Servicers who are getting ready for this year’s storm season need to make sure they are better prepared than last year by reviewing some of the obvious lessons that were learned.
Before an event, servicers need to conduct a self-evaluation that reviews how they did last year and any areas of improvement. The conventional wisdom is that 2018 will be no better and may be much worse.
An effective self-evaluation is particularly important when dealing with flood valuations. At a minimum, servicers should audit the sufficiency of flood insurance coverage on their collateral properties which lie in flood zones where FEMA requires coverage. Servicers often overlook this step, allowing insufficient coverage to be renewed again and again. This oversight can come back to haunt them when it is time to file a claim.
Also, a big lesson learned from the losses from Hurricane Harvey is that servicers should take time before storm season to notify borrowers whose homes may be in areas previously affected by floods, but which are not required by FEMA to have flood coverage. Those borrowers can buy Flood Insurance voluntarily at affordable rates.
Last year one of the biggest challenges was the relatively lengthy deployment many property preservation teams took to get in place for reasons ranging from insufficient staffing to difficulties in accessing the affected properties. When an event occurs it is crucial that servicers work with their property preservation vendors to ensure that they deploy very quickly. Last year, many homes sat for over a month without being inspected.
If servicers’ vendors are not able to mobilize fast enough it may be essential for servicers to send their people. In these cases, time is the enemy. A long wait ends up costing servicers more money as damaged properties will deteriorate, potentially to the point of being a total loss due to conditions such as mold or vandalism.
Acting quickly also improves communication between servicers and homeowners. Being on the spot faster than last year enables servicers to be more effective at determining whether or not homeowners have evacuated or are remaining in the house. Once the level of property damage is determined the servicer can find out if a claim was filed and whether or not a decision was made on that claim. Also, servicers can help their borrowers by discussing any payment forbearance options that are available and by finding out if they have a plan to repair or rebuild and whether they have sought other available financial assistance.
To improve the relationship between homeowners and servicers it is a good idea to assist homeowners in seeking monetary relief as quickly as possible. Many states have funds for victims of natural disasters that can be accessed but homeowners may not even be aware they have options. Some funding is also available through organizations like the Small Business Administration. Even when homeowners have no flood insurance and their house was impacted by a flood, it may be possible to double-check and see if any other existing insurance policies can be applied.
It is also very helpful to homeowners if servicers provide guidance on how to complete repairs in conformance with legal requirements and help outline all the necessary steps that are needed. Most homeowners have no experience dealing with bids or general contractors and can easily be overwhelmed. This is particularly important when dealing with the confusing traditional loss draft process.