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74 During the 2010s, our industry saw foreclosures fall to record lows as the economy experienced a full decade without a recession. At the same time, however, residential properties were negatively impacted by a host of natural disasters with a scope and frequency not seen before. As we now transition from one decade to another, servicers are sensing the inevitable impact of a future economic correction paired with a predicted continuation of severe weather events nationwide and are working to proactively evaluate the potential impact on loan portfolios. e reality today is that servicers face significant risk in expeditiously managing the liquidation of distressed properties due to a number of different types of claims, each with its own unique, strict requirements—all adding to the complexity of the filing process. ose with FHA loans in their portfolio are impacted most as FHA home retention (incentive) claims and home disposition (foreclosure) claims are among the most scrutinized investor claims. Of these, approximately six out of 10 claims filings are deficient due to either inappropriate depletion of escrow funds or claiming inappropriate expenditures, resulting in the assessment of monetary penalties by the Department of Housing and Urban Development (HUD). e result is almost $9,000 on average in loan-level losses per file due to FHA claim filing errors—errors that HUD often converts into fines since submitting inaccurate claims for reimbursement can be viewed by HUD as fraud. In instances such as these, the loss is then multiplied by the number of nonperforming loans within the servicer's portfolio. In many cases, these errors, fines, and inefficiencies are largely avoidable. e majority of loan-level losses stem from the failure of either internal staff or outsourced claims service providers to perform effective due diligence of the circumstances of the case file. Losses can also occur from the filer's lack of knowledge of reimbursable items, mistakes in proper identification of the appropriate automatic interest extensions (i.e., an interrupted foreclosure sale due to bankruptcy or loss mitigation actions) or the servicer failing to utilize HUD-approved extensions where applicable. To counter this threat, many servicers are leveraging a mortgage loss analysis strategy to support final review of case A PROACTIVE APPROACH TO LOSS MITIGATION Here's how mortgage loss analysis can help mitigate negative impacts at the portfolio level. Feature By: Denis Brosnan