HMDA Product Now Available

As community bankers prepare to meet expanded data collection requirements under the Home Mortgage Disclosure Act (HMDA), we have heard from many compliance officers requesting resources to help ensure consistent and accurate data collation for reporting. 

In response to these requests, the Compliance Adviser team has developed tools to assist you with HMDA data collection for 2018. For $99 (members) or $149 (nonmember) you’ll receive:

  • Two customized data collection forms (in Excel form and Fillable PDF formats) with all 110 HMDA fields and the regulation defined choices available for the user to make the correct selection for the transaction, minimizing error risk; and
  • An enhanced version of the CFPB’s “Reportable HMDA Data: Regulatory and Reporting Overview Reference Chart,” with an additional column defining suggested documents that the user could use to collect the data. An additional Excel spreadsheet is provided to allow the compliance officer to customize this form based on your bank’s policies and processes to ensure HMDA data collection consistency.

These resources, conveniently packaged for your use, are now available to purchase online. You will receive the products in your email box approximately one hour after completing your purchase.

Baker Market Update: Nov. 20, 2017

The nation’s legislators generated a lot of news this week. Some we can talk about, and some we can’t. Judging from their reactions yesterday, one might conclude that House Republicans had just won the Super Bowl. They might need to be reminded that it’s not even halftime yet. Despite the many, joyous declarations of “victory”, there’s a long way to go before reaching the End Zone of tax reform. As we all learned on Sesame Street, the Senate now needs to finish approving its version, prior to the two chambers then reconciling whatever differences exist between the two plans. Piece o’ cake. 

Read More in the Baker Market Update

Calling all Sub S Banks

With the U.S. House of Representatives expected to act on a tax reform bill this week, your VERY URGENT action is encouraged to express concerns on specific provisions affecting banks organized as S corporations.

IBAT members should call their members of the U.S. House of Representatives today with the following message:

  • H.R. 1 (the tax reform bill) does not afford direct sub s shareholders (employees and directors) the same pass through tax rate as passive shareholders. The majority of sub s shareholders are direct shareholders. Failure to address this disparity would likely result in the elimination of sub s banks and contribute to further consolidation in the community banking industry, with disproportionate effect on rural Texas. 
  • Please let Ways and Means Chair Kevin Brady and Ways and Means committee member Kenny Marchant know that HR 1 should treat passive and active members the same. 

Please use this link, to find the contact information of your member of the U.S. House of Representatives. When calling his/her Capitol offices, you should request to speak with the staff member handling constituent feedback on H.R. 1.

Thank you for your prompt response to this call to action. As always, please share any feedback you receive from your House member.  

Baker Market Update: Nov. 13, 2017

At times this week, it seemed like there were more tax-plan iterations floating around out there than say, oh, the number of Saudi princes. Of course, the latter is in decline and the former is in despair. Maybe. Depending on whom one asks, tax reform is a foregone conclusion that’s just going through some legislative fine-tuning, or it’s an attempt at pleasing everyone while ultimately pleasing no one and will never make it to the President’s desk. Which camp are you in? 

Read More in the Baker Market Update

IBAT Legislative Fund

Recently, we sent out a letter requesting support for our Legislative Fund. We are extremely appreciative of the generous responses thus far, and thank you for your support. 

As there have been some questions regarding the submission of contributions, we have developed a form to provide additional information. As always, thank you for your support of IBAT and our efforts to represent community banking.

Home Equity Summit

As you're most likely aware, Proposition 2 (Home Equity Lending) was on the constitutional amendment ballot yesterday. The amendment was overwhelmingly approved by voters.

What This Means for Community Bankers:
You have less than two months to get lenders, loan processors and compliance staff trained for the new laws, effective January 1, 2018. Texas community banks have been able to make home equity loans for nearly two decades, and with the exception of the line of credit (HELOC) addition, not much has changed - until now!

Changes include:

  1. Lowering the cap on home equity loan-related fees from 3 to 2 percent, but excluding certain additional fees from counting towards this cap; 
  2. Allowing home equity loans against agricultural property; 
  3. Allowing the refinancing of a home equity loan with a “traditional” mortgage loan; and 
  4. Allowing advances on a home equity line of credit as long as the principal amount remained below 80 percent of the fair market value of a borrower's house.

What IBAT is Doing to Help You:
IBAT's Home Equity Summit is scheduled to take place December 5, 2017 in Dallas. Take advantage of this opportunity and join Karen Neeley, IBAT General Counsel and Senior Attorney with Kennedy Sutherland LLP, in addition to IBAT compliance staff Kelly Goulart and Janie Daniel, for a general discussion on home equity lending and the potential compliance pitfalls of the new revisions to law.

Specific Topics to be Covered:

  • The basics of Texas homestead requirements.
  • Permissible non-purchase money security interests in a Texas homestead.
  • Required notices and delivery issues surrounding home equity lending in Texas.
  • An exploration of Title 7, Chapter 153 of the Texas Administrative Code.
  • What now? Understanding ‘cure’ provisions and what to do if (really when?) mistakes are made.
  • What exactly changes on January 1, 2018?
  • What exactly does not change on January 1, 2018?

If your bank currently makes home equity loans, or wants to get into the home equity loan business, this is a must-attend program. Resverve your spot today.

H.R. 1

The long-awaited tax reform bill, H.R. 1, was rolled out last week by Ways and Means Committee Chairman Kevin Brady of Texas. The summary provided by the Committee hits the high points and is a short read.

This bill is designed to lower tax rates, stimulate investment and simplify the tax code. While difficult, if not impossible, to grasp the nuance buried in a 429-page “simplification” bill, there appear to be both very beneficial provisions and some potentially problematic areas. The issues to be addressed will become more clear as we, and others, review the bill text to determine the ultimate impact on community banking.

Continued from Bottom Line:

Of particular note for banks is a top corporate tax rate lowered from 35 to 20 percent; a decrease in rate for pass-through entities, including Sub S banks, to 25 percent with potential issues regarding limitations; limitations on interest deductions for both commercial and personal borrowings (including a decrease in the mortgage interest deduction and phase out of the deduction for interest on home equity lines of credit and second homes); limits on deductions for FDIC insurance premiums for larger banks (>$10B); and additional limitations on deferred compensation plans. As mentioned, details on these and certainly other provisions will garner more clarity in coming days and weeks.

IBAT is working with other interested parties on the language for Subchapter S shareholders. As drafted, the bill does afford “passive” shareholders—meaning those not materially active in the business—the pass-through rate of 25 percent. Obviously, some Subchapter S shareholders include directors and officers who would not qualify under the passive definition.

IBAT has been active on a number of fronts as this proposal has been crafted and will continue to be engaged to ensure community banking is treated fairly and appropriately. We will provide additional information and potentially request your involvement as this saga unfolds.

Baker Market Update: Nov. 06, 2017

Woody Guthrie once wrote in one of his depression-era songs that, “…the farmer feeds us all.” And he was right. But, farmers don’t get much attention from the Bureau of Labor Statistics (BLS) who reported this morning that 261k more non-farmers found jobs last month. And on top of that, the 33k decline in non-farm jobs reported for September, was actually an 18k gain. So, good news for non-farmers, but one has to dig pretty deep in the 39 page BLS report to find out anything about the people out there getting their hands dirty on our behalf. Where’s the love?!

Read More in the Baker Market Update


Baker Market Update: Oct. 30, 2017

While no evidence exists that anyone has yet become tired of winning, the announcement [Friday] morning by the Bureau of Economic Analysis (BEA) that the economy grew at an estimated 3.0% in the last quarter is feeling like a victory to many. Against this backdrop, the toxicity of the nation’s political environment became practically radioactive. One might think a shipment of uranium had been delivered to Capitol Hill as lawmakers wrangled over proposed tax-reform legislation.

Read More in the Baker Market Update

Baker Market Update: Oct. 23, 2017

What do the rebellious citizens of northeast Spain have in common with recalcitrant Senators in Washington, D.C.? Well, they’ve both been moving the bond market this week. News out of Madrid that the dreaded Article 155 would be invoked in order to bring Catalans to heel, caused a bit of a bond rally yesterday as investors worried about the potentially negative impact such a move would have on the European Union. In the U.S., the Senate induced a reversal of that rally when it narrowly passed budget measures that enhance the possibility of tax cuts coming to fruition. And stocks prices? Well, they just keep going up ‘cause that’s what they do these days. Moo! 

Read More in the Baker Market Update


New OCC Guidance

The Office of the Comptroller of the Currency (OCC) issued new guidance to the Policies and Procedures Manual providing a ‘framework’ for determining what impact evidence of discrimination or other illegal credit practices would have on the assigned CRA rating for national banks. IBAT General Counsel Karen Neeley sees this as a significant—and welcome—change in tone from the OCC.

This policy change appears to remove the probability of an automatic CRA ratings downgrade, despite the fact the bank had already addressed any alleged discriminatory or illegal credit practices and/or their impact on the bank’s CRA activity was inconsequential.

Acting Comptroller of the Currency Keith Noreika issued the following statement regarding the changes to OCC PPM 5000-43, “Discriminatory and Illegal Credit Practices.”

“Today’s changes to an internal OCC policy ensure a logical nexus between our CRA performance evaluation ratings and banks’ CRA-related activities. The revisions make certain we give full consideration to the corrective actions taken by banks during our evaluation. The revised policy ties a CRA rating, and any downgrade, to CRA lending activities so that banks have incentive to improve their CRA activity and are held accountable for any discriminatory or other illegal credit practices related to their CRA activities.”

Baker Market Update: Oct. 16, 2017

In a week where Spain tried to turn itself back into an Ernest Hemingway novel and the Cub Scouts tried to turn themselves into a Virginia Wolff essay, one might be forgiven for missing the release of the FOMC minutes. Not to worry; they were very much like the previous meeting’s minutes. And very much like the minutes before that. To the surprise of no one, the members of the FOMC are universally concerned and frustrated about the lack of inflation, but are of different minds regarding a course of action to address those concerns. Also, according to the minutes, nobody got called a moron. Yet. But, how should one refer to policy-makers who are convinced that raising the cost of credit is an appropriate policy response to a disinflationary environment? Very carefully.

Read More in the Baker Market Update

Baker Market Update: Oct. 10, 2017

It may take a little squinting, but if one can get past a few trees infested with pine-bark beetles, the view of the labor market forest uncloaked by this morning’s jobs report provided many observers with an eye-pleasing vista. It was September of 2010 the last time the monthly NonFarm Payroll (NFP) count was negative, but in the face of last month’s 33k decline, the Unemployment Rate fell by two-tenths to 4.2% while the demographically driven and downward trending Labor Force Participation Rate rose by those same two-tenths to 63.1%. In terms of actual numbers, the actual number of employed persons rose by 906k while the total of those unemployed fell by 331k. Sightseers might want to remember that data from the Household Survey can produce measurements that can sometimes appear to not quite agree with the much larger Establishment Survey. This particular forest is not without weeds.

Read More in the Baker Market Update

IBAT Convention Recap

IBAT’s 43rd Annual Convention wrapped up last week in Austin with near-record attendance and rave reviews from attendees. While there were many highlights from this year’s event, we captured a few special moments for you to enjoy via video, including:

Attendees will receive an email this week with links to many of the slide decks used by presenters. And, don’t miss the collection of photos from the IBAT Convention posted online!

Presidential Proclamation


NOTE: Please be advised that President Donald Trump has issued the following proclamation concerning the flying of the United States flag at half-staff immediately through Friday, October 6, 2017.  Please contact me if you have any questions concerning this proclamation. 


Greg Davidson 

Gregory Scott Davidson, Executive Clerk and

Director of Constituent Communication Division

Office of the Governor ● P.O. Box 12428 ● Capitol Station ● Austin, Texas 78711



Office of the Press Secretary


October 2, 2017


- - - - - - -



Our Nation is heartbroken.  We mourn with all whose loved ones were murdered and injured in last night's horrible tragedy in Las Vegas, Nevada.  As we grieve, we pray that God may provide comfort and relief to all those suffering.

As a mark of respect for the victims of the senseless act of violence perpetrated on October 1, 2017, by the authority vested in me as President of the United States by the Constitution and the laws of the United States of America, I hereby order that the flag of the United States shall be flown at half-staff at the White House and upon all public buildings and grounds, at all military posts and naval stations, and on all naval vessels of the Federal Government in the District of Columbia and throughout the United States and its Territories and possessions until sunset, October 6, 2017.  I also direct that the flag shall be flown at half-staff for the same length of time at all United States embassies, legations, consular offices, and other facilities abroad, including all military facilities and naval vessels and stations.

 IN WITNESS WHEREOF, I have hereunto set my hand this second day of October, in the year of our Lord two thousand seventeen, and of the Independence of the United States of America the two hundred and forty-second.




Hurricane Harvey

The Impact of Hurricane Harvey
In a speech last week, Dallas Federal Reserve President Robert S. Kaplan outlined the impact of Hurricane Harvey on the region, including:

  • $75-100 billion in total property damage;
  • $45-55 billion in damage to residential property;
  • $16-20 billion in commercial property damage;
  • $10-12 billion in vehicle damage;
  • $6-10 billion in infrastructure damage.

The storm also resulted in the short-term loss of 55,000 to 75,000 jobs. Click here to access the resources page IBAT put together to aid community bankers in the recovery process.

Hurricane Harvey Relief Fund Update
One final heartfelt thank you to everyone who donated to the Hurricane Harvey Relief Fund to help affected banking families across the state recover and rebuild. We are proud to report that fund distributions given last week totaled nearly $1.5 million to more than 600 bankers and their families.

Baker Market Update: Oct. 2, 2017

Death and taxes; the only two sure things in life. Right? While any debate over the former is unlikely to engender any changes in outcomes, we’re all in store for much wrangling over the fate of the latter. The announcement this week of the Administration’s plan for tax-structure reformation has market participants scrambling to gauge, among other things, the likelihood of the proposed framework actually becoming actionable legislation. With more details expected as the process evolves, a reduction in marginal rates for businesses and households are hallmarks of the new plan with changes to allowable deductions garnering much attention. The nine-page outline was a little light on specifics. An environment ripe for wrangling

Read More in the Baker Market Update

Baker Market Update: Sept. 25, 2017

Financial markets around the globe are digesting an address just delivered this morning by British Prime Minister Theresa May in which she sought to comfort those suffering from Brexit-related anxiety. Her job becomes more difficult with the announcement that Uber’s license to operate in London has been revoked by the regulatory dotardson-the-Thames. Somebody’s going to need a ride. 

Read More in the Baker Market Update

Baker Market Update: Sept. 18, 2017

A lot of excitement this week for those that get excited about cell phones. Apple announced their latest and greatest new device to much fanfare. There’s was also a lot of excitement this week for those that get excited about inflation. The Bureau of Labor Statistics (BLS) announced a greater-than-expected rise of 0.4% in its Consumer Price Index (CPI). One wonders, will Janet Yellen still be able to blame disinflation, the bane of her existence, on the telecommunications industry? Rumor has it that the shiny, new iPhone X comes with a shiny, new price tag of $1,000. American. That’s more than a new set of irons! Two thru wedge, even.

Read More in the Baker Market Update

Presidential Proclamation

Please note the following proclamation from President Trump ordering flags to half-staff on Monday, September 11 for Patriot's Day.  Since no flag may fly higher than the US flag, all flags should be lowered appropriately.  Please contact me if you have any questions. 

Gregory Scott Davidson

Executive Clerk and Director of Constituent Communication

Office of the Governor, P.O. Box 12428, Capitol Station, Austin, Texas 78711


The White House

Office of the Press Secretary

For Immediate Release

September 08, 2017

President Donald J. Trump Proclaims September 11, 2017, as Patriot Day

- - - - - - -

On Patriot Day, we honor the nearly 3,000 innocent lives taken from us on September 11, 2001, and all of those who so nobly aided their fellow citizens in America's time of need.  We rededicate ourselves to the ideals that define our country and unite us as one, as we commemorate all the heroes who lost their lives saving others.
September 11, 2001, will forever be one of the most tragic days in American history.  Through the unimaginable despair, however, ordinary Americans etched into our history remarkable illustrations of bravery, of sacrifice for one another, and of dedication to our shared values.  The shock from the indelible images of the smoke rising from the World Trade Center and Pentagon gave way to countless inspiring videos of co-workers helping one another to safety; of heroes running into collapsing buildings to save the innocent people trapped within; and to the unforgettable story of the patriots who charged the cockpit of Flight 93 to save untold numbers of lives.  These heroes moved us with their bravery.  They make us proud to be Americans. 
Throughout history, everyday Americans and first responders have done the extraordinary through selfless acts of patriotism, compassion, and uncommon courage.  Not just in New York, Virginia, and Pennsylvania, but across our great Nation, Americans on September 11, 2001, bound themselves together for the common good, saying with one voice that we will be neither scared nor defeated.  The enemy attempted to tear at the fabric of our society by destroying our buildings and murdering our innocent, but our strength has not and will not waiver.  Americans today remain steadfast in our commitment to liberty, to human dignity, and to one another.  
It has been 16 years since the tragedy of September 11, 2001.  Children who lost their parents on that day are now parents of their own, while many teenagers currently in high school learn about September 11th only from their history books.  Yet all Americans are imbued with the same commitment to cause and love of their fellow citizens as everyone who lived through that dark day.  We will never forget.  The events of September 11, 2001, did not defeat us.  They did not rattle us.  They, instead, have rallied us, as leaders of the civilized world, to defeat an evil ideology that preys on innocents and knows nothing but violence and destruction.  
On this anniversary, I invite all Americans to thank our Nation's incredible service members and first responders, who are on the front lines of our fight against terrorism.  We will always remember the sacrifices made in defense of our people, our country, and our freedom.  The spirit of service and self sacrifice that Americans so nobly demonstrated on September 11, 2001, is evident in the incredible response to Hurricanes Harvey and Irma.  The same spirit of American patriotism we movingly witnessed on September 11th has filled our hearts as we again see the unflinching courage, compassion, and generosity of Americans for their neighbors and countrymen.  The service members and first responders who lost their lives on September 11, 2001, and in the years of service since would be proud of what we have all witnessed over these last three weeks and what will undoubtedly unfold in the coming months of recovery.  By protecting those in need, by taking part in acts of charity, service, and compassion, and by giving back to our communities and country, we honor those who gave their lives on and after September 11, 2001.
By a joint resolution approved December 18, 2001 (Public Law 107-89), the Congress has designated September 11 of each year as "Patriot Day." 
NOW, THEREFORE, I, DONALD J. TRUMP, President of the United States of America, do hereby proclaim September 11, 2017, as Patriot Day.  I call upon all departments, agencies, and instrumentalities of the United States to display the flag of the United States at half-staff on Patriot Day in honor of the individuals who lost their lives on September 11, 2001.  I invite the Governors of the United States and its territories and interested organizations and individuals to join in this observance.  I call upon the people of the United States to participate in community service in honor of those our Nation lost, to observe this day with appropriate ceremonies and activities, including remembrance services, and to observe a moment of silence beginning at 8:46 a.m. Eastern Daylight Time to honor the innocent victims who perished as a result of the terrorist attacks of September 11, 2001.
IN WITNESS WHEREOF, I have hereunto set my hand this eighth day of September, in the year of our Lord two thousand seventeen, and of the Independence of the United States of America the two hundred and forty-second.


Baker Market Update: Sept. 11, 2017

Last week, the fortunes of credit markets were heavily influenced by a hurricane, a missile,  and  tawdry  political  machinations. This  week, credit  market  behavior was heavily influenced by a hurricane, a missile, and tawdry political machinations. Is this history repeating itself or just the present in a programming loop? Come to think of it, the economy has been stuck in a loop for lo, these last eight years.  The series of four rate hikes that began at the end of 2015 would support the contention that the economy had broken out of its loop and needed to be reined in. Minneapolis Fed President Neel Kashkari addressed this loopiness with his observation that “…we at the Fed might be making one of two fundamental mistakes…”. That’s right; the “M” word.

Read More in the Baker Market Update

Recovery Plan

IBAT Services is pleased to announce that IBAT Endorsed Service Provider Diebold Nixdorf has activated a recovery plan for service demands in affected areas of Hurricane Harvey to ensure safety and to facilitate a rapid restoration of service. These actions are taken to ensure seamless recovery of all branch operations in the affected areas and are applicable to both direct and indirect Diebold Nixdorf customers.  

Our actions include: 

  • Ensuring full technician availability around locations affected by flooding, so they are available to assess damage and prioritize recovery efforts, once it is safe to do so; 
  • Mobilizing technicians from nearby areas and volunteers from other regions to manage assessment and recovery efforts;
  • Staging parts and equipment and coordinating expedited parts shipments to necessary areas; 
  • Ensuring availability of appropriate personal protective equipment to deal with flooding; and
  • Executing a flexible crisis management strategy that brings together various areas at Diebold Nixdorf to perform a coordinated response.

As we respond to the storm's impact and talk with customers and local employees, our strategy remains flexible to address specific concerns within the area. Diebold Nixdorf remains focused on its disaster recovery efforts, so stay tuned for updates. 

You can contact us at 1-800-DIEBOLD (1-800-343-2653) to get immediate, 24/7 support right now, or reach out to us through our online contact form.

We care about you and your customers, and we want to get you fully operational as soon as possible. Diebold Nixdorf and the staff at IBAT Services will be there as long as it takes to make sure that happens.

For further information please do not hesitate to contact me at 512-783-4776 or mfew@ibat.org

AHPT Resource Sheet

By Melissa Nance, Advantage Health Plans Trust

During times of weather related emergencies we are often overwhelmed with  all the details of starting over. Below are a few reminders that may help you identify where to start.

  • Providers and members can speak to a representative by calling your health plan customer service number on the back of your member ID card. Here are some common numbers:
  • Advantage Health Plans: 800-324-9396
  • Aetna: 800-872-3862
  • BCBS: 800-521-2227
  • Cigna: 800-244-6224
  • Humana: 844-330-7799
  • Scott & White: 800-321-7947
  • UHC: 877-294-1429
  • Lost or damaged member ID Cards can be reordered by contacting your health plan customer service. Often, temporary ID cards can be printed online. 
  • The Affordable Care Act mandates that emergency services are available under all benefit plans. If you need emergency assistance, dial 911 or go to your nearest emergency services provider. 
  • To verify provider network participation, you may contact your health plan customer service. 
  • Lost or damaged prescriptions may be replaced at no cost* to the participant. Contact your health plan customer service or your pharmacy benefit manager for instructions. *This benefit may not be available from all health plans.
  • Maintenance medications typically ordered through a mail order program, may need to have shipment delayed by contacting your mail order pharmacy or your health plan customer service. 
  • Members may consider updating their mail order prescriptions shipping address to an alternate address until more permanent solutions transpire. Contact your mail order pharmacy or your health plan customer service for instructions. 
  • Often times, employer sponsored group life or disability plans include an Employee Assistance Program (EAP). Contact your employer or group life or disability plan customer service for details.  

Our thoughts and prayers are with you now, as always, as you, your employees, your family and friends, and the community begin to move forward from the devastation caused by weather related emergencies.

Hurricane Harvey Relief Fund

Our thoughts and prayers are with the communities affected by the devastation from Hurricane Harvey. While we have been in touch with our members in affected areas, we know it will take time—especially in heavily flooded areas—to properly assess the extent of the damage. IBAT and TBA, along with the Independent Community Bankers of America, American Bankers Association, Texas Department of Banking and Texas Department of Savings and Mortgage Lending, have established a fund to help banking families directly impacted by Hurricane Harvey.

The Hurricane Harvey Relief Fund is set up through the Texas Bankers Foundation. Click here to donate by credit card or check. Please note IBAT and TBA will absorb all credit card processing fees so that 100 percent of every dollar collected goes directly to the relief effort. The Texas Bankers Foundation is a 501(c)(3), and all corporate and personal contributions are tax deductible. Checks must be made payable to the Texas Bankers Foundation in order to be tax deductible, and please denote this is for the Hurricane Harvey Relief Fund. Thank you for your support of fellow bankers as they soon begin the difficult recovery process. Together we will recover and rebuild. God bless Texas community bankers and God bless Texas

Hurricane Harvey Aftermath

A Non-Exclusive Checklist of Post-Harvey Items For Lenders and Servicers to Remember
From Harvey’s Ancestors – Katrina, Rita and Ike

By Tom Alleman, Member, Dykema Cox Smith

The sudden arrival of Hurricane Harvey is an unfortunate reminder to lenders and servicers of the issues that arise after catastrophes. This checklist provides guidance about immediate issues lenders, servicers and special servicers must address now. It is non-exclusive, of course; a lesson from prior disasters is that they have a tendency to generate unforeseen problems.

These problems will arise again and likely in other unexpected parts of the country.

Now is the time to attend to the following critical issues and protect your rights with the assistance of experienced professionals. Even if you escaped Harvey (or Katrina, or Rita or Ike), you cannot relax.  Hurricane season doesn’t “end” until November and the next storm may strike in your area — and it is time to start preparing for fallout with experienced professionals. 

1. Do you have copies of the policies, binders or other documents providing effective proof of coverage?

  • Locate and review them with experienced professionals immediately!
  • Was the property on a binder at the time of loss? It is important to ensure that you know what coverage terms are applicable.

2. FEMA flood policies (if the borrower has one)

  • It is possible, even probable, that FEMA will extend the deadline for reporting Harvey claims as it has for other hurricanes and river flooding incidents. But until that extension is granted, there is a hard 60-day deadline from the date of loss in which the insured may report FEMA flood insurance claims. Failure to comply means a loss of coverage.
  • FEMA flood policies contain requirements as to what must be included in the insured’s proof of loss. Strict compliance is an absolute must. The standard FEMA policy requires the insured to provide current contact information on all mortgagees/lienholders. Has your borrower done so?
  • Are you listed as a loss payee? A lender loss payee? What do your loan documents say about who makes/controls the claim?

3. Business interruption policies

  • Business interruption policies are highly manuscripted forms that vary widely from insurance company to insurance company. Do you have a copy of the relevant policy?
  • Who is responsible for making the claim? Have they done so? Have the policy provisions been complied with? This is important because most business interruption coverage includes a “waiting period” before coverage/benefits begin.
  • Does the policy require the insured property itself to have suffered physical damage before there is coverage? Many basic forms of business interruption coverage provide no coverage unless this is the case.
  • Are you listed as a loss payee? Lender loss payee? What do your loan documents say about who makes/controls the claim?
  • How are damages being computed for covered losses? Whose responsibility is it to do this? Are the documents available to make/support the claim?

4. Property/builders’ risk policies

  • Do you have a copy of the policy? Are you listed as a loss payee? Lender loss payee? What do your loan documents say about who makes/controls the claim?
  • Who is responsible for making the claim? Have they done so? Have the policy provisions been complied with?
  • Co-insurance: is the valuation adequate to avoid a co-insurance or underinsurance penalty?
  • How will losses be valued? Are there special issues involved? What support does the insured have for its claims?
  • Does your borrower’s policy have a Named Storm Deductible or other percentage deductible? Does it apply? How is it computed? What is the borrower doing to comply?
  • Does the business interruption policy require direct physical damage to the structure? Are there delays or waiting periods for business interruption coverages? Is there contingent business interruption or civil authority coverage?

5. Valuation

  • a. What is the borrower doing to collect/preserve evidence to prove the amount and cause of loss? If the policy does not provide coverage for flooding, there may be coverage only for wind-driven water or wind. Proving what happened to a particular structure requires prompt action.

6. What ifs — real situations from prior disasters

  • What if the property is at some point in foreclosure proceedings? Who handles the claim? What must the lender/servicer/special servicer do?
  • What if the borrower is unable or unwilling to proceed with a claim? What does the lender/servicer/special servicer do?
  • What if there are multiple properties each with a different lender on a single policy?
  • What if the insurer denies coverage and the borrower is unwilling or unable to proceed with a claim?

All of these questions can be addressed, but experience teaches that now, rather than later, is the time to do so. Starting today, begin triage of possible issues, reach out to affected borrowers and consult with and assemble experienced professionals to assist in earlier and easier resolutions.