The devastation Hurricane Sandy caused on the East Coast in late October will have a major impact on the mortgage servicing industry. Among the most critical needs of servicers are obtaining immediate information about the condition of properties in affected areas, receiving ongoing updates about the conditions in storm-affected areas, getting assistance with outreach to borrowers, obtaining adjustments to investor guideline requirements in affected areas and addressing hazard claim issues.
Mobilizing their inspector networks to provide mortgage servicers with fast and accurate property condition information on vacant and foreclosed properties is one of the most important steps field service companies can take in storm-affected areas.
After Hurricane Katrina, servicers began to ask their field service partners to inspect not only properties with defaulted loans, but also occupied homes with current loans. These types of inspections have become routine in storm-damaged areas. The purpose is to establish contact with borrowers to confirm the occupancy status and condition of their properties, provide borrowers with contact information for their mortgage companies and attempt to learn whether insurance claims are being filed to repair property damages.
In declared disaster areas, mortgage servicers also need perspective and a broader context regarding the conditions in surrounding neighborhoods, the specific types of storm-related damages that areas have suffered, as well as the status of utility services, road conditions, emergency access, and other factors.
Utilizing their contractor networks, real estate brokers and other mortgage servicing partners, as well as news stories and other resources, field service companies can provide their clients with timely information and updates.
Damage information is reported at the ZIP code level as light, moderate or severe, so servicers receive information almost immediately following the storm. Once inspectors are able to gain access to neighborhoods, servicers will receive damage information at the property level. This information is valuable not only to servicers, but also to others in the mortgage industry, and even beyond to the broader financial services sector.
The ability to provide this information, incidentally, requires that field service companies themselves have effective disaster recovery processes in place when their operations are impacted by severe events.
A major challenge for mortgage servicers during major weather events is reaching borrowers to disseminate important information that will help them act responsibly to protect and repair their properties. Field service companies and their vendor networks can be allies to facilitate outreach to borrowers. Vendor networks can assist in disseminating information to encourage homeowners to contact their mortgage companies, educate homeowners about avoiding contractor fraud, offer advice for filing insurance claims and provide foreclosure prevention resources for homeowners in financial distress after the storm.
Gaining access to affected properties is a major issue after a disaster. Roads may be closed because of flooding, surface damage, fallen power lines that create dangerous situations, downed trees and other debris. Because of this, investor guidelines may need to be adjusted to extend time frames for securing properties, conducting inspections, performing required services and conveying properties post-foreclosure.
By providing information about the conditions that prevent servicers from complying with required timeframes, field service companies help investors evaluate and make required adjustments. Additionally, as the price and availability of gasoline and building supplies are impacted by the storm, field service companies must work with their clients to obtain pricing adjustments and identify new supply channels to obtain plywood, tarps, roofing materials and other building supplies needed for property preservation.
Servicers face many challenges in filing hazard claims on properties damaged during hurricanes. During Hurricane Katrina, due to the large volume of claims, delays were common with retail carriers reviewing and concluding claims in a timely manner. The same can be expected with Hurricane Sandy.
Non-covered perils may also pose problems for servicers filing claims on foreclosed properties or homeowners filing claims on their own homes. For example, standard insurance policies do not contain flood coverage, and many homeowners are not aware of this. In fact, after Hurricane Katrina, many lawsuits were filed to recover flood damages, and the courts sided with retail insurance carriers in concluding that standard insurance policies do not cover flood damages. Field service companies with experienced hazard claim experts can help guide their mortgage servicing clients through the process to save time and money.
Robert Klein is founder and chairman of Safeguard Properties, based in Valley View, Ohio. He can be reached at (216) 739-2900.