MBA Defends Superstorm Sandy Relief Efforts
Investor Update: On March 12, MBA NewsLink® published an article titled MBA Defends Insurers/Servicers Efforts in Sandy Cleanup.
MBA Defends Insurers/Servicers Efforts in Sandy Cleanup
The Mortgage Bankers Association, in testimony submitted yesterday to a New York Senate committee, defended efforts by mortgage insurers and servicers to assist in relief efforts to victims of Superstorm Sandy, saying servicers have distributed “the vast majority” of claims have already been distributed.
The hearing, Release of Remaining Superstorm Sandy Insurance Funds Currently Held by Banks and Mortgage Servicers to Affected Homeowners, held by the New York Senate Standing Committee on Banks, came amid criticism by lawmakers and others, who asserted that mortgage insurers and servicers had reacted too slowly to the storm, which cut a wide swath of damage across parts of the Northeast and Mid-Atlantic states, particularly New Jersey and New York.
In written testimony provided to the committee, Pete Mills, MBA senior vice president of residential policy and member services, sought to provide context and clarity to the extensive efforts of servicers to assist their customers impacted by the storm.
“Mortgage servicers understand the difficulties many borrowers are facing, not only with the loss or damage to their homes, but the emotional toll as well,” Mills wrote. “As an industry, our goal is to ensure that borrowers receive funds as expeditiously as possible to repair damage suffered from the storm. Our interests and incentives are well aligned with our customers in this regard--the faster borrowers are able to access their insurance proceeds to cover alternative shelter, replace critical contents, and repair their homes, the less likely they will experience financial hardships caused by these expenses.”
MBA noted, however, that servicers must also follow requirements from Fannie Mae, Freddie Mac, FHA, VA and the Rural Housing Service if they own, insure, or guarantee the loans or securities affected. “Servicers that administer their own portfolio of loans often look to the agency rules to ensure consistency and process efficiency,” Mills said.
From data MBA collected from four major servicers regarding disbursement of insurance claim funds in connection with Superstorm Sandy, MBA noted the vast majority of funds had already been disbursed as of mid- to late-February, despite criticism that servicers were slow in disbursing funds. On average, MBA said servicers took 1.6 days to release the first insurance disbursement, which is key to hiring contractors and purchasing building materials.
“From the more than 34,000 claims received in New York State, 77 percent of the total funds (dollars) processed by the servicers has been disbursed to borrowers,” MBA said. “Eighty percent of the total number of claims has been fully disbursed, and the cases are closed. Also, only about 19 percent of the claims remain in the monitored claim process.”
Mills said MBA understood frustration that rules behind the claims disbursement process are complex and often differ depending on investor, property type and condition and/or loan status, noting that Fannie Mae, Freddie Mac and federal government agency requirements are not aligned.
“This misalignment is not only confusing to borrowers, but requires servicers to maintain various sets of protocols and training,” Mills said. “As a result, the industry and the federal agencies and guarantors, led by mortgage servicers and MBA, [HUD] and the Federal Housing Finance Agency are working to align all of the agency policies to a uniform set of rules to be applied across the nation. Moreover, we seek to streamline the process overall to make more consistent the process for disbursing funds not only for Superstorm Sandy, if appropriate, but for future federally declared disasters.”
In addition, Mills said MBA and its members are working with the GSEs and federal agencies to ensure that borrowers who have accepted disaster-related forbearance or payment deferrals will have standardized and consistent loss mitigation options after those moratoriums sunset if such borrowers are unable to repay the funds that became due during the forbearance.
“The industry believes it is imperative that borrowers impacted by Superstorm Sandy, and other disasters, are offered simple and effective programs to ensure their success in curing any arrearages,” Mills said. “For borrowers who were current before the storm, these loss mitigation options should be easy to administer and easy to qualify for.”
Mills added it is important to note that mortgage companies are assessing and re-assessing the needs of their customers on an almost continual basis to help borrowers with particular needs. The mortgage industry, however, is subject to extensive federal and state requirements.
“Servicers are equipped to deal with an extensive range of customer needs, but must also address their corporate responsibilities to protect the safety and soundness of mortgage companies and agency investors and guarantors,” Mills said. “We recognize that these standards are not always easy for consumers to understand. That is why we are working with the GSEs and federal agencies to develop streamlined, common procedures in areas that are impacted by large scale disasters to ensure that borrowers receive efficient service and that the standards the industry must follow can be easily conveyed to consumers by servicers and regulators alike.”
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Safeguard Properties is the largest mortgage field services company in the U.S. Founded in 1990 by Robert Klein and based in Valley View, Ohio, the company inspects and maintains defaulted and foreclosed properties for mortgage servicers, lenders, and other financial institutions. Safeguard employs approximately 1,700 people, in addition to a network of thousands of contractors nationally. Website: www.safeguardproperties.com.