This piece originally appeared in the February 2022 edition of DS News magazine, online now.
As human beings, we see those caught up in the destruction wrought by natural disasters, and we feel compassion for them. Compassion calls us to action and to become involved in relieving another’s pain. Despite this, however, those of us working in the housing industry have requirements to meet and we are driven by our missions to spring into action when disaster strikes. Which, lately, seems to be just about all the time. Balancing the humanitarian response with the pragmatic business response takes foresight, effort, and application.
In 2021, we saw what will likely be a record-breaking number of natural disasters, with losses exceeding $1 billion each. In October, the number was 18. No one could have guessed that tornadoes would devastate a 350-mile path through America’s heartland just a few weeks later, nor predicted the year’s close with the destructive fires in Colorado, destroying nearly 1,000 homes.
Being prepared for the worst is a mandate we all share, but because storms, earthquakes, and wildfires no longer seem to be confined to a season, we’re called to exist in a constant state of preparedness.
It may sound impossible, but every lender, mortgage servicer, and service provider can be prepared before the next disaster strikes. I know this is true because, as the daughter of a Coast Guard serviceman, I have lived disaster preparedness since I was very young. The fundamentals that were instilled in me provided valuable insight that I have applied in business application over the course of my career.
Here are some of the things I learned:
Five Keys to Disaster Preparedness
Disaster preparedness is not just a written plan. That is part of it, certainly, but actually being capable of responding effectively in a crisis goes well beyond that. Here are five principles to bear in mind that will help you assume a prepared stance and develop a sound emergency response plan before your team is tested.
1. Communicate, Connect, and Pivot
When disaster strikes, we are no longer able to operate as we have in the past. It might be a temporary disruption or something on the scale of Hurricane Maria in Puerto Rico, but it means we have to pull our disaster plan off the shelf and put it into play.
Without a written plan to use as a playbook—or even if you have one but no one knows about it—you’ve already failed. If your plan doesn’t have one or more contingency plans built into it, you are also likely to fail. Too many smaller companies and providers don’t have written plans, much less a contingency plan.
Write the plan and then communicate with your staff, partners, customers, and other stakeholders to make it accessible to them. Then, connect with them to practice the plan and determine gaps, if any.
For example, it’s great when working with a strong vendor that has a ready panel of appraisers, inspectors, field services personnel, and real estate agents at the ready. But what is the plan if the disaster strikes in such a way that these resources are compromised?
Sometimes, the contingency plan dictates that you can’t meet the original requirements for a situation, and you have to pivot. If your requirement is that you have a field inspector at a property to file a report, but resources are scarce, what are the regulatory allowances?
Absent acceptable alternatives, look to reputable industry associations for guidance. In times of need, the governing associations work quickly to come together and create solutions.
2. Communicate With Clients, Partners, and Customers
Compliance requires us to communicate with consumers, and most companies are experts at staying in touch with the customers we serve. Too often, however, we find disaster plans that don’t spell out how clients and partners and providers will work together in a crisis. Bridging this gap is critical to supporting consumers.
This is important because we are a task-driven industry. We are all subject to regulations that require us to do certain things and measure certain KPIs. There are second- and third-order effects that trigger if those metrics are not met, creating additional requirements. Failure can occur on both a personal and financial level, and understanding that is essential to developing sound practices.
It gets easy to fall into a pattern where you are driving your business by metrics and tasks. During a crisis, this can create a disconnect between your internal team and your partners, their subcontractors, and the communities being served.
In many cases, the properties being managed during and after a crisis are unoccupied, but that is not always the case. It’s also true that the individual providers who are deployed to assist us in local markets do so in an effort to help us meet our metrics, but are doing so under very difficult conditions.
In the case where properties are occupied with a borrower or tenant, we’ve become much better as an industry at communicating with borrowers in distress. Default servicing has matured in its processes, policies, and procedures over the last five years. However, we’re still working on dealing effectively with our business partners during a crisis and have much to improve upon.
Our initial reaction may be to simply apply more pressure to these providers, but that is usually counterproductive. Our contingency plans must consider that our KPIs may not be satisfactory when these important business partners are, themselves or their businesses, compromised by a natural disaster.
We need to have contingency plans and regulatory approval to take alternative actions in these cases.
3. Care for Business Needs
In a business as complex as home finance, every business relies on partners and contractors to do its work. When disaster strikes, it is critical that companies do what they can to help the vendors and providers in the field, especially those operating in designated disaster areas.
For servicers and investors with properties in a disaster area, this includes all of the appraisers, inspectors, BPO providers, real estate agents, field services personnel, and others who are the “boots on the ground” during the emergency. While our industry has a heavy reliance on analytics, without these people, nothing can get done, and we would not have data to fuel our analytics. Each of them is deemed critical.
If the last 19 months have taught us anything, it’s the importance of being able to pivot in extreme and unpredictable situations. It also taught us to break our problems down to smaller situations that can be handled without getting paralyzed by the enormity of the situation.
That was absolutely the case when we were working in Puerto Rico, but it doesn’t take a storm the size of a hurricane to create this kind of situation, nor to develop viable solutions.
A few weeks before this article was written, I was having dinner with my family when I got a call from our college-aged daughters at school in Arkansas. The authorities had just told them to return to their apartment building and take shelter in the basement. That’s not something we had heard before, even residing in a state that is no stranger to dangerous storms. They heeded the warning, returned 30 minutes later, and advised they were safe. I did not put much more thought into it.
When the sun came up the next day, we saw why the urgent warning had been issued. I remember looking at the destruction and asking myself who we could call who hadn’t been compromised by the storm—and I had immediate concern for our colleagues in the area. The mind-shift was immediate and urgent and the feeling helpless.
Over the past couple of years, the infrastructure of our industry has been severely tested. Contractors and subcontractors play a critical role in our process. Helping them prepare for the worst is just part of our own disaster-recovery plans.
4. Focus on Brand
The industry’s larger companies pay a lot of attention to their brands in the marketplace, as they should. But during a crisis, it becomes obvious that our brands are heavily influenced by the people we work with in the field.
For the most part, these are smaller firms and providers that may not have the resources to spend on branding or even training for all of their employees. Even when we work with larger regional players, they will often contract with the smaller local players who are already in the disaster area.
Most larger firms take advantage of industry events and conferences, coming together to share information and learn from each other. It’s important to create and include modules suitable for these smaller players and invite them to join with us in preparation for what may come.
This training must go beyond just getting new business or a new REO listing to empower them to operate more effective businesses, especially in the face of a natural disaster.
Many of the larger firms provide training internally to remain in compliance with federal and state regulations. We should open that door to our smaller partners and contractors to help them build stronger businesses and to be ready in the case of disaster.
5. Reflect, Regroup, and Restart (If a Business Closes/Merges, etc.)
Finally, after the crisis has passed and the situation is under control, it’s time to make sure that our partners in the field are back up to full strength and help those who suffered the worst to restart their businesses.
Those of us working in larger firms should not forget that even a single-person shop requires infrastructure to operate. Some of that we expect them to bring to the table, but some of that infrastructure, we must provide. This means assisting our clients by assisting our providers where we can so that they may address the impact of hazards and recover and continue operations as quickly as possible.