DSNews delivers stories, ideas, links, companies, people, events, and videos impacting the mortgage default servicing industry.
Issue link: http://digital.dsnews.com/i/722115
64 64 But why would public adjuster laws even apply to the mortgage servicing industry? Alaska Hawaii Climate change is real, and it has been happening to the mortgage servicing industry. Recent lawsuits against several major banks and servicers resulting in Billions of dollars in fines have shed light on the inner workings of mortgage servicers and their relationships with their vendors. •is heightened scrutiny has resulted in a greater need for transparency in these dealings. Often in the wake of such publicity, lawmakers seek to tighten existing laws, and the NAIC has already begun discussions on a new Creditor Placed Insurance Model Act, as a guideline for states to follow. One of the often overlooked areas that may now see new light are the dealings between the mortgage servicer and the Property Preservation and Protection Companies ("P & P Companies") when it comes to bringing hazard claims. Many mortgage servicers are unaware of state insurance laws that govern such claims and, as a result, are violating these laws. With the new spotlight shining on the mortgage servicing industry, those practices need to change. HUD guidelines mandate timely inspection and repair of property that serves as collateral for FHA loans. Many properties sit vacant for years before foreclosure, and during this time, damage occurs. HUD guidelines require that servicers must file insurance claims for damage, and that all damage, including damage caused by fire, flood, earthquake, hurricane, tornado, boiler explosion, and mortgagee neglect, as well as vandalism and theft, be fully repaired before conveyance. HUD allows mortgage servicers to use any "qualified business individual" i to accomplish these goals. •e problem lies in determining who those qualified business individuals are. Historically, mortgage servicers have used P & P Companies to adjust the claims with the hazard insurance companies and perform all necessary repairs. But are these P & P Companies "qualified" to adjust the claims under state insurance laws? And more importantly, even if such companies do employ in-house licensed adjusters, are they violating state law by doing both the adjusting work as well as the repairs? State insurance laws impose a minefield of regulation for the unwary servicer attempting to comply with these HUD mandates. Laws and regulations vary from state to state and, at the very least prohibit unlicensed adjusting by third parties, such as a P & P Companies. Many states go even further and prohibit the adjusting company from having a financial interest in the restoration and repair of such property, while some require disclosure of such financial interest. •e related Conflict of Interest Map, details the state requirements as of the close of 2105 as these laws relate to public adjusting. But why would public adjuster laws even apply to the mortgage servicing industry? •e answer is simple. A third party bringing hazard claims on behalf of the mortgage servicer meets the definition of public adjusting in almost every state that licenses public adjusters (currently 45 plus the District of Columbia). Public adjusting is most commonly defined by statute, and according to the NAIC Public Adjuster Model Act, as one who "adjusts losses or advises an insured about first party claims for losses or damage arising out of policies of insurance that insure real or personal property" ii . •e activity of the P & P Companies in bringing hazard claims on foreclosed properties falls squarely within that definition. Adjusting claims without a license is simply not allowed by state law. Even more vexing for the mortgage servicers is that contracting with P&P Companies that have licensed public adjusters on board doesn't always help the P&P Companies, and by extension, the mortgage servicers, to comply with these state insurance laws. Back to the Conflict of Interest Chart: nineteen (19) jurisdictions have laws which would ban a P & P Company from adjusting THE DAY AFTER TOMORROW: A NEW WORLD IN HAZARD CLAIMS HUD guidelines require that servicers must file insurance claims for damage, and that all damage, including damage caused by fire, flood, earthquake, hurricane, tornado, boiler explosion, and mortgagee neglect, as well as vandalism and theft, be fully repaired before conveyance. CA NV OR ID UT AZ NM CO MT WY WA