Sarah Acosta: How Mortgage Lenders Can Create an Efficient Natural Disaster Response


PERSON OF THE WEEK: The number of natural disasters and the costs associated with their subsequent damages continues to rise due to climate change, according to data from the NOAA National Centers for Environmental Information (NCEI). With disasters making a more significant impact than ever, lenders and servicers must be prepared to respond.

The key to successful disaster response is insight and efficiency. In a recent interview with MortgageOrb, Sarah Acosta, vice president of product and data operations at Veros Real Estate Solutions, explains what an efficient disaster response looks like and how data and automation can accelerate a lender’s response.

Q: Why is responding to a disaster quickly and efficiently so critical for mortgage lenders?

Acosta: While it is easy to think of natural disasters as earthquakes, fires or hurricanes, there are so many other risks that homeowners face depending on where they live. There are 18 different natural hazards on FEMA’s National Risk Index, including floods, drought, hail, heat waves, ice storms and more. There is likely no area that is safe from these hazards, so it is not a matter of if a disaster will strike, but where and when.

When these unpredictable disasters strike, lenders and servicers should not expect homeowners to reach out to them right away. They have more pressing needs to worry about, and their mortgage lender may not be top of mind compared to an insurance company or disaster relief organization.

For mortgage lenders, it’s essential to know which properties and borrowers are affected in order to respond in the most efficient manner. Once properties have been identified, portfolio lenders can assess the effect on their portfolio and begin to estimate potential losses. They can also prioritize likely impacted properties for inspection and connect affected homeowners with necessary assistance and resources to help with post-disaster recovery.

A swift disaster response from lenders is also important for borrowers going through the origination process, as the various stakeholders involved in the transaction need to be made aware of the potential impact the disaster had on the property. Many times, the origination process needs to be put on hold until someone can assess the condition of the property before closing the loan.  This protects both the borrower and lender.  

Q: What should a mortgage lender do once a natural disaster strikes?

Acosta: Let’s say a disaster strikes – where should a lender start? The first thing to do once a disaster strikes is find which homeowners are affected. FEMA disaster declarations are at the County level, meaning FEMA’s blanket declaration can cover a huge area when only a small number of properties and homeowners are affected. This leaves lenders with the difficult responsibility of narrowing down the geographic range of the impacted areas to find the actual properties that have been damaged or destroyed. 

Today, many lenders conduct borrower outreach to everyone in the FEMA declared disaster zone that are part of their portfolio, in process of closing a loan, or that they service for other investors. This takes a significant amount of time, resources, and effort, with much of the outreach being unnecessary. Not only is this costly, but it eats up resources dealing with properties that are not impacted, rather than going straight to the properties that need immediate attention.

Today, leveraging FEMA data is the standard in the industry.  What about disasters that are not declared by FEMA?  The burden to find disaster impacted properties and homeowners is all on the lender. In 2021, lenders responded to 124 disaster events, when only 73 were declared by FEMA. Fortunately, there are tools in the market that will help lenders navigate this challenge.  

Q: How can a mortgage lender make disaster response more efficient?

Acosta: Right now, finding affected properties is time-consuming. Lenders dedicate manpower to sift through publicly available information or reach out directly to homeowners to aide in determining which properties to prioritize. This isn’t ideal in any scenario, but especially not now while many lenders are facing tight margins and are tasked with saving costs and cutting down on manpower.

This makes disaster response a prime area to deploy data and automation. By using the right tools, lenders can automate the previously manual sifting through of data and quickly and easily pinpoint properties that are in the actual disaster area. Tools are now available that use a combination of satellite imagery, along with FEMA or NOAA data and state and local government reports to give lenders detailed information enabling them to more easily zero in on specific areas and find where impacted areas overlap with their properties. 

Technology can also be used to help calculate potential losses post-disaster. Knowing which properties could be affected and determining how much they’re worth at the time of impact can help lenders understand their potential exposure. Automated Valuation Models (AVMs) also provide an instant valuation of a property to determine what it was worth before the disaster, so lenders and servicers have a clear picture of both the outstanding principal balance of the loans they own or service and their exposure to the related properties.  

Another area technology can streamline disaster response is inspections. Borrowers have so much to coordinate after a disaster has damaged or even destroyed their home. Providing them with the necessary support and technology to easily and quickly show the damage themselves remotely via their mobile phone, rather than having to schedule and wait for someone to physically inspect their home, allows for a much faster and easier option to get them on the road to recovery. Think of a video call telehealth visit with a doctor – inspectors can do the same thing, saving time for both the homeowner and the inspector.

As climate change and natural disasters continue to increase in frequency and severity, lenders must have a plan, the tools, and the data to respond. Leveraging the right technology provides a multitude of ways to help lenders and servicers maximize efficiency and help impacted homeowners when their lives are upended by nature’s fury.

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