In 2011, 14 disasters totaled over $11 billion in losses for servicers. Meanwhile, a year later, this figure was surpassed substantially, according to Traci Luckhaupt, vice president of loss mitigation for Fifth Third Bank, based in Cincinnati.
At National Mortgage News' Mortgage Servicing Conference in Dallas, Luckhaupt provided servicers with several steps to disaster preparedness based on lessons learned from Hurricane Sandy that devastated the Northeast last October.
"Floods and hurricanes cause not only property damage, but delinquencies and job loss," Luckhaupt said. "These storms destroy the infrastructure of cities and it takes a long time to recover."
First, Luckhaupt said servicers need to meet the needs of their customer base by providing focused and organized relief efforts. She noted that it is necessary to take a proactive approach to help customers "get back on their feet." This includes developing a holistic disaster policy, which features a servicer's operations, lending, reporting and collections group all-in-one policy.
"A late response leads to increased number of complaints. Servicers have to be proactive on the front-end, which means more ease on the back-end," Luckhaupt added.
On the operation side, a disaster strategy a servicer can utilize to assist struggling customers can include waiving potential late fees, providing information and talking points to customer service agents, suppressing credit bureaus, and having an insurance draft policy.
Also, Luckhaupt said face-to-face outreach events are effective as well as radio advertisements since many storm victims often lose power in their homes following a natural disaster. Additionally, a servicer's staff must be well versed on programs available to help a customer during these outreach events and have to be knowledgeable about damaged areas.
During her speech, Luckhaupt mentioned three keys to a successful outreach event: timing, location and notification. She said having an event one month post-disaster is optimal and partnering with state housing agencies to determine a location to host these events is essential to help the greatest amount of customers at once to handle loss mitigation and insurance questions families may have.
"Even after a storm, we follow the loan inception all the way through foreclosure. Borrowers still need an immediate answer to their problems and some sort of resolution has to be figured out with a customer," Luckhaupt stated.
Overall, the benefits for a servicer having an organized plan following a natural disaster results in easier execution, reduced reputational risk, and an improvement in customer service. However, Luckhaupt noted that servicers need to always make changes to their business models they use due to new policies issued by federal entities.
"We have to adjust plans when the government sponsored enterprises come out with something new," Luckhaupt said. "Our plan is a work in progress and we continually learn from our mistakes."