How Mortgage Industry Powered Through Freakish Winter Storms

Mortgage originations and closings largely went on during this winter's freakish snowstorms, even when companies' main and/or local offices were forced to shut.

Lenders and service providers credit the business-interruption plans they put in place after previous disasters such as Hurricane Sandy in 2012, when power outages on the East Coast affected many lenders' operations and closings were put on hold.

Such plans can make the difference in keeping a company from permanently closing its doors. Almost one quarter of all businesses affected by a major disaster such as a hurricane fail to reopen afterwards, according to the Insurance Information Institute.

"Every day a business is not up and running it is losing revenue," says Loretta Worters, a vice president at the institute.

"Business owners are busy building their businesses, but they need to invest the time and money to develop a disaster recovery and contingency plan."

New Penn Financial, which is located in the Philadelphia suburb of Plymouth Meeting, Pa., learned its lesson after Sandy disrupted its operations, says Brian Simon, the lender's chief operating officer. It put in place a disaster recovery plan after that storm, including the purchase of a backup generator for its headquarters. It is a nationwide business, but the email servers and origination system servers are at its headquarters.

"I can't have the people in California not be able to work because we have a snowstorm here," Simon says.

Equity Loans in Atlanta implemented its contingency plan when its hometown was struck by two winter storms within a two week period starting in late January and February.

Both storms closed its headquarters, which originates in the retail, correspondent and wholesale channels, says David Abrahamson, executive vice president of operations.

The first storm shut down the major highways in the area when it arrived at midday. About a dozen people ended up spending the night in the office. Abrahamson, whose commute is normally 20 minutes, left Equity Loans headquarters at 10 p.m. and didn't get home until 5 a.m.

But it implemented its contingency plan on Day Two and the work got done. By the time the second storm came, "we were pros at that point" at working offsite, he says. Parts of Atlanta had an inch of ice on the ground from the second storm, and as a result the city was shut down.

The company's plan to keep the business functioning involves having its underwriting, processing and closing staff work remotely from their homes. That kicked in in this case, although some people lost power because of the ice storm.

Things were not functioning at 100%, but Equity was able to continue underwriting, closing and funding loans. "We didn't miss a beat," Abrahamson says.

The one area where Equity was most affected was in post-closing. The nature of that business, which is still heavily paper-intensive because mortgage documents need to be scanned before being shipped to investors, is best done from the corporate offices, Abrahamson points out. The original notes need to be sent to the purchaser, whether it is an aggregator or Fannie Mae.

Three years ago Atlanta was hit by another winter storm, which Abrahamson pointed out was not as bad as the two recent ones. But that was impetus for Equity Loans to create its plan. Business came to a halt during the 2011 storm. So the firm put into place the technology needed to allow people to work from home, including establishing a virtual private network for document security purposes.

When Equity activates the plan, it sends a companywide voicemail and posts the news on the website so the people in its branches are aware of the shift in workflow.

No mortgage loan closings were delayed as result of the shifting of work to off-site locations this winter. If anything, the situation allowed its workers to be more productive than they normally would if they had come into the office, Abrahamson says. Without the commute, people were putting in more time to make sure the work was completed.

In the absolute worst-case scenario, where its offices are damaged and information needs to be recovered, Equity Loans has two offsite data storage facilities.

Ice and snow are unusual in Atlanta, and the municipal infrastructure to deal with them is limited. "A lot of our branches are in the Northeast, so they got a good chuckle out of us," Abrahamson says.

Even vendors need to have plans in place to keep things going. Williston Financial Group, in Portland, Ore., is the parent company of a title insurance underwriter and a settlement services provider. The company was formed in 2010 and published its first information technology disaster and recovery plan the next year. That has been updated a couple of times since and is now known as WFG's disaster recovery and business continuity plan, says president and CEO Patrick Stone.

WFG created the program partly out of "inherent paranoia on my part," Stone says. "But also a lot of it has been driven by the large lenders, [whose] vetting and auditing standards are requiring better and better detail and more and more planning to ensure there is continuity of services" from vendors.

There is also a pandemic response plan at WFG which was written in 2011 at a client's request.

Those large lenders have responded to the Consumer Financial Protection Bureau's statement on holding them accountable for vendor actions quicker and in a more encompassing way than Stone expected.

"And bless them for doing it," he says. "They've come out and vetted companies like ours. We've been vetted extensively by three major national lenders−policies, procedures, data backup and data security. We actually had to hire an outside firm to hack us."

WFG has a principal data center in Seattle and a backup data center in Plano, Texas. Information is backed up from Seattle to Plano every 15 minutes.

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