Following the unusual cold-weather power outage in the Texas region, mortgage companies are rushing to deal with a surge in homeowner claims before any further delays add to mounting costs.
Nearly 15% of U.S. housing stock in 20 states — over 23 million units — were exposed to severe, low temperatures, according to CoreLogic’s initial numbers. While only a small fraction of these are expected to incur damage from burst pipes and flooding, for those that do, the cost could be $10,000 per home on average. That will contribute to broader estimated losses of $18 billion, according to Karen Clark & Co., a catastrophe risk modeling firm.
Insurers need mortgage companies looped in to cut claim checks, so that’s now risen in the waterfall of workflow priorities for an industry already processing a flood of inquiries about forbearance and originations.
“I think we will get through this, but our customer loss drafts are our concern on the servicing side at the moment,” said Jeff Bode, owner, president and CEO of Mid America Mortgage, a Texas lender and servicer with roughly 40% of its customer base based in the state. “We know that we’re going to spend this next month trying to help our customers get their homes repaired because there were water pipe breaks and damage.”
The mortgage and insurance industries have go-to strategies for these circumstances, but because winter storms aren’t typically a concern in the Lone Star State, the costs and delays associated with the event could be extraordinary, said Laura MacIntyre, CEO of Dimont, a vendor that offers outsourcing and white-label technology that helps the industry handle claims.
Current estimates for total damage from the storm are on the level of those
“The Texas area doesn’t typically deal with this type of damage, so there will be a lot of learning, local limits and delays when it comes finding the right resources to fix whatever’s been broken,” she said. “No one in this area has experienced something like this recently or with such severity.”
Because the power outages were concentrated in more metropolitan areas, large numbers of customers were affected by varying degrees, said Mid America Mortgage’s Bode, noting that while he was in an area of Texas that went without power for a stretch, he was able to go to another area just 12 miles away that had electricity for the duration. Mid America is headquartered in Addison, Texas.
The ability to work out of different locations and cloud-based technology did keep some mortgage companies going when power went out, but servicers also contended with a reduction in workforce capacity.
"There has been no real impact on the corporate side, but we did have several employees who were unable to work given power outages,” said Allen Price, senior vice president, at BSI Financial, which has operations in Dallas, Irvine, Calif., and Titusville, Penn.
Outsourcers can help if servicers are willing to add an extra party in an equation that already may involve an insurer, borrower, public entities and contractors. Even if they do, the servicers should be proactive about customer outreach.
“It would behoove the servicers to post something on their website, if they haven’t already, to ask if they’ve been impacted,” MacIntyre said. “Servicers should reach out to their customers so the borrowers know what to do and where to go.”
On a positive note, repairs to Texas homes can begin more quickly than they would in consistently colder areas, MacIntyre pointed out. Mortgage companies should act quickly to get borrowers the money needed to hire contractors and limit any further damage.
“It’s going to take several months to recover, but here’s one good thing about Texas, it’s not Minnesota. Repairs can happen, rather than having to wait until the spring or summer, because you’re probably not going to have another major storm there,” MacIntyre said.
— Brad Finkelstein contributed to this report
