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   ARTICLE   |   From Scotsman Guide Residential Edition   |   May 2018

Prepare for the Worst

You need a plan to keep operations running smoothly during a disaster

Prepare for the Worst

Key Points

How to prepare for natural disasters

  • Plan for various disruptions.
  • Consider that disasters can last hours, days, weeks, or even months.
  • Identify critical and noncritical operations.
  • Determine how each team will work during a disaster.
  • Test the plan regularly.
  • Be prepared to revise the plan.
  • Stay calm.

The United States set a record in 2017 for damages by natural disasters, with an accumulated cost of more than $306 billion. Earthquakes, tornados, wild fires, floods, hurricanes, blizzards and other calamitous acts of nature are seemingly increasing in severity and frequency, wreaking havoc in regions across the country. Consequently, every mortgage office needs to make sure their business is prepared, so they can keep the lights on, protect their clients’ valuable personal data and meet their closing deadlines.

Preplanning can help your company keep its operations running smoothly during major weather events or other disasters. It also is important for mortgage originators to know the plan — and know that one is in place — so they can trust that their loans and their clients won’t be affected by the unexpected.

Your company’s business structure and size will determine what types of disasters could directly affect you. If you work for (or with) a regional-based lender, then you will only be affected by events that happen within the region where you operate. A national lender or mortgage company should prepare for a larger range of disasters. Regardless of your size, the first thing your company should do is to identify what types of disasters could directly affect the business.

Make sure your company hasn’t limited its preparedness to the corporate office or main operations-support center, either. Large, national companies should expand their plans to include regional operations centers, branch operations around the country, as well as key remote employees who could be subjected to business disruption because of a disaster event.

Make a plan

You may think your company has a disaster plan, but are you sure? Is it in writing, or has your company just talked about it and assumes everyone knows what to do? Until you are affected by a disaster, you really do not know how prepared or unprepared you really are.

You need to have a written plan of action that covers all critical and noncritical business units within your operations. For those who do not have a plan, here are some items your company should consider when writing out its plan.

First, plan for various types of disruptions. Numerous major disasters can affect your business. Hurricanes, blizzards and wildfires are the ones that make national news. What about other events that occur that could affect your operations?

Construction down the street can cut the fiber line connecting you to the internet. What about rolling blackouts that can take out your power grid? Or how about that ice storm that snapped the power line down the road? All of these incidents — minor or major — could disrupt your mortgage processes. When your company creates its plan, it must think about and identify any possibilities that will directly or indirectly affect operations and understand how they could affect each area of operations.

It also is important to consider that disasters can last hours, days, weeks and even months. Depending on the severity of the disaster or event, you could be lucky and get back to normal operations in less than an hour, or you could be unlucky and have it last several weeks, or longer.

Your company should identify how business could be affected by either short-term or long-term events, because either one can have a drastic impact on loan closings, underwriting timelines and other loan processes. Your company’s plan should include multiple scenarios, because each business area will need to react differently when the plan is put into action. A good rule of thumb is to be prepared for events that last: one hour, two to four hours, four to eight hours, one to three days, four to seven days, one week, two to three weeks, one month, and multiple months.

Next, your company’s plan should identify critical and noncritical operations. Preparations should be considered for multiple areas of operations, and the plan should identify what is critical to keep day-to-day operations up and running. When there is a short-term disaster event, these critical operations must be kept up and running. When the event becomes a long-term event, the company should put into action a plan for maintaining noncritical operations as well.

You may think your company has a disaster plan, but are you sure? 

In most cases, critical teams in a mortgage company include secondary marketing, loan processing and underwriting, closings, funding and some of post-closing functions. You want your company to keep those areas of operations up and running no matter how short the event is. Different companies will have different time intervals for when they move to start preserving noncritical functions. Most companies have all teams become “critical” by day five of the disaster event.

Finally, your company’s plan should determine how each team will work during the disaster. Today, most loan origination systems are internet-based so, for most companies, their critical teams should work on laptops instead of desktops. Most remote employees already have laptops, which is a huge benefit for those teams because they can work outside the office — outside the disaster-event area — and continue to keep business moving.

For noncritical teams, your company must determine how it will support them if they need to be put into action. It could be as simple as having some desktop computers on standby that can be shipped to a remote location, where noncritical employees can work. It also is possible to contract with a business disaster-preparedness company that can drop a trailer in a planned location where employees can work. Either way, the company will need to budget for this eventuality and invest in a solution.

Test the plan

Once your company has a written plan, it must make sure that it works. Your office should regularly test the plan to identify and address any problems. The dream is that you have a solid plan, so you never skip a beat and your business continues to run smoothly during a disaster. If you never test the plan, however, you will never know.

Once or twice a year your company should run a regularly scheduled event that gives everyone a chance to test the plan and learn their roles in that plan. These tests can be arranged so managers know about it in advance, or they can be unannounced to test how department managers react to the pseudo-event. The only way for everyone — from originators and processors to branch managers and executives — to know if the company has created a good plan is to test and test and test.

Once the plan has been built and tested several times, it is important to make sure the teams learned from the experience. Did anything not work as planned? Is there any room to improve on the plan? These are questions that should be asked after each test or disaster event. Regardless of the plan, there is always room to improve.

In addition, there will be events that your company’s plan did not prepare for. You might get flooding that creates rolling internet outages so closers have a difficult time working from home. Hurricane force winds can take out power in areas away from the storm. Unplanned events will occur, so your company should revisit the plan after each event or test to determine how each business area operated and what can be improved upon for the next time.

Finally, remember that there will be things that are forgotten, or missed, in the plan. If you are in the middle of a disaster event and find your company’s plan is missing something, stay calm. Document what was missing and help your company revise the plan afterwards. More importantly, when you are in the middle of the event, your loan team will be looking to you for guidance. Determine a workable solution and put it in play.

When a disaster event starts going past a day or two, other things become critical. Your company’s plan may have considered all of your operational needs and vendors that support you, but what about vendors that provide physical support? Mail delivery, overnight deliveries, office supplies, etc., become critical services after a few days. Dealing with losing these services should be added to the plan to make sure your operations are fully covered.

•  •  •

This past year, disasters had a large effect on homeowners as well as business owners. Many major lending operations were affected in one way or another. Every mortgage company should have a plan in place so that originators can continue to operate and keep their loans moving through the process.

If your company has not written down a plan yet, do not hesitate to bring the idea to the attention of executives. Once they make the call to activate a plan, encourage them to see it through to the testing phase, and then offer advice for adjusting the plan based on anything you learn.


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