DS News - Bank of America

24 INSURANCE TRACKING CHALLENGES FOR NON- BANK SERVICERS By Proctor Financial Since the financial crisis, nonbank participation in the servicing market has accelerated. Nonbanks are now the primary source of mortgage originations and continue to grow in mortgage servicing, with approximately two-thirds market share of all mortgages. Mortgage servicers are responsible for collecting borrower payments, loss mitigation, and loan administration— including disbursement of funds to pay insurance, which presents challenges related to lender-placed insurance and insurance tracking. Managing Corporate Advances for Lender-Placed Premiums When a borrower does not provide valid insurance, the servicer or outsourcer must begin the required notification letters and lender placement must occur. e servicer is responsible for advancing the lender-placed insurance premium to its vendor to preserve coverage and protect their financial interest. is corporate advance directly impacts the servicer's bottom line, especially if the reimbursement is not collected from the borrower. e administration gets complicated if the borrower is falsely lender-placed. Lender-placed insurance partners alleviate this challenge by employing technology and processes where lender placement is the last resort. Electronic Data Interchange (EDI) efficiently surveys borrowers' preferred policies without needing to wait for a borrower response. When EDI technology falls short, strategic manual processes to acquire the policy from agents or borrowers bridge the gap. Technology, blended with policy procurement processes, minimizes the need for servicers to make corporate advances for lender-placed insurance premiums. Administering Private Label Responsibilities Subservicers are typically nonbanks that perform servicing functions for the servicer of record. e subservicer can have multiple clients that need varying private labeling requirements to retain their borrower visibility and brand awareness. Requirements can include dedicated toll-free numbers, trained call center agents, branded correspondence, specific business processes, and custom reporting. Leveraging expert teammates and technology, insurance tracking partners should provide seamless private labeling to accommodate the nuances of a servicer's business decisions. In managing multiple investors and clients under a single program, the insurance tracking system should exhibit flexibility and transparency. A subservicer should be able to perform independent vendor management for their clients to ensure their insurance tracking partner is meeting or exceeding service-level agreements. Every borrower touchpoint should be accessible at any time—including insurance documents, recorded borrower calls, correspondence, transaction history, and claims documents. Adhering to Industry Regulations Nonbank servicers still have as stringent of regulations and are subject to the same consumer-related regulatory requirements as bank servicers. Increased scrutiny calls for strengthened processes, quality assurance, and borrower-facing practices. An insurance tracking partner with a dedicated compliance team can help unravel the challenges of changing regulations related to lender-placed insurance. A nonbank servicer should have the confidence that its partner proactively monitors CFPB, GSE, federal, state, and agency news. When impacting changes occur, they should be communicated timely with recommendations for action. When action needs to be taken, the insurance tracking system should be able to balance nimbleness and tight controls to manage the change process when regulations need to be implemented. An insurance tracking partner dedicated to compliance means nonbank servicers mitigate borrower harm, reduce consumer complaints, and remain in compliance. In the wake of COVID-19, there are additional lender-placed and insurance tracking challenges that nonbank servicers rely on their vendors for support. Unwinding Moratoriums As state moratoriums are announced in response to the COVID-19 pandemic, nonbank servicers are looking to their insurance tracking partners to assist in interpreting the impact on their servicing portfolios and borrowers. Moratorium timelines and requirements of being mandatory or optional differs by state. e moratoriums impact borrower correspondence and insurance tracking business processes. is requires an agile response from the insurance tracking partner to quickly reconfigure the insurance tracking system to adjust to these moratoriums. Pandemic Preparedness and Vendor Management Pandemic preparedness has been another test of the insurance tracking partner—the speed and ability to adapt to a remote workforce, initiate sanitization and safety protocols in facilities, follow state orders, maintain IT security standards, and perform third-party vendor due diligence—all while continuing to meet service-level agreements. With over 4 million borrowers in forbearance, servicers are experiencing a spike of borrower calls. Nonbank servicers have relied on their insurance tracking partners to handle overflow calls and tasks related to the pandemic. During times of crisis, it is crucial to have a scalable and adaptable partner, with staff augmentation procedures and teammates who are trained in empathy. Nonbank servicers will always face new challenges, but a flexible, responsive, and detail-oriented insurance tracking vendor with expert teammates and innovative technology will serve as a partner to find service solutions to mitigate these challenges. SPONSORED CONTENT

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