Advocate Insights

SummaryExpanding on the analysis of insurance approval timelines in Part 1, Part 2 unveils the crucial role of insurance brokers. Advocate’s comprehensive analysis of review times across our 20,000+ reviews reveal striking variations in approval timelines among different broker categories. What does this mean for lenders? Identifying the insurance broker for your borrower early and seeking Advocate's (or your existing consultant's) opinion on the broker's responsiveness and professionalism are the fastest way to determine if there will be issues within insurance.Advocate’s Data-Driven InsightsDiving into Advocate’s extensive dataset, we identify substantial disparities in approval timelines among various insurance broker categories (see Methodology section). A low significance level, represented by a p-value, suggests these variances are not merely random chance, indicating the impact of broker categories on insurance compliance approval timelines.This underscores the importance of str

In long-standing industries and markets, crises are often cyclical, and inevitable. While the players on this stage may change, the recurring nature of challenges remains constant. The insurance sector, currently facing challenges, can derive insights from historical crises, particularly the 1980s casualty crisis and financial crisis of 2008. This article aims to draw parallels between past and present challenges, guiding lenders through the intricacies of today’s complex landscape. Today, the insurance industry is facing a potential crisis, underscored by the climate change driven natural catastrophes (NATCATs). Populous states are lacking coverage options and turning to insurers of last resort. In this tumultuous landscape, market participants, particularly lenders, stand at a crossroads, prompting a collective call to action. The 1980s Casualty Crisis: Drivers and Dilemmas In the 1980s, the insurance industry faced a significant challenge known as the casualty crisis, primarily affe

Summary This two-part analysis delves into the insurance compliance process for mortgage lenders. Part 1 explores the correlation between insurance compliance turnaround time and five determinants commonly linked to extended approval timelines. In Part 2, our focus shifts to investigating the impact of insurance brokers in shaping these timelines.   Insights from Advocate’s Reviews At Advocate, our cutting-edge technology and expert insurance review team consistently outperform industry standards in expediting insurance compliance processes – a crucial step in facilitating loan closings. Despite these advancements, variations persist in compliance and resolution turnaround times across different deals.  The insights presented in this analysis are derived from our insurance reviews conducted over the past 12 months. The dataset encompasses all approved loans across various loan programs and lenders.  The key metric under evaluation is the turnaround time on insurance compliance, represe

None of us expected Hilary to show up as a storm, certainly not in California. Who’d have thought that California of all places would get hammered by a tropical storm so bad that a discussion would be needed on the state of property insurance going forward? In reality, however, a lot of experts in the industry have been ringing alarm bells for a good while. While it’s true that their fears didn't stem from anticipating storms to hit the state, their reasons were valid and remain so today.  What are those reasons and is Storm Hilary going to make things worse? If so, then to what extent? Was there a time when Florida was in the same state? Can we learn from Florida to manage California’s impending crisis better? These questions, and many more, are merited and demand intellectual pondering followed by swift, actionable measures. Today, we will discuss what the current state of California’s insurance market is and what lies ahead. Storm Hilary is unprecedented, but destructive, nonetheles

The integration of Artificial Intelligence (AI), particularly Large Language Models (LLMs) like ChatGPT, stands as a transformative breakthrough across industries. This advancement promises efficiency, precision, and cost-effectiveness.  In the insurance sector, these strides carry the potential to revolutionize crucial processes such as writing policy waivers for compliance challenges. This significance is amplified during agency reviews, where regulatory scrutiny is rigorous. Creating waivers tailored to meet the stringent requirements set forth by Fannie Mae, Freddie Mac, and HUD is imperative for ensuring compliance. AI’s ability to analyze vast amounts of data and generate precise, context-aware language makes it a valuable tool in this process. As insurance companies navigate the complexities of agency reviews, the effective use of AI in writing waivers can contribute to a streamlined and compliant insurance process.   The Potential of LLMs in Insurance LLMs are powerful tools fo

As we approach 2024, the multifamily and commercial real estate (CRE) sectors find themselves at a critical juncture. These sectors, integral to the American economy, are influenced by a myriad of factors, including economic conditions, Federal Reserve policies, and evolving market dynamics. In this article, we investigate the current state and outlook of multifamily and CRE, highlighting their significant impact on lenders navigating short and medium-term expectations from the Federal Reserve. As experts on Wall Street analyze these trends, it's crucial for stakeholders in the real estate and financial sectors to stay informed and adapt to the changing landscape.  Economic and Market Overview The multifamily and CRE sectors are heavily influenced by broader economic indicators. As of the midyear review of 2023, the CRE market, specifically, has been undergoing notable changes. Investment volumes in this sector are expected to decrease by 37% year-over-year in 2023, but are anticipated

As we evaluate the multifamily market's trajectory going towards the end of 2023, we face a landscape of nuanced economic signals and shifting market drivers. Despite its resilience, multifamily real estate is not immune to broader economic forces. For lenders in this space, understanding these dynamics is critical to navigating the waters ahead.  Current State of the Multifamily Market  The multifamily lending landscape of 2023 is marked by cautious optimism and calculated navigation through economic indicators. Fannie Mae estimates multifamily originations to be marginally higher in 2022, ranging from $460 billion, followed by a projected decrease to approximately $440 billion in 2023. This expected downturn aligns with a broader forecast of a market softening, potentially intensified by an economic recession. Freddie Mac's observations corroborate this sentiment, noting that the labor market's robust performance—averaging nearly 280,000 new jobs per month through the first half of 2

In the dynamic landscape of commercial real estate, insuring residential-type properties like multifamily housing and apartment complexes can be challenging. For property owners navigating these complexities, the California FAIR Plan stands as an essential safety net, offering insurance when traditional coverage options fall short. This insurer of last resort should not be an afterthought but a strategic priority. Let’s delve into how California FAIR Plan can protect your commercial real estate investments.   Eligibility Requirements  Commercial properties qualify for the California FAIR Plan when traditional insurance options are not available. Here are the key points regarding eligibility and the type of commercial properties covered under the California FAIR Plan: Eligibility Determination The FAIR Plan is considered as the insurer of last resort when a broker's diligent search in the traditional market fails, as defined by California Insurance Code section 10090 (d).  High-Risk Pro

Climate change, a pressing global challenge, has caused severe damage to Earth's ecosystem, but its ramifications extend well beyond the natural world. The US real estate market finds itself in imminent jeopardy, as experts predict that the relentless rise in sea levels alone could imperil over a trillion dollars' worth of properties. In addition to this staggering figure, climate change has unleashed a range of adverse effects, from record-breaking snowfall in California to heightened flooding risks, and more frequent hurricanes in Florida. It’s important to understand that such changes impact the bottom lines of borrowers in many ways, including limiting their ability to meet operating costs, insurance premiums, and loan payments.  The regulatory environment concerning real estate loans, largely under the purview of the Department of Housing and Urban Development (HUD), has witnessed some changes that now dictate the practices of real estate lenders. Additionally, these changes have

For commercial property investors in multi-family complexes, insurance isn't merely a bureaucratic requirement—it's the bedrock of financial stability, offering protection against potential damages and economic setbacks. Navigating insurance in Florida requires a structured approach due to local challenges like limited coverage options from weather-related damages and fraudulent litigation. The Citizens Insurance Program, a non-profit insurer, is available to Floridian property owners who can't secure coverage in the private market. Here's a guide to help borrowers understand and navigate the various facets of this program.  1. Eligibility Criteria Under Florida Law  Before diving into the intricacies, ascertain your eligibility under Florida law. Citizens can issue a new policy only if the property cannot acquire coverage from a Florida-authorized insurance company or is subject to premiums from Florida-authorized insurance companies that exceed 20% of the premiums for comparable cove

In Part Two of our webinar series, our team continues to unravel the intricate challenges stemming from the ever-changing landscapes of high-risk states, with a particular focus on Florida and California. Building on the insights from Part One, our CEO & Co-Founder, Ashwin Agarwal, VP and industry expert, Kristine Economus, are once again joined by the distinguished Commercial Lines Property & Casualty Agent from Insurance Office of America (IOA) in Boca Raton, FL, David Zemlin.View the full Webinar recording below 👇  Here's a brief recap of the key takeaways: National Market Trends:The insurance market has been experiencing a general hardening trend nationwide, with increasing challenges in traditional areas. The catalyst for significant disruptions in the market was fraud, compounded by the impact of Hurricane Ian, which led to companies leaving or going bankrupt.Legislative Measures:Legislative measures are being explored to address the issues plaguing the insurance market

Amidst the backdrop of higher interest rates, unforgiving market conditions, unprecedented natural disasters, and delayed legislative changes, one question lingers: Can these challenges truly jeopardize the future of the insurance industry? Interestingly, the industry could very well face extinction in the face of not being able to recognize, protect, nurture, and grow its most valuable resource, its workforce. The insurance industry has battled that need for sufficient and competent talent throughout time and is yet again facing similar circumstances imposed by trends such as the "great resignation," a widespread phenomenon where large numbers of employees are leaving their jobs. Recent demographics indicate that the average age of an insurance professional in the United States (US) is 59. However, it is preeminent to mention that these demographics also highlight that more than 65% of the workforce is above the age of 40.  A large majority of these professionals are set to retire in

No system can promise a perfect success rate over an extended period of time, but not striving towards it is something that industries such as insurance compliance simply cannot afford. While a 98% success rate may seem great in some contexts, like exam grades or how full a glass of wine is, it falls short in critical areas such as reviewing insurance policy documents. In industries where precision is paramount, nothing less than a 100% success rate will suffice. Artificial Intelligence is being paraded as the most significant disruptor since the dotcom boom and with equal reverence by being described as having the ability to impact almost all aspects of commerce and society. McKinsey, in its 2021 report, described the relationship between AI and insurance by stating that the former could “transform every aspect of the (insurance) industry”.  Surely, a technology with such promise must be able to demonstrate its effectiveness. In several cases, AI, through its several, uniquely powerfu

In our recent webinar, our CEO & Co-Founder Ashwin Agarwal, joined by our VP and Insurance Expert Kristine Economus, unveiled Advocate's cutting-edge Insurance Compliance software and services, highlighting the crucial fusion of insurance expertise with technology-driven solutions.As the insurance landscape becomes increasingly complex, with rising premiums, expanding agency rules, and a scarcity of skilled talent, automation emerges as the pivotal path forward. Advocate's platform offers a comprehensive solution, boasting a transparent dashboard, real-time workflow updates, and intelligent decisioning automation that factors in specific variables for each insurance review.Our platform not only simplifies compliance assessments and manual workflows but also fosters efficient communication between reviewers, brokers and lenders. Additionally, the system provides invaluable insights for both senior insurance professionals and junior team members, offering a centralized hub for insura

In the world of lending, the frustration of encountering last-minute hurdles in an otherwise promising deal is all too familiar. Underwriting and credit teams work diligently to bring opportunities to the table, only to find themselves stonewalled by insurance compliance issues.At Advocate, we empathize with the challenges you face when a deal is on the line, and you're left in a difficult situation you were not fully prepared for. That's why we're excited to introduce our Red Flag report. Our objective is for this resource to empower your teams to proactively identify potential complications tied to assets located in challenging, highly regulated or natural disaster prone areas. With the Red Flag report, you'll have the foresight to address these issues in advance, ensuring you never find yourself trapped by insurance roadblocks.    Ask the Community any question here View our upcoming Webinars and Events

On Thursday September 14th, our CEO & Co-Founder Ashwin Agarwal, VP and industry expert Kristine Economus were accompanied by David Zemlin, a distinguished Commercial Lines Property & Casualty Agent from Insurance Office of America (IOA) in Boca Raton, FL. Together they discussed the intricate challenges arising from the evolving landscapes of high-risk states, particularly Florida and California. View the full Webinar recording below 👇Here are the main points that were discussed over the session: Market Background:The hard market in Florida insurance began in 2017, following several hurricane-free years. In 2022, Hurricane Ian and the Champlain Tower Collapse in Surfside led to an overreaction in the insurance market. Litigation and fraud emerged as primary drivers of the current challenges, with five carriers going out of business due to lawsuits. Rising interest rates have diverted investment away from insurance, posing a permanent challenge.Homeowners' Insurance Issues:Hom

 What do lemons and used cars get you? For, Joseph E. Stiglitz and George A. Akerlof, a Nobel prize in economics. But, with Advocate, much better pricing on insurance policies for borrowers, which means more business for lenders.  Property insurance is not getting cheaper. In fact, there has been a lot of talk around big insurance companies trying their best to increase premiums in response to soaring inflation. And when they aren’t able to do that, mostly due to state regulation, they are reconsidering their business in entire states. Where does that leave lenders? Sitting on the curbside watching the sun go down on new and old business waiting for a Hail Mary. Sounds gloomy, doesn’t it?  It certainly is gloomy if you are on the phone with multiple borrowers every day listening to them talk about how finding cheaper options, if at all, when insuring their next property or renewing an existing one is getting difficult by the day. Before we talk about what you could do instead, let’s ex

 Our latest webinar offered fresh insights into the differences between waiver approvals from Fannie Mae and Freddie Mac given the varied preference and requirements of each agency. Key points included Fannie’s greater interest in waivers that are tied to net worth and liquidity due to shared risk, Freddie’s preferences for robust loss runs, and differing attitudes towards Deductible Indemnity Agreements. Kristine introduced a comprehensive list of questions that waiver writers must ask borrowers to be able to produce a comprehensive enough waiver for either Freddie or Fannie.   Kristine also discussed writing waivers specific to Flood prone locations such as Florida given that these are considered to be a tricky bunch by the industry. Adding to the importance of comprehensiveness in waivers, Kristine included a second list of questions that insurance consultants and waiver writers must ask brokers and agents to become equipped with all the necessary information to produce an approval-