Stalled over Southeast Texas for days in late August 2017, Hurricane Harvey’s catastrophic flooding and powerful winds left damages at $125 billion. The following year, California’s Camp Fire burned 6,453 homes, resulting in damage exceeding $24 billion. And in 2019, devastating floods in the Midwest caused nearly $3 billion in damages to homes and farms.
Those three events represent only a small fraction of the widespread natural disasters impacting property owners across the United States. In addition to the increased frequency of major natural disasters, the economic damage inflicted by these events has intensified.
From 1980 to present, the number of housing units in the U.S. has grown from approximately 87 million to over 138 million. What’s more, in that same timespan, the median U.S. home value has increased from $47,200 to $300,000. Consequently, natural disasters that occur today will cause more damage than in decades past for this simple reason: there is more property to destroy – and that property is considerably more expensive to repair or replace.
This threat impacts homeowners, as well as their mortgage servicers’ portfolios.
Servicer Response to Natural Disasters
When it comes to major natural disasters, mortgage servicers have three primary concerns: outreach to their borrowers, protecting their real estate assets and staying compliant with regulatory requirements. For damaged or totaled properties, it’s critical for servicers to work with borrowers on getting insurance adjusters to perform evaluations and make homeowners aware of available assistance to help them repair or rebuild.
Additionally, servicers must follow strict GSE regulations to maintain compliance. When properties are located in an area declared to be an Eligible Disaster Area, Fannie Mae and Freddie Mac disaster policies go into effect. Servicers may be required to suspend mortgage payments for 6-12 months; waive assessments of new penalties or late fees during forbearance, trial and repayment plan periods; suspend reporting mortgage loan delinquencies to the nation’s credit bureaus; and disburse insurance proceeds.
Disaster Tracking Within the MSP® Servicing Platform
The first step in performing customer outreach or applying disaster policies is identifying impacted borrowers. But quickly finding and marking these particular loans among portfolios with thousands – even millions – of mortgages can be both daunting and time-consuming. One solution to help servicers is Disaster Tracking, a standard enhancement within the Black Knight MSP® loan servicing system. When FEMA posts disaster areas to its website, MSP users can download those areas and create special loan headers in the servicing system for those locations. Disaster Tracking then “sweeps” the client’s entire mortgage portfolio to place appropriate headers on any loans within the designated disaster areas. This loan header serves as a unique identifier for customer service representatives, collection personnel or anyone interacting with the loan in MSP to immediately identify that borrower as being impacted by a disaster so specified procedures can be followed.
Disaster Tracking even accounts for the rare event when borrowers are impacted by more than one declared disaster – such as when a severe snowstorm followed Hurricane Sandy in 2012. The solution also notes whether FEMA or non-FEMA funds are being used to rebuild the property.
The Disaster Tracking solution provides servicers with robust reporting and data at the loan-level and portfolio-wide in standard format that can be sorted various ways. As a result, servicers can see which investors have been impacted by a disaster, the overall number of loans in a given area and if the number impacted warrants sending representatives to that area to offer special borrower assistance.
New Disaster Management Analytic
To further automate information needed to quickly identify loans impacted by natural disasters, Black Knight has introduced a new Disaster Management analytic within its Actionable Intelligence Platform℠. The analytic uses an online feed from FEMA that specifies which areas of the country are impacted by a natural disaster and combines that information with Black Knight’s extensive, nationwide property data and servicing records to automatically build unique identifiers for impacted loans in the MSP system. The analytic then sweeps a client’s mortgage portfolio to tag loans in affected areas with those loan headers.
This new Black Knight analytic displays a heat map of affected properties to give servicing organization leaders an at-a-glance view of the disaster’s impact on their portfolios, as well as access to summarized worklists for newly eligible properties that fall under Fannie Mae or Freddie Mac disaster policy guidelines.
Preparation in the Face of Uncertainty
With electrical power and home internet service likely to be down for an undetermined time after a natural disaster, the one communications channel that will likely remain available to most consumers is their mobile phone. Using Black Knight’s Servicing Digital℠ mobile app, servicing representatives can instantly contact all borrowers in impacted areas about how to contact various service organizations and disaster agencies that can provide assistance.
Of course, it’s impossible to predict exactly when or what type of natural disaster may occur. However, in this new normal of heightened natural disasters, servicers know it’s only a matter of time before devastation strikes part of their customer base. Just as homeowners keep emergency preparedness kits on hand in the event of a disaster, now servicers can prepare for natural disasters with two powerful tools from Black Knight. With these innovative capabilities, servicers can better help borrowers and their loan portfolios recover from whatever disaster may come their way.