PERSON OF THE WEEK: The hurricanes and wildfires of 2018 are stark reminders that U.S. residential properties are at increasing risk of natural disasters – however, there is a question as to whether mortgage servicers stand ready to handle a potentially large wave of delinquencies and defaults should a major disaster – or series of disasters – occur at some point in the future.
Responding to these disasters and more specifically to the needs of distressed borrowers requires speed and agility on the part of servicers. But there is a question as to how quickly servicers can scale in order to respond appropriately.
To learn more about the importance of evaluating current natural disaster operations – and ways in which servicers can improve and become adequately prepared – MortgageOrb recently interviewed Denis Brosnan, president and CEO of Dallas-based DIMONT, a provider of specialty insurance and loan administration services for the residential and commercial financial industries.
Q: Should mortgage servicers be evaluating their current disaster relief strategies on a regular basis? If so, why?
Brosnan: It’s extremely important that mortgage servicers consistently and regularly evaluate their current disaster relief strategies. Catastrophic events can happen anywhere at any time, and have been occurring at an alarming rate.
Every few weeks we’re witnessing events like Hurricane Harvey and Irma destroying entire cities, wildfires in California burning thousands of acres or flooding in Maryland wiping out homes and buildings. These disasters can have long-range repercussions on the local, regional and national economy, and the housing market is often among the hardest hit when they occur.
For an industry that relies on consistency, natural disasters are one area that seems to foster significant uncertainty. Real estate lenders and mortgage servicers are faced with the possibility that their borrower’s property may be seriously damaged or destroyed, their customer’s income and employment could be affected and their ability to maintain current mortgage payments is potentially at risk.
To navigate these uncertain waters, servicers must rely upon the high ground of best practices, which includes conducting self-evaluations. It is important to be prepared and conduct an internal audit at least once a year. Before the next disaster, servicers should take a look at how they were the previous year and discuss any areas of improvement or lessons learned.
Q: Why is communication so vital after a disaster? How can servicers improve their communication?
Brosnan: One of the biggest mistakes servicers make when dealing with a disaster is failing to properly communicate with homeowners. Nothing slows up the claims process or shreds a servicer’s reputation faster than ineffective communication. Communication must be clear, concise and most importantly, often.
After a disaster, servicers have a duty to ensure loan payments continue and that damaged collateral is appropriately remediated. At the same time, the homeowners are struggling and going through one of the worst times in their lives. This is why effective communication is so crucial.
Part of a successful communications strategy is educating homeowners about the process and eliminating uncertainty. Effective communication not only helps speed up the claims process, but also helps set realistic expectations. A servicer should have message points and FAQs prepared, and there needs to be clear communication between servicers and homeowners at all times.
Additionally, communication plans must be established prior to a disaster occurring, so that once catastrophe hits, the plan can be implemented immediately. Unfortunately, a lot of servicers fail to do this and scramble to come up with a plan last minute leaving deadlines missed and borrowers frustrated. If the disaster recovery process is immediate, it can actually be an opportunity to earn the goodwill of homeowners.
Q: What role does technology play in processing claims after a disaster?
Brosnan: There are few components of the modern mortgage business where technology isn’t a requirement for efficient operation. This is particularly true when it comes to managing the complexities of claims after a natural disaster. It’s important for servicers to utilize efficient and accurate processes.
As homeowners are already dealing with numerous difficulties, the last thing they want is an endless back-and-forth. Companies must ensure that homeowners can return to their normal lives as soon as possible, and the best way to do that is with robust technology.
Technology used to process claims after a disaster should provide tracking capabilities so that homeowners can see exactly how the claim(s) is progressing, and which documents are required. Homeowners shouldn’t be left in the dark guessing whether or not their claim has been approved. Servicers that don’t have this type of technology are unable to ensure the correct repairs are being done, and can’t see the status of claims. Being able to add efficiency and speed to claims processing benefits both the customer and the servicer.
Q: How can servicers be prepared when it comes to their staff? What guidelines should they follow?
Brosnan: It’s very important for servicers to examine and alter recruiting/staffing processes where necessary. Many servicers try to cut costs by only having a few employees to handle calls and/or answer questions from homeowners. This can result in servicers feeling shorthanded, and panicked homeowners feeling helpless. When homeowners reach out via phone, they need help quickly. Anything more than a few minutes can feel like an eternity.
Servicers should also focus on the knowledge and training of its staff. Many servicers do not adequately train new staff about compliance or disaster relief once they’ve been hired. When poor training is combined with using outdated manual processes, the results can be even more disastrous.
In order to properly handle disasters, servicers need teams that are dedicated and solely focused on disaster relief. Servicers should focus more on hiring staff with compliance experience, and training should not be viewed as a one-time effort. It needs to be ongoing throughout the year.