After the unusual cold weather blackout in the Texas area, mortgage lenders are rushing to deal with spikes in homeowner claims before further delays add to rising costs.
Nearly 15% of the U.S. housing stock in 20 states – over 23 million units – has been exposed to severe, low temperatures, according to CoreLogic's original figures. While only a small fraction of it is likely to be damaged by burst pipes and flooding, the cost for those who do so could average $ 10,000 per home. According to Karen Clark & Co., a disaster risk modeling company, this will add to more general estimated losses of $ 18 billion.
Insurers need mortgage companies looped in to cut loss reviews. That has now risen in the waterfall of workflow priorities for an industry already handling a flurry of forbearance and lineage requests.
"I think we will get through this, but our customer loss schemes are our concern on the service side right now," said Jeff Bode, owner, president and CEO of Mid America Mortgage, a Texas lender and servicer with approximately 40% of its customer base in the state. "We know we will be spending this month helping our customers repair their homes due to water pipe breaks and damage."
The mortgage and insurance industry has strategies for these circumstances, but since winter storms are typically not an issue in the Lone Star State, the costs and delays associated with the event could be exceptional, said Laura MacIntyre, CEO of Dimont. A provider that offers outsourcing and white label technology that helps the industry process claims.
Current estimates for total damage from the storm are on par with Hurricane Harvey, which cost $ 20 billion, she said.
"The Texas area doesn't typically deal with this type of damage, so there will be a lot of learning, local boundaries and delays when it comes to finding the right resources to fix what's broken," she said. "Nobody in this field has seen anything lately or so much."
Because the power outages were concentrated in metropolitan areas, large numbers of customers were affected to varying degrees, said Bode of Mid America Mortgage, noting that he could walk into an area in Texas where there was no power for a long time other area only 12 miles away that had electricity for a long time. Mid America is headquartered in Addison, Texas.
The ability to work in multiple locations and with cloud-based technology kept some mortgage companies running when the power went out, but servicers also struggled with a reduction in workforce capacity.
"There was no real corporate impact, but we had several employees who were unable to work due to power outages," said Allen Price, senior vice president at BSI Financial, based in Dallas, Irvine, California. and Titusville, Penn.
Outsourcers can help when servicers are willing to add an additional party to an equation that may already involve an insurer, borrower, government agency, and contractor. Even if this is the case, the servicers should be proactive in customer contact.
"It would be up to the servicers to post something on their website, if they haven't already, and ask if they are affected," MacIntyre said. "Servicers should reach out to their customers so borrowers know what to do and where to go."
On the upside, home repairs in Texas can begin faster than in consistently colder areas, MacIntyre said. Mortgage lenders should act quickly to get borrowers the money they need to hire contractors and limit further damage.
"It will take a few months for us to recover, but here's a good thing about Texas: it's not Minnesota. Repairs can happen instead of waiting until spring or summer as you probably won't have another major storm there MacIntyre said.
– Brad Finkelstein contributed to this report