Tag Archives: Consumer Financial Protection Bureau

cybercrime

Protect mortgage credit information from cyber threats

Hardly a day goes by without the revelation of another information security breach leaving thousands of consumers’ private information exposed to hackers and for sale to the highest bidders. Major retailers, financial institutions and educational institutions continue to be favorite targets of cyber criminals. As was seen in the recent breech with mega-retailer Target Corporation, hackers have found it easier to focus on less secure business partners to gain access. In the Target case, the retailer was compromised through a third-party vendor with access to Target systems. It’s also a scary fact that this may be the case with your financial institution as well.

According to the Office of the Comptroller of the Currency (OCC), a division of the U.S. Treasury, the risk of cyber threats is growing and electronic bank fraud is increasing. The OCC reports cyber threats are growing in sophistication and frequency, and require heightened awareness and appropriate resources to identify and mitigate the associated risks. “The costs and resources needed to manage the risks continue to increase; at the same time, the tools and knowledge to conduct the attacks are more readily available. Additionally, institutions’ early adoption of new technology and their growing reliance on third-party providers may expand the overall system’s vulnerabilities to these attacks,” the OCC reports.

What can homebuyers do?

In this environment of increasing risk, what can you as a homebuyer do when purchasing a new home or refinancing to ensure that your private information is well protected? Is all the information the bank or lender asked for protected? What about all of the other people involved in the transaction? After all, loan documents contain every possible piece of sensitive information about you and your spouse. Just imagine if that data fell into the wrong hands.

You can take some comfort that new, recently-adopted federal rules with large penalties for non-compliance and industry best practices are intended to help protect you. However, you would be well-advised to ask whether your providers – lenders, banking partners, etc. – are complaint with these rules because not all are and you need to protect yourself and your data as best as possible.

In 2010, the Dodd–Frank Wall Street Reform and Consumer Protection Act created the Consumer Financial Protection Bureau (CFPB) and provided authority for the CFPB to supervise financial institutions for compliance with federal consumer financial laws, including existing laws intended to protect your non-public personal information or NPI. Providing real estate settlement services to one of these regulated financial institutions (like your bank or mortgage lender) is deemed to be providing financial products or services under the Act. As a result, the CFPB can bring enforcement actions directly against a real estate settlement services provider (such as your title insurance agent) for a violation of a consumer financial protection law – if they fail to protect your documents and security information.

Title Companies and ‘Best Practices’

In response, the American Land Title Association (ALTA) created a detailed program of industry “best practices” intended to put settlement service providers (title agencies and escrow firms) in compliance with the CFPB regulations. On July 19, 2013, ALTA published its version 2.0 of “Title Insurance and Settlement Company Best Practices,” setting forth industry guidelines for business procedures and service levels. The best practices address seven main areas ranging from internal controls regarding trust accounts to protecting customers’ personal information and responding to complaints. However, Best Practice No. 3 deals specifically with protecting Non-Public Personal Information or NPI. In addition, Best Practice No. 3 includes requirements and procedures for physical security of computers, “clean desk” policies, risk management, disaster recovery, information security practices and methods for the encryption of private data.

For instance, loan and closing documents emailed to you containing NPI must be encrypted. Collectively, these practices are a means for settlement service providers to address the need for increased lender oversight and to ensure necessary safeguards to protect consumers. The implementation of the Best Practices is voluntary but an important means to ensure reduction of risk in the overall financial system and to protect against identity fraud. Banks, including large national institutions like Wells Fargo, have embraced the Best Practices Program.

Under the ALTA Best Practice Program, settlement service providers perform a detailed review and assessment of their operations — typically using an experienced third-party expert. The resulting “Best Practice Certification Package” is then used to certify to consumers, mortgage originators and mortgage servicers that the assessment found the firm to be in compliance with the ALTA Best Practices in all material respects and represent that the firm will remain in compliance for the next two years.

So back to the original question – what can you do to ensure that your mortgage loan data is kept safe and secure? One thing you can do is to ask your title agency about its participation in the ALTA Best Practice program and whether it has undergone a Best Practices Review. If not, you may want to ask for another title agency.

Chuck Matthews is a 30-year veteran of the banking and real estate industries. He is the Chairman and CEO of WGM Associates LLC, a Scottsdale-based information technology and security consultancy.

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Mortgage lenders prepare for impact of Dodd-Frank Act

Stan Feffer is president and chief operating officer of Grand Canyon Title Agency, Inc. – a Phoenix-based firm with 18 offices located throughout Maricopa County. When Feffer is not leading Grand Canyon’s 120 employees, he prefers to navigate the cool waters off the coast of San Diego on his surf board. Patiently waiting for the right set of waves and watching the horizon closely helps him choose the right wave to commit his efforts. Diligence in picking the right waves makes for a good day surfing.

While at work, Feffer is focused on the pending impact of the Dodd-Frank Act on the mortgage lending community and in particular the title industry. Prepared with more than 30 years’ experience in the real estate and title and escrow industry working both for a large, public firm and a local title agency, Feffer has charted a course for Grand Canyon to successfully navigate these uncertain waters and in doing so, established the organization as a leader nationally with its underwriters. By embracing industry reform, Grand Canyon is better prepared to deal with lenders’ compliance needs and to protect consumers’ privacy needs.

In 2010, the Dodd–Frank Wall Street Reform and Consumer Protection Act created the Consumer Financial Protection Bureau (CFPB) and provided authority for the CFPB to supervise financial institutions for compliance with federal consumer financial laws. Providing real estate settlement services to one of these regulated financial institutions (like your bank or mortgage lender) is deemed to be providing financial products or services under the act. As a result, the CFPB can bring enforcement actions directly against a real estate settlement services provider (such as your title insurance agent) for a violation of a consumer financial protection law or against the financial institution making the loan.

With the increased risk, banks are giving a hard look at all of their service providers. Complicating the matter, the CFPB has been faulted for its lack of transparency and guidance leaving many uncertain as to how to comply with the new requirements.

As a result, the Wall Street Journal reports that the CFPB’s actions are stirring concerns about large scale consolidation of closing services providers by the banks and the potential that some title companies – especially smaller firms that serve isolated and rural communities – will be forced out of business.

“When the Bureau (CFPB) operates in a transparent … and open … manner, the results are generally positive … However, when the bureau makes unilateral decisions, rolls out initiatives, rules or processes in a more closed deliberation, the results are far more likely to be problematic,” American Land Title Association (ALTA) President Rob Chapman said in testimony on May 21 before the Financial Institutions and Consumer Credit subcommittee of the House Committee on Financial Services.

To strategically position itself and avoid this existential threat, Grand Canyon Title’s Feffer aggressively moved to establish the agency as a leader in “compliance” with the emerging rules to present an easy choice for lenders to work with. In late 2012, Feffer began steering the organization to adopt a series of industry “best practices” put forth by the ALTA intended to put settlement service providers (title agencies and escrow firms) in compliance with the CFPB regulations.

On July 19, 2013, when ALTA published its version 2.0 of “Title Insurance and Settlement Company Best Practices,” setting forth industry guidelines for business procedures and service levels, Feffer engaged WGM Associates LLC, a Scottsdale-based information technology and security consultancy with extensive banking and real estate experience to lead the effort. The ALTA best practices address seven main areas ranging from internal controls regarding trust accounts to protecting customers’ personal information and responding to complaints. Best Practice No. 3 deals specifically with protecting consumers Non-Public Personal Information or NPI. Best Practice No. 3 includes requirements and procedures for physical security of computers, “clean desk” policies, risk management, disaster recovery, information security practices and methods for the encryption of private data.

For instance, loan and closing documents emailed to you containing NPI must be encrypted. Collectively, these practices are a means for settlement service providers to address the need for increased lender oversight and to ensure necessary safeguards to protect consumers. According to Feffer, WGM’s direct industry knowledge and extensive information security experience made the process clear and kept the mission on track.

The implementation of the Best Practices is voluntary, but an important means to ensure reduction of risk in the overall financial system and to protect against identity fraud. Many settlement service providers have adopted a ‘wait-and ’see’ attitude. However, large banks such as Wells Fargo have embraced the ALTA Best Practices Program validating Feffer’s strategy. In their newsletter to Settlement Agents dated March 6, 2014, Wells Fargo says that ALTA’s Best Practices “… are designed to help illustrate to consumers and clients the industry’s professionalism and best practices to help ensure a positive and compliant real estate settlement experience. Wells Fargo supports ALTA’s Best Practices, and considers them to be guidelines for sound business practices that should ideally already be in place for businesses providing title and closing services for our customers.”

Under the ALTA Best Practice Program, settlement service providers perform a detailed review and assessment of their operations – typically using an experienced third-party expert like WGM. The resulting Best Practice Certification Package is then used to certify to consumers, mortgage originators and mortgage servicers that the assessment found the firm to be in compliance with the ALTA Best Practices in all material respects and represent the firm will remain in material compliance for the next two years.

In January of 2014, Grand Canyon successfully completed its first compliance review. Feffer proudly presented the document to his business partners as evidence of their continued leadership in the Phoenix marketplace. Recognizing the effort is a continuing commitment and ongoing journey, Feffer conducts regular training and educational seminars for Grand Canyon employees with WGM’s help. Now Feffer confidently presents copies of the Certification Package to lenders when they meet, assuring them of their continued compliance effort. Feffer’s hope is that mortgage lenders and their peers will recognize Grand Canyon’s efforts and see the company as a logical choice to provide closing services and to help mitigate risk in this changing environment.