Natural disasters like Hurricane Harvey and other significant events can cause widespread property damage and put borrowers’ and lenders’ investments at risk. Additionally, because many people may have lost homes, loved ones, or treasured personal belongings in such events, it is imperative that any damage at properties be handled with sensitivity and efficiency. NorthMarq recognized the challenge this presents when working through the insurance process following an event and enacted a plan to make the entire process more efficient for both borrowers and lenders.
Changing Our Process to Create Efficiencies
In prior years, the insurance claim process required communication between the insurance and asset units of NorthMarq’s servicing team—and carried the potential for miscommunication as technical information was transferred between the units and then reported, often under urgent conditions. But not this time. NorthMarq had recently transferred the insurance loss function from its insurance unit to its asset unit, training its asset analysts in the rules and nuances of insurance losses. Insurance expertise was still required, and NorthMarq’s insurance team was ready with an insurance analysis of the entire loan portfolio—information that was readily absorbed and put to use by NorthMarq’s newly-trained asset team. The result was an integrated, seamless response to the emergency needs of both the borrower and the lender—the most effective emergency servicing operation we have mounted.
NorthMarq made the decision to transfer the insurance loss process from the Insurance Department to the Portfolio Management Department, a move that shifts our structure to be more in line with the servicing industry as a whole. In addition, this change also makes the primary contact the same analyst responsible for handling capital improvement or deferred maintenance disbursements, further streamlining the loss process.
This decision came at a critical time as multiple significant events, including hurricanes Harvey and Irma, occurred that put the team to the test. The 2017 hurricane season was the most active since 2005, and the California wildfires of October and December 2017 were some of the most devastating in recent history, all of which occurred in the midst of transferring the insurance loss procedure.
Collaboration Speeds Up the Process
With the recent shift in responsibilities, as well as the widespread damage caused by multiple events, NorthMarq decided to process this round of significant events through both the Insurance and Portfolio Management Departments, bringing them together to work through the requests, the correspondence, and the lender updates while continuing to provide personalized, customer-oriented service to lenders and borrowers.
It was a challenging year for property losses, as demonstrated by this abbreviated list of significant events:
|Event||Month||# Potentially Affected Properties* in NMC’s Portfolio|
(*Not all properties sustained losses)
In addition to helping with the unusually high volume of losses, the collaboration between departments helped NorthMarq gather additional information on the insurance coverage in place at the time of the loss. The essential role this additional information played in the loss claims is best demonstrated by the claims tied to Hurricane Harvey. An occurrence, as defined in a typical Insurance Services Office (ISO) form, establishes a 72-hour window for damage to occur under that single occurrence. However, Hurricane Harvey was unique as it stalled over land, causing a single storm (‘occurrence’) to continue to cause damage after the end of the 72-hour window. Several questions arose out of this event: Will the carriers respond to the event as a ‘Named Storm’? Will the carriers respond via the ‘Flood Coverage’? Will the levy release affect how the policies will respond to loss claims? Facing these complicated insurance questions, NorthMarq knew that all parties involved would be concerned with how the insurance coverage would respond, so we proactively gathered insurance information for the affected properties, creating a better understanding of the situation and the ability to provide improved service.
NorthMarq’s regional offices even stepped in to assist with the loss process. Our regional offices have the strongest relationship with the borrower—oftentimes knowing them on a personal level—and when they helped with the loss process, they were able to provide improved and personalized service. Throughout the process, they were constantly filtering information to the Servicing Department, and some of our regional offices even initiated correspondence to check in with borrowers. A few of our producers in Florida also offered to check on potentially-affected properties in the wake of Hurricane Irma.
Keeping Everyone Informed While Being Mindful of Timing
Looking beyond the internal collaboration, NorthMarq also took steps throughout the entire process to respect the legitimate interest and concern of all parties invested in the property. With any loss, the lender and borrower have the same goal of protecting their investment, which oftentimes means restoring the property to normal operations as quickly and efficiently as possible. During this entire process, communication is key, but so is the timing of that communication.
NorthMarq always assesses each significant event on a case-by-case basis to ensure the timing of the initial correspondence to the borrower does not go out while those affected are still recovering from the devastating event. Once initiating communication, we strive to be sensitive to the borrower’s circumstances at all times—their safety is of upmost importance—while also asking for their understanding that the lender is also concerned for the property and its condition and that they send this information when it is available.
With numerous properties in NorthMarq’s portfolio affected, we sought to provide timely updates to our lenders in the face of an influx of loss claims while also being mindful of our borrowers’ situation. To do so, we built our procedure and correspondence on the concepts of customer-oriented service and relationships. We hope you never have to experience our loss procedures first-hand, but if you do, know that we are doing everything we can to ensure both the borrower and lender get the information they need as quickly as possible.