Do you have a business continuity plan?

by Kimberly Greene06 Feb 2019

For mid- and large-sized lenders, compliance requires that they have a disaster recovery plan, also known as a business continuity plan, in the event of a disruption to business, such as a natural disaster.

A year ago, Fannie Mae released updates to their guidelines, and one of those updates outlined clarifications on the business continuity and disaster recovery required for anyone doing business with the GSE. Business continuity is defined as “any plan focused on how to move forward in the case of a disaster or a criminal act that disrupts operations.” The plans can include how to access and protect data, move and recover operations, and alternate communication plans.

Technology can be a huge help when it comes to helping mortgage servicers and originators alike prepare for such events.

“Cloud-based technology helps a lot. If somebody’s data is all sitting in the office and the office is flooded, the data just went out the door. So we believe that cloud-based technologies and web-based technologies play a big role in disaster recovery solutions, said Gagan Sharma, president and CEO of BSI Financial Services. “For larger organizations, having distributed operations infrastructure helps; if the operations are spread across multiple geographies, that helps, but that may or may not be possible for smaller organizations.”

Where the cloud is undoubtedly helpful is for day-of and immediately after an incident like a natural disaster, where offices are inoperable and people need to be able to access data and information reliably and quickly. But a business continuity plan could also be relevant from a reputational standpoint if someone were to say, commandeer a company’s social media channels or a rogue employee were to share information of some kind with media outlets, said Cameron Watts, principal of C. Watts Mortgage Consulting Services.

Ultimately, these plans exist to keep doing business as usual as possible in the face of a disruption.

The ability to work remotely is crucial, for small- to mid-sized companies, since many of them only have one office, or maybe one office per region. That doesn’t mean access to emails and contact numbers on a phone. It means accessing client data remotely through a secure portal as well, and not accessing borrower information on a home computer.

When coming up with a business continuity plan, keep in mind that what’s necessary for a lender in the Midwest won’t necessarily be the same things that a broker in the Southeast might want to safeguard against.

When developing a plan, Gagan says, businesses need to think about how their consumers will be impacted in the following ways:

  1. While the disaster’s ongoing, or shortly thereafter, companies need to make even more of an effort to establish contact. Whether that is having call centers open and available, or making sure local lines are rerouted to other locations, nobody wants to be in a situation where there’s a disaster and then they have to wait for 15 minutes on the phone to speak to someone.
  2. Having relevant information available online and make it easy to find so people can do what is necessary via the web. Being able to make payments or learning how to handle a short-term hardship or even reading disaster-related FAQs can be a big help.
  3. Be mobile. Most consumers have a smartphone, and even if they’re evacuating, they’re likely to take their smartphone with them. With a mobile app, consumers can do everything on that mobile app that they can do on their desktop, and so as long as their phone is charged, it is able to address the needs of a “vast majority of people,” Gagan said.

Gagan also pointed out that in the event of a relocation, most consumers have a day or two before they need to contact their mortgage company. For a lender, however, being dark for a day or two could be a disaster unto itself, which is why having a plan is essential. Having a plan isn’t even enough. It also needs to be clearly outlined, Watts said. Otherwise, it could be a nightmare scenario where employees or clients don’t even know what’s happened.

The biggest misstep Watts sees is from companies trying to go too big from the start.

“When something happens, you’ve got this 300 page document that no one’s gone through because it’s too much. So I think having it easy to understand, and be concise and clear I think is huge.”

The most important component, he said, is testing. He often recommends having a concise plan and then testing it to make sure it’s adequate. Watts quotes Mike Tyson: ‘Everyone has a plan until they get punched in the mouth.’

“I think that’s a pretty good analogy, that I think you can plan as much as you can until something does happen.”

Mortgage companies can’t plan for everything, but they can plan for a handful of scenarios and ensure that their plans can be followed smoothly.

“If you have a plan and it’s never tested then you don’t know if people know what they’re doing. So I think having an annual testing would be great. It doesn’t have to be that you close down office for the day, but let’s say you say, ‘okay, for these employees, let’s just make believe that there was a fire . . . and let’s just do it for the morning. Let’s just see if we’re able to continue operations.’”