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76 THE REALITY OF DISASTER RELIEF REQUIREMENTS A recently published Mortgage Bankers Association (MBA) white paper entitled "Improving Default Mortgage Servicing Processes," calls on the industry to improve both clarity—such as taking the chaos of exception processing and automating—and consistency in disaster relief policy. Asserting that the "industry needs a common playbook across all the federal agencies and guarantors as well as uniform standards of property preservation and hazard mitigation programs," the proposal is timely, but may fall on deaf ears amidst pandemic fears. Overlooking this and similar important calls to action would be a mistake. Default servicing has struggled under tight margins and constrained human resources, while disaster events have soared conversely to record low delinquency and foreclosure. Adding to this dilemma is the fact that relief options and requirements have continued to change, which requires implementation and administration by already strained mortgage servicing operations. For example, this past summer, HUD strengthened FHA mortgage relief options by expanding their Disaster Standalone Partial Claim option to all borrowers living or working in a Federal Emergency Protection Act (FEMA) Presidentially Declared Disaster Area. With the looming coronavirus pandemic, nearly all U.S. states and territories have filed Emergency Declarations for COVID-19 disaster assistance, which also falls under FEMA in accordance with the Stafford Act. is means that default servicers now need to reassess relief options and requirements to effectively support homeowners impacted by the coronavirus. Likewise, Fannie Mae and Freddie Mac recently expanded their relief options to include 90 days to one year of suspended payments, depending on a borrower's circumstances. is may sound small but keeping up with previous and existing agency relief has been a challenge even before the onset of the coronavirus. In addition to other new disaster relief requirements, servicers must also provide accurate and timely relief amidst sunsetting programs, including the FHFA Home Affordable Refinance Program (HARP), the subsequent Freddie Mac Enhanced Relief Refinance (FMERR) program, and existing relief under Fannie Mae's High-LTV Refinance Option (HIRO). THE PRESSURE IS ON Today's challenges are unique, but they are not new. Mortgage servicers have always had to protect themselves from excessive default risk brought on by natural disasters. In addition to ensuring disaster preparedness, mortgage servicers also need to "spread their wings" and prepare their teams for domino issues arising from the continuing occurrence of disaster events. e more disasters that happen, the more those dominos can pile up. For example, the cost to provide repair and relief for homeowners impacted by disasters of any kind is growing exponentially, and it's hitting the insurance business hard. According to InsuranceJournal.com, the growing number of property claims has fueled an 18% rise in property insurance pricing in the U.S. in Q4 2019, compared to a global commercial average increase of 11%. ese price increases not only impact homeowners in areas affected by disasters, but homeowners across the U.S. as well, who are absorbing these costs in their monthly housing expenses. Recent wildfires, floods, and hurricanes— and now the virus—have also created a serious underinsurance crisis. As property claims are submitted, repair assessments frequently overlook the true cost of reconstruction, which has been adversely impacted by the rising cost of materials, ongoing labor shortage, and tariffs on construction materials. is creates a gap in claim reimbursement and the actual repair cost burden on the homeowner. Many disaster-stricken families are facing severely strained finances as they juggle the cost of home displacement and potential loss of income during recovery timeframes. Underinsurance is also growing as new homebuyers purchase in areas where wildfires, flooding, and tornadoes have not previously occurred, at least not at the catastrophic level. If it's not an investor requirement, homebuyers rarely opt to purchase insurance coverage that sufficiently covers a natural disaster, if it covers one at all. When a disaster occurs, the rising reconstruction expense and the underinsurance gap, coupled with increasing costs of homeowner's insurance, can push even financially stable borrowers into default. "RELIEF" FOR DEFAULT SERVICING? Mortgage servicers have been put to the test since the financial crisis, and they continue to show their strength and perseverance despite the Feature Default servicing has struggled under tight margins and constrained human resources, while disaster events have soared conversely to record low delinquency and foreclosure. By: Jane Mason

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