Nowadays, people like to throw around the word ‘disaster’ a lot. Some people will brand a bad date or a party that doesn’t go exactly as planned as such when in reality, they are annoying inconveniences.
Real disasters can change the entire course of peoples’ lives and end them in very unfortunate circumstances. The Federal Emergency Management Agency (FEMA) defines a disaster as; “an occurrence of a natural catastrophe, technological accident, or human-caused event that has resulted in severe property damage, deaths, and/or multiple injuries.”
When most people hear FEMA, they think of natural disasters that are usually weather-related because they are the most common. Floods in the Midwest, fires on the West coast, and, most recently, devastating hurricanes in the Southeast like Ian come to mind. Science has shown that climate change is responsible for these natural catastrophes’ increased frequency, severity, and unpredictability.
With one-in-ten homes affected to some degree by natural disasters in 2021, both mortgage servicers and homeowners experience shared dread for these life-altering events. While the overall impact is much more significant for homeowners, Servicers worry about being able to provide the fast relief that will keep prevent them from defaulting on their loans.
If a homeowner needs forbearance (a temporary reduction or suspension of mortgage payment) or some other sort of mortgage assistance after they experience a natural disaster, their first stop should be to contact their Servicer right afterward. However, that’s not a reality. Before people even think about their mortgage, there is a long list of other priorities that come to mind. Prior to Servicer contact, people will usually:
After all these things happen, and a person can better understand their financial situation, then they may consider reaching out for mortgage assistance. By this time, the homeowner could be approaching (or past) the 30-day delinquency mark, missing a mortgage payment, and starting to compound their financial issues. Homeowner hardship can also be compounded by not knowing they can get mortgage assistance during a natural disaster. Homeowners might dive into savings or seek other high-interest loans to make their mortgage payments while unforeseen expenses pile up, setting them up for a deeper hole down the road.
What does all this tell us about disaster relief? It’s evidence that mortgage servicers must proactively educate their customers about their options. If someone experiences a FEMA disaster, they can automatically get put into forbearance, which should be a quick and easy process for homeowners. But, since call center support is most Servicer’s primary method of assistance, it remains a frustrating interaction after disasters suddenly strike.
Time is a critical success metric for homeowner assistance, especially when disasters are involved. A fast path to resolving the customer’s problem results in fewer Servicing costs and provides the homeowner with a satisfactory experience. In the event of a natural catastrophe, it’s understandable that call volumes would go up and wait times would increase. To try and curb this, managers will add temporary options in the IVR (Interactive Voice Response), record outbound messages cautioning people of expected hold times, and will pull personnel from other departments to work call centers. This “all hands on deck” approach might help the call center, but it incurs additional training costs, depletes resources in other departments, and impacts customer satisfaction scores.
Once a customer is finally talking to someone, what does the forbearance process look like? Life-long mortgage servicing professional and Brace’s VP of Servicing, Jose Morin, speaks to the forbearance call center process to better understand how long it actually takes to provide this kind of assistance.
“After you consider the average speed of answer (60 seconds), a 10-12 minute interview, five minutes setting up the forbearance, and maybe another six-minute follow-up call from the homeowner to ensure everything is set up correctly—when it’s all said and done, you’re looking at around two to three touches on one file for a total of 24-minute over the course of two to three days.”
For a moment, let’s look past a Servicer’s primary goal of providing the fastest relief possible and look at these numbers from a cost perspective. Based on Jose’s numbers, for forbearances alone, mortgage servicers spend an average of 24 minutes per homeowner seeking streamlined assistance. According to Indeed, the national average salary for a collection representative is $17.90 per hour. So, it costs mortgage servicers at least $7.16 each time a customer calls to request a forbearance. That’s also not considering the associated business costs of call centers or the loaded costs of employees (benefits, technology, etc.). If you happen to be one of the few Servicers that require signatures, time and costs increase further.
To further drive this point forward, in the wake of Southwest Florida’s most recent disaster (hurricane Ian), more than 222,000 insurance claims were filed. While it’s hard to say how many of those claims are home-related, it’s fair to assume that a good portion of those claims will in some way impact people’s ability to pay their mortgage. If just an eighth of people who made insurance claims also need forbearance, it’s collectively costing Servicers that use call centers as their only means of setting up forbearance $198,690. And that’s not to mention any additional costs related to the assistance homeowners will need from their servicer afterward.
Brace’s Default Management Platform helps mortgage servicers by integrating with Federal Emergency Management Agency (FEMA) data, which actively pulls data on affected areas. When the Federal Government declares a disaster area related to any sort of natural disaster (such as floods, hurricanes, or other climate-related disasters), Brace instantly layers that information — down to the ZIP-code level — into the customers’ account. This technology lets lenders make potentially impacted customers aware that financial assistance, or in some cases, mortgage forbearance, could be available to them.
This solution significantly reduces the need for reliance on call center support by placing a customized message in the customers’ portal for potentially impacted customers. These messages inform homeowners of their options and how to engage with their Servicer to address the next steps with their mortgage. If a customer does call the Servicer, the call center can confidently direct them to their portal to learn more. Enabling customers to consider their options for pausing the mortgage payments or addressing immediate needs, such as temporary housing, is usually available to homeowners in any FEMA-declared disaster area.
Brace complies with the Real Estate Settlement Procedures Act (RESPA) and puts the lender in a position to proactively assist the homeowner, instead of reactively. All of this increases customer satisfaction and engagement over the life of the loan.
From science to marketing, data is everything. It helps us make logical predictions about our future to help us be more prepared for what’s to come.
Regarding weather-related disasters in the United States, the inconvenient truth is that thanks to climate change, things are getting worse. According to the National Centers for Environmental Information (NCEI), the past five years top the natural disaster charts in both frequency and cost. The most weather-related catastrophes occurred in 2020 at 22 events, while 2017 saw the most costly damage at a mind-blowing $366 billion.
Based on data from hurricanes Ida and Ian alone, Brace has helped its Servicing partners provide rapid disaster assistance to 472 homeowners at just 5.26 minutes per application via its FEMA integration with its online servicing portal. While that number may seem small, it’s only two of the 31 disasters that have occurred in the past two years. While only some disasters classified by the NCEI qualify for FEMA relief, it only makes sense for mortgage servicers to get ahead of these increasing trends in any way possible.
Brace’s FEMA integration can also help Servicers save time by providing direct data on how their customers are affected rather than considering the potential impacts of disasters and weighing every “what if” scenario. Since the FEMA integration is standard within the Brace Default Management Platform, Servicers can proactively reach out to customers impacted by disasters informing them that they immediately qualify for forbearance assistance and providing education about other loss mitigation options.
To learn more about how Brace can evolve your default management teams, please contact us.