The servicer’s imperative post-foreclosure is to liquidate the property and seek recovery under whatever guaranty may exist for the loan. Given the complexity and inherent risk of these processes, servicers have traditionally engaged expert, third-party providers to assist with hazard insurance claims and investor claims. Historically, different companies have specialized in these discrete claim types, so servicers have gravitated toward the leading providers of those services to meet their specific needs.
However, the “long tail” end of the mortgage crises has reached the areas of servicers responsible for conveyance and investor claims processing, causing volumes to spike and surfacing more comprehensive needs. So, what happens when a servicer needs assistance processing both hazard and investor claims? Must they partner with multiple providers? A few years ago, the answer might have been, “yes.” However, by bundling hazard and investor claims services, servicers can save time and money while producing better outcomes. This “collateral loss mitigation” approach recognizes the interconnectedness of processes and commonality of data elements in post-foreclosure mortgage loan servicing. By dual tracking work, compiling claims in advance, and leveraging insights gained from data processing in hazard claims, curtaiments (meeting timeframes) are minimized while recoveries for servicers are maximized.
When a servicer engages a third-party provider for collateral loss mitigation, the investor claim begins while the hazard claim is still in process. During the resolution of the hazard claim, the third-party provider takes a proactive approach and begins work on the investor claim due to the similarities of the documents and the requests that are made when filing a hazard claim. In addition to ensuring consistency of process throughout, this approach enables the field services vendors to more quickly complete any repairs necessary to effectuate conveyance condition (“ICC”) for the property.
We have seen a significant reduction in processing time when hazard claims adjustment and investor claims management processes are combined. In some cases, as many as ten days are shaved off the overall claims process. This streamlined approach not only reduces processing time for both types of claims, but it also potentially saves servicers hundreds of dollars per property. If a projection is done over the servicer’s portfolio, the savings could be significant with this proactive approach.
Servicers dealing with increased volumes of conveyances and investor claims should be looking to reduce risk and decrease timeframes. An effective third-party provider can assist by offering both hazard claims and investor claims processing as bundled services under the umbrella of collateral loss mitigation. This innovative approach, which combines economies of scale and commonality of data, assists in minimizing the risk of curtailments while ensuring maximum recoveries for servicers in both the hazard and investor claim domains.
About The Author
Denis Brosnan is the president and chief executive officer of Dallas-based DIMONT, provider of specialty insurance and loan administration services for the residential and commercial financial industries in the United States. Additional information is available at www.dimont.com.