Black Knight, Inc. [1] has announced the release of a new case study [2] illustrating how self-service technology (SST) deployed by loan servicers during natural disasters can improve loss mitigation outcomes.
The COVID-19 pandemic significantly impacted the U.S. and its economy, as the percentage of unemployed Americans quickly spiked to double digits and millions of Americans were in a state of distress because they were laid off or otherwise unable to work. With the passage of the CARES Act [3] and widespread adoption of forbearance options by servicers and borrowers, the potential for a foreclosure crisis to rival, or even eclipse, that of the Great Financial Crisis was largely averted.
"When borrowers face periods of financial hardship, they need seamless access to qualified assistance options," said Joe Nackashi, CEO of Black Knight. "The COVID-19 pandemic brought this fact to light like never before, and as we expect to see an increasing number of natural disasters, it's in the best interest of both servicers and the homeowners they serve to stand prepared with self-service technology. For borrowers, capabilities that offer convenient access to assistance can make an impactful difference in helping them stay in their homes."
The "Helping Homeowners in Times of Financial Crisis" [2] case study looks at borrowers who use Servicing Digital [4], Black Knight's consumer-facing responsive web and native app solution. Servicing Digital gives users 24/7 access to detailed, timely and highly personalized information and helpful tools about their loan, including a devoted "Disaster" capability that can be activated by servicers and used to help them provide specialized assistance to consumers during times of exceptional need.
This additional functionality helps servicers provide a broad array of forbearance options to borrowers impacted by disasters. With this capability, servicers can respond quickly to anticipated spikes in payment assistance requests with appropriate solutions, including repayment plans, FHA partial claims, GSE payment deferrals, loan modifications and more.
Initially developed in response to market needs from the 2017 hurricane season, the capability was activated for the COVID-19 pandemic to give borrowers a direct, familiar and secure way to contact their servicer when it looked like they might miss or need to delay a mortgage payment due to economic hardship.
Black Knight collected disaster data from a representative selection of 21 clients from August 2020 to September 2022 and found that approximately 342,000 borrowers interacted with the "Disaster" option to initiate a self-service loss mitigation request, with results including:
- Some 139,000 homeowners committing to new forbearance plans
- An estimated 49,000 extending existing forbearance plans
- Roughly 112,000 committing to final loan modifications
While most natural disasters affect a relatively small geographic region and a relatively small number of people, the COVID-19 pandemic provided an unusual opportunity to study the demand and efficacy of SST disaster assistance across a broad geography over an extended time. In addition to the positive borrower impact discussed above, Black Knight also discovered the following additional SST disaster assistance benefits based on its analysis of borrower actions:
- Accelerated borrower engagement, giving servicers more runway to work toward mutually beneficial mitigation solutions
- Configurable workflows allowing for a rapid and adaptive response by servicers to borrower needs
- Increased borrower engagement during a time of high anxiety when many borrowers have been known, historically, to avoid contact with servicers due to stress, embarrassment and fear of losing their homes
"While events like 2017's record-shattering hurricane season or the COVID-19 pandemic may not happen every day, natural disasters appear to be on the rise across the country," said Nackashi. "By proactively engaging homeowners who may be struggling to pay their mortgage and empowering them with tools that help them understand their options, servicers can expect positive outcomes that may include higher portfolio retention, increased customer satisfaction and loyalty, greater servicing efficiency, and fewer third-party collections."
To read the full report, including more data, charts, and methodology, click here [2].