As in many industries, risk and compliance continue to be a major concern. Hazard claim challenges in the mortgage servicing space fall within similar concerns. To limit risk, mortgage servicers manage hazard claim lines by prioritizing and addressing major areas of vulnerability, one of which is physical damage at assets either in the process of foreclosure or currently in REO status. Events that trigger a hazard claim will continue, that we are all assured, but to recover funds directly related to a hazard claim, the mortgage servicer must first initiate procedures, internally or externally, to manage the process of filing and recovering the claim. To what extent will the servicer go to manage the process and how?
Although there are a number of ways to manage a process that leads to the recovery of hazard claims, careful consideration is prudent prior to a final decision. Mortgage servicers can choose to manage claims internally, outsource to a third-party company, or accept many losses up to a certain dollar threshold to prevent delays for conveyance or foreclosure proceedings. All of these options are costly, so what is the most cost effective?
If the objective of the servicer is to recover claims while reducing employee cost, partnering with a third-party company may make both risk and financial sense. A third-party company can keep a servicers employee cost at bay while ensuring knowledgeable licensed hazard claim professional are working in your best interest to recover your losses.
Key factors to consider when choosing a hazard claim partner are:
- What is the percentage take on each claim by the hazard claim company?
- Do the adjusters maintain a license to file hazard claims?
- Will the claims file within a timeline that allows maximum payout of the claim, including recoverable depreciation?
Overall, nearly all mortgage servicers and large real estate holding companies should consider their options when choosing, but regardless of the direction chosen, claims should be filed and funds should be recovered. It’s your money; shouldn’t you claim it?