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58 innovation and leveraging new technology—not just to optimize costs, but also to better handle customer outreach. Rawls said, "In order to service effectively, servicers have to properly leverage their technologies—providing their customers with the ability to self-service 24/7 via multiple channels, including web, app, and IVR, and to conduct operations such as phone payments, payoff quotes, and escrow analysis without having to place a call to customer service, creating tasks for back-office personnel to execute." Another concern for servicers? e increased threat of natural disasters. ough Rawls notes that "hurricanes did not cause as much damage as in the prior two years," there was still significant damage from flooding and wildfires across the U.S. According to CoreLogic, 20 of the country's metropolitan areas posted at least a small annual increase in overall delinquency, notably in areas impacted by flooding this spring in Kentucky, Ohio, Illinois, and Indiana. CoreLogic data also revealed that there are 775,654 residential properties at extreme risk of wildfire damage in the 13 Western states, with a reconstruction cost value (RCV) of just over $221 billion in 2019. "With denser housing populations in areas prone to floods and other disasters, the need for servicers to be present for their customers in time of need is higher than ever," Rawls continued. "e ability for impacted customers to route directly to empowered and educated customer service agents will differentiate servicers in their customer's greatest time of need." DISASTER ON THE RADAR e U.S. has experienced 36 major disasters so far in 2019, according to data from Fannie Mae, and for those homes in disaster-areas, preparation begins at the building process. Mike Hernandez, VP for Housing Access and Disaster Response & Rebuild at Fannie Mae, said in a Fannie Mae Q&A that "preparedness should include far more than financial steps and logistics." A study by the National Bureau of Economic Research found that mortgages written on homes in these "exposed locations" are being shed by banks and absorbed by Fannie Mae and Freddie Mac. "is implies that homeowners and investors have been making location decisions without properly pricing the cost of potential peril, and that the government has been enabling the oversight," the Harvard Business Review reported. Although this year's hurricane impact was less than in some other recent years, wildfires stepped to the forefront as far as natural disaster risk in 2019. In California alone, ClosingCorp estimated that there is more than $7 billion in loan value and $60 million in service fees and transfer tax revenue at risk due to recent wildfires. Redfin previously reported that Los Angeles, Orange, and Santa Clara Counties were at risk of losing more than $2 trillion worth of housing as a result of the fires. Los Angeles County has 1.49 million households valued at $1.2 trillion, with an estimated median home value of $625,000. Orange County has a total housing value of $502.6 billion, with a median home value of $709,800. Going into 2020, Rawls suggests servicers need to "be proactive" with their customer outreach ahead of disasters. Technology again is key to this approach, as it can give customers 24/7 access to the information they need, when they need it. "Having smart systems that allow customers access 24/7 to update their status, report hardships, and provide emergency contact information helps servicers to quickly assist customers most impacted by disasters," Rawls noted. "Additionally, the ability to harness satellite and drone technology to provide images can assist servicers in identifying the highest risk properties to prioritize outreach to those customers." MOLDING THE FUTURE Looking beyond 2020, servicers must learn how to adapt to the needs of younger generations, such as Gen Z. Like millennials before them, Gen Z is increasingly reliant on technology and interconnectivity, but this doesn't only mean through an app. "Millennials and Gen Z are more reliant on self-service and anytime, anywhere convenience, but when it comes to the largest purchase ever, we still believe that having a trusted advisor will play a key role in addressing their needs," Rawls said. "We're confident the combination of digital educational tools and empowered and educated mortgage professionals will be the winning combination for the next generation of homeowners," he continued. Servicers need to be able to adapt to the growing demand for digital mortgages, according to Armando Falcon, Founder and CEO of Falcon Capital Advisors and former head of the Office of Federal Housing Enterprise Oversight, the precursor to the FHFA. Even in a low-default environment, it "[ere are] three key factors to look at in 2020: continued pressure on costs, a focus on natural disasters, and—possibly surprising to some—a chance of rising delinquencies in the months to come, even after historically low delinquency rates nationwide." —Mike Rawls, EVP of Servicing, Mr. Cooper

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