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Data breaches threaten mortgage industry, experts say

Massive data breaches at Sony, Target and eBay, among other major companies, garnered global headlines and highlighted the worldwide threat posed by cybercrime.

Mortgage companies, which maintain huge digital stores of financial and personal information, also face an “existential threat” from malicious hackers and online criminals who aim to rob companies, steal identities or simply wreak mayhem, analysts say. 

“In my view, there is only one thing that could absolutely destroy a company overnight, and that is [a lack of] cybersecurity,” said Fannie Mae Chief Information Security Officer Anthony Johnson during a panel discussion at the Mortgage Bankers Association annual conference in San Diego last week.

“If [mortgage companies] don’t build the processes and don’t have fundamental backups and prepare for it, then you are really at the mercy of a technical group who wants to destroy your company, and they absolutely can.”

Roger Cressey, an NBC counter-terrorism analyst and former presidential adviser, said during a speech at the conference, “You can’t stay ahead of the threat, that is lesson number one. You will be breached.”

Jeff Bernstein, managing director of T&M Protection Resources headquartered in New York City, said statements that treat cybercrime as an "existential threat" to individual companies and the financial sector as a whole are not mere hyperbole meant to stoke fear. Several mortgage companies have had loan files breached, he said, even if nonbank mortgage companies haven’t to date been the preferred target of hackers.  

In a 2013 case involving W.J Bradley Mortgage Capital, for instance, several former loan officers shared customer information with another company not affiliated with W.J. Bradley, the company reported. In 2012, DHI Mortgage notified customers that hackers compromised the company’s loan-prequalification system and accessed files.

More recently, HSBC Finance notified New Hampshire's attorney general in April that it had discovered it was inadvertently publishing customers' personal information, including names and social security numbers, online. The company didn’t reveal how the breach occurred, according to newspaper reports.  

A growing problem 

Bernstein said despite these breaches, mortgage providers haven’t been targeted as much as the large banks and other sectors.

“I think that is going to change,” Bernstein said. “Nobody else collects that information, not to that extent. Arguably, the mortgage bankers and the mortgage lenders are a more compelling target than any other sector out there because of the private data.”

Matthew Merlone, director of product and fraud strategy at Interthinx, recently told Scotsman Guide News that cybercriminals have more commonly worked scams around home-equity loans than first mortgages. Merlone said, however, he was concerned that more cases of data theft and fraud would originate in cyberspace.

 “They are selling that information on a third market, or a third-party market on what is called the dark Web,” Merlone said. “We are going to see more of these things. We are going to see account takeovers where payments are misdirected for first mortgages. We are starting to see a little bit of that now.”

Merlone also said the mortgage market generally should pay more attention to the threat.

“That is one area that I would like to see a focus group come together and try and tackle cyberfraud for first mortgages,” Merlone said. “Because of this focus on compliance, I think as an industry we are kind of taking our eye off the ball for the fraud risks that are out there.” 


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