Global warming has been playing a contributing role in severe storms such as tornadoes and hurricanes hitting communities that are not accustomed to experiencing these types of natural disasters on a recurring basis.
For example, over the last two summers, residents who live on the East Coast have dealt with Hurricane Irene in August 2011 and Hurricane Sandy in October 2012, the latter leaving far more significant damage to homes.
A day after Hurricane Sandy traveled through the mid-Atlantic from Washington, D.C., all the way up through New York, New Jersey and Connecticut, CoreLogic estimated that nearly
More recently, neighborhoods in Oklahoma were hit with tornadoes in two consecutive weeks that resulted in people seeing their homes and schools get torn apart to pieces, therefore leaving many families homeless or in need of substantial help to go through the recovery process.
These types of natural disasters resulted in lingering questions that are still unanswered for many property owners, lenders, mortgage servicers and investors.
First, because insurance companies have been reluctant providing homeowners who need assistance in fixing their properties with money in a timely manner, borrowers have speculated whether it is worth the time and effort to repair their homes that sustained a large amount of damage or is it better to just default on their mortgage loans?
Also, how can the mortgage banking industry prepare, based on lessons from these previous storms, and protect themselves if and when this happens again?
Doug Rossbach, vice president within North Highland’s financial services network, believes lenders can move into a proactive instead of reactive mode when it comes to mitigating future risk in order to help homeowners avoid default and lose their property to foreclosure after a hurricane or tornado hits a community.
“Lenders have the resources to get closer to the situation and really become an information source for borrowers communicating what they know when they know it to try to reduce uncertainty,” said Rossbach in a phone interview, a Rumson, N.J., resident whose home was inundated with 17 inches of water after Hurricane Sandy. “That would be helpful because it could be part of a strategy to keep borrowers in their homes. Proactively reach out to borrowers and keep them informed as to what is actually happening.”
A second way lender-servicers can assist homeowners who live in an area subject to flooding is by understanding the risks that these properties face by conducting appraisals and surveys. Rossbach mentioned that if a lender-servicer owned a lot of loans and credit risk in this area, an appraiser can conduct a height survey on a home-by-home basis in an area prone to flooding informing property owners whether their home’s elevation level meets regulatory guidelines which guarantees their homeowners insurance will not go up.
Furthermore, Rossbach said appraisers have to really understand the local markets and not use comparable homes in their reports that were not hit by a particular storm.
“Getting better information and data and being more predictive in which homes are most likely in danger could be very valuable and make the difference in a borrower deciding to bail or not,” he added.
The Federal Emergency Management Agency current flood maps go back to 2009. Even though new maps have been proposed since Hurricane Sandy, new official maps don’t go into effect until 2014.
Specifically, Rossbach is hearing that homeowners who live in Flood Zone V, which is subject to high velocity wave action, or Zone A, subject to flooding, premiums could go as high as $30,000 a year if no mitigation is done to your property, which is clearly not affordable.
“As a homeowner and lender, it is very confusing to know what you should do,” Rossbach stated. “As part of Dodd Frank’s ability-to-repay, a lender is supposed to be able to calculate affordability for a borrower. But you now have absolutely no idea where flood premiums are going and have to wait until the regulations are issued in 2014 to set premiums and evaluate risk.”
Meanwhile, a not-for-profit organization that helps individuals, families, and communities pursue their dreams of homeownership, has received a $100,000 contribution from Citi Community Development to upgrade their technology system used to assist clients with resources they need to recover and rebuild after Hurricane Sandy.
For six months after Sandy made landfall, the Community Development Corp. of Long Island was using a color-coded spreadsheet with over 100 fields that kept a record of how clients were being helped. This spreadsheet tracked whether the organization was providing short term help by offering homeowner’s food baskets, as well as long-term aid by offering them referral services that allows a homeowner to rehab their property by finding a contractor to do the work or submit claims to insurance companies.
According to Donna Boyce, director of the Sandy Recovery Housing Program at the Community Development Corp. of Long Island, the Citi contribution allows CDCLI to add a disaster relief module to its NeighborWorks America CounselorMax system, which is used my mortgage counseling agencies while they help borrowers with mortgage issues. This upgrade allows for greater monitoring of rebuilding activity efforts that could support a family’s long-term housing situation, Boyce added.
“The new system is flexible and customizable, meaning every community facing a disaster recovery can enter information and fields that are particularly relevant to that recovery,” Boyce told this publication. “With this upgrade, we are able to easily track client progress because it includes a calendar feature that allows us to follow up with clients to decide what options they want to pursue.”
Additionally, Boyce said the technology now features a search tool that allows CDCLI to enter a few numbers and the system automatically pulls up phone numbers, house addresses, and ZIP codes that match. Boyce said this allows for easier functionality and it also facilitates not entering people twice into the system. If a name is about to be entered for a second time into the solution, an alert notification is sent.
“The search feature allows you to look around much quicker to see if the client is in the system, which allows us to know what benefits or services they received as a way to determine what else they need,” Boyce said. “Again, outcome driven, which helps us move things along and get the client in a better position both for this conversation and the long-term recovery. Now we spend less time entering data into the spreadsheet, and more time dealing directly with the clients who need our help.”
