March 3, 2021

The economic commotion triggered by the COVID-19 pandemic has impacted customer confidence in the housing market. Most of the States in the US have filed Emergency Declarations seeking COVID-19 disaster assistance and alternative approaches to sustain their home lending business.

With the social distancing protocols being mandated, the appraisers could be opting for modern approaches such as leveraging location analytics and remote sensing in their property valuations. Lenders can use this technology to not only align with the remote inspection guidelines, but also achieve efficiency in the underwriting process by utilizing location intelligence-based data and insights. The technology can also help close loans faster than before and at more affordable rates.

Risk assessment using aerial intelligence: A lender’s approach

Satellite imagery and location intelligence technology can pro-actively identify high risk areas with greater accuracy when offering mortgage loans. With this technology, lenders can ensure additional precautionary

measures to maintain a well-balanced portfolio of mortgage loans. Better portfolio monitoring with drone technology and spatial analytics can help eliminate or reduce in-person site visits. Drones and spatial analytics are being complimented with remote sensing for portfolio asset management. Lenders could also wipe out fraudulent claims for disaster assistance programs, by accurately identifying the properties using parcel IDs, and assessing whether they have been truly disaster.

The following risk monitoring processes using remote sensing-based insights can be adopted by lenders:

1. Leveraging property and spatial mapping data with historical hazard -related data, to identify the potential risk exposure of the portfolio of mortgaged properties. Lenders can also combine the demographic information with these potential risk areas and try to identify the potential defaulters in case any such risks do play out. This could be used as an indicative list of borrowers to be more cautious about, based on the high probability of default and being in the higher risk category. Revamping the current mortgage loan programs or working towards identifying suitable loan pricing strategies for these potential high risk-based property categories. Lenders would need to strategically ensure the mortgage loans for hazard prone or disaster-prone zones are sufficiently covered with insurance premiums. The numerous natural disasters like wildfires, floods, the recent COVID-19 pandemic, etc. have resulted in a very challenging under insurance crisis mode. Identifying the required data and combining the use historical natural disaster data (keeping in mind the frequent natural hazard risks of late – forest fires, storms, flooding, COVID-19 pandemic etc.) with their mortgage lending expertise, to get some actionable insights and pro-actively plan the existing portfolio if such disasters unfortunately do occur later. Weaving automation and location analytics into risk modelling and mitigate risk factors, to ensure consistent, accurate, and speedy decision making processes are aligned with the much-demanded digital mode of operations. Leveraging geospatial data into data models will enable lenders to precisely forecast risk with higher confidence levels and accordingly establish mitigation tactics.

2. Precise property damage assessment with satellite imagery is one of the widely used strategies by lenders and insurance companies, in order to identify the truly impacted properties and eliminate fraudulent claims. This helps more accurate loss estimation and reduction efforts.

Conclusion

The sudden and unforeseen nature of the current global health crisis calls for a reassessment of the processes and policies of the lenders. There is need to pro-actively develop potential disaster response strategies, keeping in mind the delinquency rates could be surging. As the mortgage industry leans towards predictive analytics in all sections, lenders should tap into GIS-based satellite images and remote sensing-based analytics with extremely high location coverage and spatial resolution at one fourth the cost.

Lenders could partner with technology vendors to systematically leverage location intelligence and satellite imagery-based insights, for quicker judicious risk forecasting and mitigation. While eliminating the risks of future pandemic or natural disasters may not be totally feasible, working towards better planning and mitigating the mortgage risk could help lenders be better equipped to sail through.

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Kalpana Palaniappan is a Domain Consultant with the TCS BFSI business unit. She has worked with a leading mortgage servicing organization prior to joining TCS. Kalpana has over 17 years of experience in mortgage providing consulting and domain support for business transformation initiatives. Kalpana is a IIBA-certified business analyst and US mortgage underwriter. She holds a Bachelor’s degree in Commerce from Christ University, Bangalore, India, and a Master’s degree in Finance from the Mount Carmel Institute of Management, Bangalore, India.