There’s no doubt, natural disasters and severe weather events are on the rise in the U.S.—and the impacts have been devastating. In 2020 alone, there was a record 22 individual disasters that each caused more than $1 billion in damages, according to the National Oceanic and Atmospheric Administration. Disasters have hit everywhere, too—from wildfires in the West, to floods in the Midwest, to cyclones and hurricanes in the East and Southeast. With hurricane and wildfire season still upon us, 2021 losses are adding up quickly as well. So too are the number of loss drafts that lenders are dealing with. In fact, we’ve never seen so many companies reaching out to us for help with this issue. If you’re trying to get a handle on your loss drafts, here are three things to keep in mind:
Understand your risks Managing and monitoring loss drafts is often frustrating, as lenders must make sure that all proceeds, inspections, and repairs meet specific loan terms and requirements. However, these challenges quickly escalate when loss drafts pour in after a natural or man-made disaster. Lenders and servicers that have a high concentration of loans in areas prone to climate events are particularly vulnerable. Therefore it’s important to consult with experienced insurance professionals before obtaining coverage, so you can better understand your risks and how they are likely to evolve over time—particularly since the type and severity of disasters are constantly changing as well.
Your carriers must be prepared It’s also critical to have insurance carriers that are responsive and committed to providing superior customer service regardless of the circumstances. They should have specialized processes for handling large numbers of loss drafts quickly and efficiently, as well as their own business continuity and disaster recovery plans and self-service options, so their ability to assist homeowners doesn’t falter when disaster strikes. A trusted insurance broker can be of invaluable help identifying such carriers. They can also help find carriers that can meet your specific requirements for processing claims, whether that includes monitoring the claims adjuster’s reports, copies of repair estimates, or the contractor’s license and signed lien waiver.
Get help when you need it Ultimately, your insurance partner needs to be able to manage the process of ensuring loss draft proceeds are released to the homeowner and the homeowner’s contractors in a timely manner. That includes paying attention to servicing and investor requirements, which dictates how loss draft funds are to be used and under what circumstances the funds can be applied to the loan balance. And they need to monitor the release of funds as repairs are completed and should utilize tracking systems to ensure multiple claims are being handled expeditiously. At IL Group, we’ve been helping lenders overcome their loss draft challenges for more than two decades. Our relationships with many of the most trusted insurance carriers in the country also ensures our clients are protected from loss draft overload, too. If you need assistance with loss drafts, please let us know—we’d be more than happy to help. Feel free to reach out to us anytime at 866-300-7020 or info@ILgroup.com.
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