Residential: Ginnie Mae uses technology to stay on top of natural disasters

Disaster response has become a part of everyday life for mortgage servicers and lenders in recent years, as the frequency of billion-dollar natural disasters seems to be increasing. Recognizing the traumatic effects such disasters can have on mortgage-backed securities (MBS), industry stakeholders and homeowners, Ginnie Mae has developed its own dashboard aimed at tracking disaster-related risk.

“With record-breaking losses from natural disasters, Ginnie Mae has really taken a proactive stance to harness technology to improve decision making and information awareness,” said Stephanie Schader, Vice President of The Collingwood Group.

Natural disasters have caused hundreds of billions of dollars in economic losses in recent years. With $306 billion in losses, 2017 was a record-breaking year for disasters in the United States, according to the National Oceanic and Atmosphere Administration (NOAA). Some parts of the country, including Puerto Rico and US Virgin Islands, are still recovering from 2017 hurricanes.

Last year wasn’t much better. A reported 14 different natural disasters, including Hurricane Michael, Hurricane Florence, and the California wildfires, contributed to $91 billion in losses in 2018. In less than 40 years, the US has sustained more than $1.6 trillion in economic losses as a result of natural disasters.

“These disasters can be devastating for homeowners, who may be temporarily or permanently displaced, experience lapses in employment, and incur unforeseen financial hardships,” said Schader. “In response, we’ve seen the introduction of new disaster relief programs.” Fannie Mae, Freddie Mac, the Federal Housing Administration (FHA) and the Department of Veterans Affairs (VA) have all developed forbearance and loss mitigation programs designed to reduce the effects of disasters on homeowners and prevent foreclosure.

On the investor side, Ginnie Mae has also worked with the industry and borrowers to deal with the aftermath. “We recognized we needed to proactively manage the portfolios associated with affected areas,” Ginnie Mae explained in a recent announcement. Building off the initial response programs from the 2017 hurricane season, Ginnie Mae developed its own Disaster Response and Relief Dashboard.

Ginnie Mae said the dashboard allows it “to get ahead of the curve, assess potential loss exposure and understand the magnitude of disasters’ impact on first-time homebuyers, low-income borrowers and veterans.” The dashboard provides real-time risk assessments and a forecasting component to estimate potential future impacts of natural disasters. Users are able to test different scenarios, model stress on lenders and measure default risk.

“Since the introduction of Ginnie Mae’s 2020 plan, we are really seeing more momentum in the direction of digitization and modernization,” said Schader.

Ginnie Mae said, “By working to get ahead of future hurricanes and natural disasters, Ginnie Mae is ensuring its place as a leader in the mortgage market and empowering the business to maintain the supply of low-cost capital for homeownership.”

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