Hurricane season has officially started, and will soon be followed by wildfire season and then winter. Each of these seasons poses different challenges to a mortgage servicer.
For mortgage servicers, an important key to preparing for these potential disasters is fine-tuning service-level agreements with the vendors who provide insurance tracking and coverage services, pursue hazard claim recovery services when losses occur, or provide preservation and protection activities. It is also important to ensure that internal policies and procedures are current and reviewed with your staff.
Hurricane losses may be covered by wind, flood or hazard policies, or a combination of these. Is this information being adequately tracked? Are the borrowers’ policies being renewed or are new policies being lender-placed? Are the policy limits being correctly set?
Servicers need to seek assurances that in the event of a widespread disaster, inspection companies have the means to inspect vacant homes, board broken doors and windows, and tarp damaged roofs in a timely manner. They must also be prepared to inspect homeowner repairs. Loss draft departments be adequately staffed to handle the influx of insurance checks endorse and repairs that need to be tracked. Repairs and rebuilds may be delayed if servicers cannot quickly disburse funds from escrow accounts to homeowners wanting to pay their contractors.
There are early warnings that this year’s atmospheric and ocean conditions are similar to 2005 when Katrina hit the Gulf Coast. Some New Orleans homeowners are still trying to rebuild. Now there is an added threat of damage from the oil spill. Pro-activity on the part of servicers can mitigate future homeowner losses and subsequent repairs.
Wildfire seasons resulted in thousands of homes burning in several Western states over the last several years. This exposed a problem of under-insurance. Many homeowners mistakenly relied on their carrier to accurately set policy limits that were never updated to reflect changes in the value of their personal property, additions and add-ons, building codes and reconstruction costs. To date, a high percentage of homes have never been rebuilt because homeowners lacked sufficient coverage. It is necessary to review insuring requirements with lender-placed carriers.
Winter in the Northern states brings the threat of frozen pipes in vacant properties. Most carriers have coverage exclusions for frozen plumbing when properties are not adequately winterized or heat is not maintained. Lender- placed carriers are beginning to deny ensuing water damage when frozen pipes occur. As a result, preservation companies must winterize properties immediately upon vacancy confirmation. Most investors and mortgage insurers require servicers to preserve and protect vacant properties and will certainly review property maintenance records to ensure, at a minimum, that proper winterization is performed.
Water damage is often caused from ground water seeping into basements. Under normal circumstances, a home’s sump pump removes the water from the basement before mold can occur. However, a vacant home likely does not have electricity running which means the sump pump is not working and seeping ground water can easily flood the basement. This type of damage can become extensive and is typically excluded in policies. Power should be maintained to eliminate potential flooding.
It is also critical that preservation companies ensure properties are secure, and if a property is broken into, that it is quickly re-secured to prevent squatters or vandalism.
Insurance policies require servicers, as the insured, to do certain things. One of the most important is to notify carriers upon discovering a property is vacant or if there is any known increased risk that a loss could occur.
Servicers should be confident that should a large scale disaster occur, their hazard claims recovery partner is prepared to review, file and manage a high volume of claims in a short period of time. It is a good idea to proactively discuss this with your partners to determine their level of preparation and ability to handle sudden and large spikes in damaged property referrals.
It is also likely that each borrower’s policy will be different than the next. Therefore, it can be helpful if your hazard recovery partner is well-versed in policy interpretation and coverage assessment and qualified and licensed to represent and assist homeowners as well as mortgagees.
Is your team ready for hurricane, wildfires and winter season disasters? Are your partners experienced, knowledgeable and able to ramp up their teams and subcontractors to handle sudden, unexpected spikes in claims activity? Now is the time to take a few moments to prepare for the expected “unexpected.”
About Quality Claims Management
Quality Claims Management Corporation
QCMC's core focus is unparalleled expertise in policy coverage and the technical aspects of mortgagee and homeowner claims. QCMC has worked with homeowners and businesses including those affected by catastrophic natural disasters such as the 2003 and 2007 Southern California Wildfires, and Hurricanes Katrina, Rita and Wilma.
No comments:
Post a Comment