Editor's note: this piece originally appeared in the July 2019 edition of DS News.
Natural disasters are an unfortunate reality that affects thousands of people every year, from hurricane damage and floods to tornadoes and the ravages of wildfires. Those working in the real estate industry are familiar with the devastating consequences of these events, as well as the damage they inflict on lives and property. In 2018, natural disasters cost the United States $91 billion according to the National Oceanic and Atmospheric Administration (NOAA), and in 2017, those costs totaled more than $300 billion after the devastation of Hurricanes Harvey, Irma, and Maria. These costs are estimates, of course, and those numbers may increase further as the effects of these disasters take their toll months and years later.
Aside from the traumatic impact that these events have on the people who live through them, the real estate industry also feels a keen effect. Property damage and loss, employment interruptions, and job losses are significant issues that must be dealt with by mortgage servicers responding to these disasters and working to help the customers impacted by them. With ever-improving technology, however, more can be done to help servicers and their clients prepare.
Natural disasters are, by nature, unpredictable. That said, major events happen just about every year, and servicers should have policies and practices in place that will help their companies take action as quickly and decisively as possible when something does happen. Companies should have disaster-preparedness plans not only for how they will react if something directly impacts their company but also for events that affect their customers. How will your company respond if a disaster impacts a significant portion of your portfolio? What kind of mitigating measures will you be able to offer clients? What kind of insurance do you have to cover potential losses? These are just some of the issues that servicing companies must consider.
Educating and preparing employees is another issue to consider. Employees should be aware of the programs your company offers to help affected borrowers, as well as the work your company is doing to react to such events. Will your company offer flexible scheduling to handle increased call volume after a natural disaster? Will you need to send people to the site of the event? Will you need to bring on additional staff or shift responsibilities during the time of crisis? When these issues are thought through before a disaster occurs, servicers are better equipped to respond quickly during such events.
One of the most significant issues to take into account is the issue of communication. How will you contact customers who have been affected by a natural disaster? How will you deploy additional resources to meet the likely call volume? How will you get critical information to customers who may be displaced or without phone or internet service for significant periods of time? By addressing these questions before a disaster strikes, servicing companies can be prepared to do what is necessary on what is often little (or no) notice.
QUICK ON YOUR FEET
Natural disasters such as hurricanes often provide some degree of advance warning that a significant event is inbound. Even that limited amount of time can provide the chance for a company to prepare to respond and get word to the customers who are likely to be affected. Of course, a hurricane can change its path, but customers will appreciate the effort put forth by attempting to reach out before disaster strikes.
Communication is a paramount issue, and this is where technology can assist servicers to react quickly and efficiently. Servicers should have customizable templates ready for a variety of communication platforms, including emails, websites, and text messages. These messages should be ready for outreach efforts before a disaster, during the crisis, and during its aftermath. Each company should tailor its communication to their specific portfolio and policies, but in general, these messages should be hopeful and helpful. Stress that the company is there to help affected customers however they can, and that there are options available to help work through the problems they will be facing.
In general, it is a good idea to deploy communications within 24 hours of any significant event. This means sending emails to customers in impacted areas, having a dedicated website ready for these clients, and potentially creating a dedicated call center. Text messaging with a direct link to the website can also prove useful.
All this communication should have two key goals—to let customers know you’re aware of the disaster and its effect on them, and to let them know you’re ready to help them deal with this disaster’s effect on their ability to stay in their home or fulfill their mortgage commitment.
THE POWER TO CHOOSE
All the communication in the world won’t matter much if you’re not able to provide your customers with a variety of options to help mitigate the issues that arise after a natural disaster. Servicers should be aware not only of the ways their company can help, but also of any programs offered by the federal government that may assist their customers.
Servicers should be prepared to help clients as they struggle to deal with the significant personal and financial hardships that often result from a natural disaster. Most servicers will want to evaluate each customer on an individual basis for relief options, but the most frequently offered assistance includes:
- Deferred payment options
- Waiving late fees or penalty assessments
- Adjusting repayment plans or forbearance plans
- Suspending credit reporting to credit agencies while a customer is on a forbearance or repayment plan
Servicers may also offer loan modifications or forgiveness on interest or principal amounts, depending upon individual circumstances. These options can be offered singularly or in combination, and all will help customers stay in their home while maintaining responsible ownership. If that becomes unlikely or impossible, servicers can also offer short sale or deed-in-lieu-of-foreclosure options.
The Federal Housing Administration (FHA) has loan options designed to help in recovery efforts for disaster victims and those who need significant home repair. The FHA 203(h) loan program provides 100% financing to borrowers in presidentially designated disaster areas whose homes were either completely destroyed or suffered significant damage such that reconstruction is required. These loans can help borrowers rebuild or move on new purchases are not required to be located in the area where the previous residence was located. The FHA 203(k) is designed to help with rehabilitation and repair costs and can be another option for borrowers who are dealing with the effects of natural disasters.
When major disasters occur, servicers should be prepared to help their customers however they can. By educating employees on the issues surrounding such events and the options available to help mitigate them, companies can better serve their clients as they work through what will likely be a long and difficult recovery process. Technology can help servicers prepare and deliver the communication necessary to let clients know that despite the devastation of the disaster, there is hope and help available to them as they look to the future.