as much as having the structured programs in place so that the servicer’s response will address unique obstacles borrowers face during a significant event. Certainly, the economic recovery and the decline in defaults, currently at historic 20-year lows, have led to significant reductions in staffing in servicing.
That said, the lessons over the past 14 years, stretching back to Hurricanes Katrina and Rita, have made servicers very cognizant of the need to have staff that can respond in the most proactive and effective way and should be a factor in their staffing model. Servicers should also look at how to best leverage property preservation companies to fill any capacity needs. There is a need to understand and evaluate what can be done in-house versus outsourcing in a time of need. Many natural disasters give several days’ notice, and in that window it is critical to know what is being done each hour of the day to mitigate associated risks.
Are servicers doing a good job in communicating with borrowers following natural disasters?
Jim Vaca: Ever since Hurricanes Katrina and Rita, the industry has made great strides in communicating with affected borrowers. The government-sponsored enterprises (GSEs), the U.S. Department of Housing and& Urban Development (HUD) and the Department of Veterans Affairs (VA) have also provided guidance, oversight and support to servicers such as greater forbearance, leniency, etc.
In addition, our servicer clients have been well-prepared with the critical information we provide them with and use the best available communication channel (telephone, text, social media, etc.) to reach borrowers in distressed situations. Plus, we provide servicers with FEMA contact information, which can help borrowers in the aftermath of an event.
What role does technology play in processing claims after a disaster?
Jim Vaca: Technology can vastly improve relief management efforts, such as in getting resolution and payment to the borrower so that they can more quickly initiate repairs. Drones are one of the tools used to help determine damage after a natural disaster, although the cost of using drones is higher than traditional inspection services. Aerial drone photography can be useful in identifying damage at scale in areas that have incurred massive damage and are difficult to access. As an industry, it’s worth exploring new technologies like drones further.
But while there is technology to track natural disasters like hurricanes, there is little technology for other disasters such as wildfires and earthquakes. Plus, new technologies aren’t the only way forward; they are just part of a cadre of disaster relief services. At Altisource, we’ve made and continue to make big investments in technology to improve how damage is identified and reported and how the status of claims and repair work is monitored.
Phil Hall is managing editor of
National Mortgage Professional Magazine. He may be reached by e-mail at [email protected].
This article originally ran in the August 2019 print edition of National Mortgage Professional Magazine.