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Unexpected Lessons Learned From COVID-19 Data

This piece originally appeared in the August 2022 edition of DS News magazine, online now.

The role of data in the mortgage industry is not new, and data has become more essential to how businesses make strategic and operational decisions. However, COVID-19 emphasized the value of data for the entire industry, particularly when it comes to servicing.

During the pandemic, servicer data took on new importance as the industry worked together to help borrowers undergoing hardship.

The pandemic not only shook up the housing industry, but the way we as an industry use and value loan portfolio data. With people spending more time at home due to working remotely and quarantining, homes became more important than they had ever been, and demand skyrocketed higher than the industry had seen in some time. Understanding how to get people into homes and help keep them in their homes during this unprecedented time was challenging, and data was the lifeline that the industry needed to make decisions.

Let’s explore the role that data played during the pandemic and what we can learn from the data we have now on the other side of the pandemic.

The Case for Data-Driven Decision-Making
Data helps us measure and track certain trends and learn from them. Good data provides lessons on what happens under certain scenarios and helps predict what will happen in similar scenarios down the line.

Rarely does the same exact scenario occur twice, but by understanding how certain factors impact the economy, and eventually, each household, we can extrapolate findings from the past to better understand new scenarios in the future.

Long before the pandemic, businesses had begun to realize the wealth of information available in data and the benefits of using it to make broader business decisions. A 2019 study by PricewaterhouseCooper found that highly data-driven organizations are three times more likely to report significant improvements in decision making, compared to those who rely less on data.

The benefits of data-driven decision making are measurable and significant. While this was true before the pandemic, our reliance on data during COVID-19 was the reinforcement that many businesses needed to truly value the role that data can play for them.

The Unique Nature of Pandemic-Related Data
The challenge with the pandemic was that there was absolutely no precedent that businesses could use to guide their decision making. Until 2020, our modern business environment had rarely experienced a sudden shock to the economy like the one created by COVID-19.

In the mortgage industry specifically, it was highly unusual to witness a rise in delinquencies and borrower hardships, while also seeing a surge in housing demand and mortgage originations at the same time. Additionally, interest rates were low, which further increased volume by encouraging refinances in addition to new purchases.

With no guideposts, everyone was learning as they went along. Nothing like this had happened to the mortgage industry—or any industry—in our lifetime, and all anyone could do was make their best guesses. However, data analysis was there to boost the confidence of those guesses, and help the industry correct its course as needed. And since the industry was undergoing increased digitization, we had an enrichment of data that gave us better data than ever to guide our decisions.

Lessons Learned
The anomalous nature of COVID-19 does not mean that the data generated during the pandemic cannot be extrapolated to further our understanding of consumer behavior related to specific factors. Looking at data over the course of the pandemic illustrated the impact on mortgage performance, borrower perspectives and behaviors, and more. It even helped the industry understand borrowers on a more individual level. For example, the industry got an improved view of how self-employed borrowers are impacted by different factors, and how to use those insights to better serve this group moving forward.

Now that the biggest impacts are over, companies are returning to some sense of normalcy. The lessons we’ve learned can be applied outside of a pandemic scenario and can be used to shape industry strategy for months and years to come.

We now have new trends established that can apply to different events. For instance, we now have data to use should we ever enter another period of high unemployment due to a sudden, unexpected event. We also have insight into shifts in the market when there is both an increase in delinquencies and originations. The causes may not be the same in the future, but we now have data to help us prepare for the effects.

The industry also experienced a collective mindset shift as a result of the pandemic.

Because no one had ever been through this before, there was no one person or group to look to as the leader. The industry had to rely on data alone to know how to move forward, which reinforced the importance of the role of data in mortgage industry and, specifically, servicing.

Now that we’ve seen the power of what data can do, we all can apply more data-driven practices to our business.

Similarly, since there was no singular group or leader to guide the industry through the pandemic, everyone had to work closely together. The cooperation and collaboration between the government-sponsored enterprises (GSEs), banks, servicers, mortgage insurance providers, and other industry players were closer than ever during the pandemic. Everyone was sharing data and insights as they looked to better understand what was happening. This sharing of data among these groups helped businesses beyond that which their own data alone could explain.

Ultimately, the industry unified to understand the problem and better serve the borrower. This sharing helped individual actors understand the impacts beyond their sphere of business and allowed the industry to create a more cohesive strategy to assist borrowers.

Continuing this practice of collaboration will only make the industry stronger moving forward.

A good example of what came out of these collaborative efforts is a better, optimized way to assist borrowers in need. With a significant number of borrowers experiencing similar hardships, the industry leveraged this increased collaboration to simplify the hardship processes for borrowers. We, as an industry, began leveraging automation and technology to streamline the internal processes that support loss mitigation practices. The resulting process improvements made it easier for borrowers to get the assistance they needed and get back on the right track, serving not only the borrower, but the entire industry.

The data transparency, accessibility, and resultant optimization of processes we have now will ultimately help us make quicker and more informed decisions going forward. What we have learned from the pandemic experience can inform data, marketing, pricing, loss mitigation, and borrower assistance strategies to help both businesses and individuals in advance of the next unanticipated event.

Data Usage … Today and Tomorrow
When experience had little insight to provide, data provided exactly what we needed to make the right decisions to better serve the borrowers our industry supports. The COVID-19 pandemic was a unique situation, but the lessons it taught us do not have to wait for another unprecedented event–they can be applied in the present day and help inform our strategies going forward.

Disclaimer: The statements provided are the opinions of Alex Kudman and Srijan Sareen and do not reflect the views of Enact or its management.

About Author: Alex Kudman

Alex Kudman is the Head of Enterprise Analytics at Enact Mortgage Insurance (formerly Genworth Mortgage Insurance). Kudman leads several functional areas to develop and execute an enterprise strategy for data analytics, data management, AI/ML implementation, and data-driven decisions across the organization.

About Author: Srijan Sareen

Srijan Sareen is Director of Loss Mitigation at Enact Mortgage Insurance (formerly Genworth Mortgage Insurance). She leads the claims, investigations, homeowner assistance, and servicer reporting departments.

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