Tom Price of Incenter on Why Climate Change Should Be a Top Mortgage Banking Priority
Thomas (Tom) Price, President of Incenter Insurance Solutions, Fort Washington, Pa., shared his own perspective and that of several colleagues, including David Townsend, President and CEO of Agents National Title Insurance Company, Mark Walser, President, Incenter Appraisal Management and Vashti Brotherhood, President, Incenter Marketing. With 2,000 employees, Incenter LLC is a family of companies whose services help mortgage lenders optimize performance. More information is available at incenterms.com.
MBA NEWSLINK: Climate change is a huge, 30,000-foot issue. Why should mortgage bankers be concerned about it?
TOM PRICE, INCENTER: Climate change is likely to have several direct impacts on the mortgage business—resulting from market shifts, economic fluctuations, and an expanded need for risk mitigation. Some industries, such as agriculture, will naturally be more vulnerable than others, though we have confidence that these harder-hit sectors will innovate and adapt. Still, lenders will need to be aware of the intense pressures they face, and the potential ripple effects on risk and loan performance.
Floods, wildfires and intense storms that damage homes will add to the cumulative impact—spilling over to servicers, who will have a heightened need to get their assets revaluated and even reperforming after these events. The profession is already on the right path here with back-end automation and technologies such as remote appraisal inspections, which enable valuation reports to be completed even when neighborhoods are less accessible to outsiders.
Finally, climate change will represent an inflection point for those who insure property. The parameters for insurability will evolve, and carriers will have to redefine their tolerances for exposures.
NEWSLINK: In what ways does climate change become a local issue, as well as a global issue?
PRICE: Climatic and related meteorological events will impact local areas differently. In some regions, dwindling water sources could force residents to move elsewhere. Rising sea levels may impact waterfront property values and resalability. Meanwhile, prices in locales less impacted by climate change—in state or out of state—could climb. This could have a global impact, too, as residents of other countries make decisions about purchasing investment or vacation properties here.
Whether threatened by wildfires, floods or rising sea levels, the reduced insurability of properties in particular regions could lead to government-backed solutions. This is already happening with coastal properties in the Northeast – many of which are only insurable through state-sponsored plans like the Rhode Island and Massachusetts Fair Plans. An alternative to this involvement could be layered coverage, where one carrier would limit its exposure on a particular property, and another would make up the difference.
NEWSLINK: What are some risks/exposures that mortgage bankers need to prepare for?
PRICE: The biggest risk will be to the collateral. Mortgage bankers will need to monitor whether values are holding up in the regions that are most affected.
The potential for increased disaster scenarios could result in higher losses, damage claims and loan processing delays. In high-risk states, financing could also become a challenge, as there could be a limited selection of investors and insurance carriers willing to jump in.
NEWSLINK: How can mortgage bankers adapt processes and services to mitigate the impact of climate change and maximize performance?
PRICE: The first step is being aware that it will have a business impact. From there, mortgage lenders should start to map out where they will feel it the most in their operations and processes. Will it be with property valuations, underwriting, new insurance requirements, etc.?
This will make it easier to evaluate which services, technologies and vendor partners they should change or add in response to climate change. Servicers, too, will need to prepare for potential defaults or abandoned properties, and evaluate the right strategies and technologies to get their assets off the books or reperforming.
Besides dealing reactively with all of this, the mortgage banking industry has a chance to put greener practices in place. From eClosings to remote appraisal inspections, today’s technologies can make a significant contribution to greenhouse gas reductions by decreasing notaries’, appraisers’ and inspectors’ need to drive.
NEWSLINK: How can the C-suite make this (sustainability) a positive, company-wide mission?
PRICE: This is the perfect opportunity for the C-suite to galvanize their people. Increasingly, employees want to be associated with companies that are devoted to environmental sustainability and customers want to do business with them. Mortgage leaders can demonstrate that this is a priority through corporate philanthropy initiatives; spearheading “green” practices and publicly sharing their results; moving into LEED certified buildings or renovating their existing offices; and continuing to foster hybrid or remote work policies.
Moreover, they can emphasize doing business with green builders, solar companies, and other commercial borrowers who need mortgages, or with likeminded partners such as appraisal, insurance and title companies prepared to invest in and offer specialized services in support of a reduced carbon footprint.
By sharing their commitment, these leaders will set an example for others—within and outside their industry—to do the same.
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