It did not take long after the Silicon Valley Bank failure for politicians in Washington to rush to the next available microphone and lament the “loosening of bank regulations”. Instinctively the finger pointing began, and in many quarters ended up in the direction of the prior administration’s policy to generally roll back stringent business regulations and allow free market decisions to govern various industries. Chief among the complainants (no pun intended) was Sen Elizabeth Warren, who emerged out of the 2008 crisis as an architect and advocate for the Wall Street Reform Act and the creation of the vaunted Consumer Financial Protection Bureau ( CFPB), which she briefly directed. Just yesterday in DC’s The Hill publication, Sen Warren was reported as blaming the the collapse of Silicon Valley Bank on Republicans in Congress, which in 2018 helped pass a law to ease bank regulations put in place following the 2008 financial crisis. “No one should be mistaken about what unfolded over the past few days in the U.S. banking system: These recent bank failures are the direct result of leaders in Washington weakening the financial rules,” Warren is quoted as saying. According to The Hill piece, Warren, who voted against the 2018 bank deregulation bill, said that the crises would have been avoided if the banks were required to hold more liquid assets because the bill exempted banks with less than $250 billion in assets from rigorous Fed stress tests. Warren and other Democrats say the old rules could have caught the issues at SVB sooner. Given that politicians generally “never let a crisis go to waste,” many now suspect that the banking industry is about to be slammed with heightened regulatory scrutiny, tighter operational rules, more audits and exams, and larger and very public fines, penalties and consent orders. What does this mean for independent mortgage bankers (IMBs)? It means that they have to get back to the compliance mindset they were frightened into adopting between 2008 and 2018, and before the bottoming out of interest rates led everyone to believe that easy money was here to stay and that self-regulation meant hiring more loan officers. Keep those risk management officers and compliance directors close by folks, we are all in for a bumpy ride on the regulatory
The mortgage lending industry has faced severe financial threats and incurred significant financial harm due to data security and data privacy breaches. These breaches have resulted in wire fraud, data theft and identity theft in the past few years. The industry has previously come together and incorporated tools and policies to combat the issue, however the government’s stay at home orders are now taking many into uncharted waters and raising risk concerns.
Those professionals now sheltered in place at home, who include mortgage industry processors, underwriters and closers, as well as settlement professionals, including attorneys, title agents and escrow officers, need to adopt measures to protect banks and consumers from harm.
Just as they would in their offices, these important workers who have daily access to consumer personal and financial data, and are transmitting information, files and even wire instructions via email, must maintain strict policies to avoid fraud. This means to only use company email addresses when conducting business, turning off home computers when not working, destroying hard copies of files instead of simply throwing them in the trash (via shredder or simply tearing them up), avoiding talk about consumer personal information within earshot of family or friends who may be about, and not leaving laptops and hard files in their vehicles when traveling or simply sitting in the driveway.
In addition to these simply personal practices, sheltered at home workers must be even more diligent regarding wire fraud. Whenever there is a breakdown or interruption in a well conceived and executed workflow, there is the possibility for exploitation by criminals. With so many conducting work at home it is only natural to let one’s guard down a bit, to skip strict compliance and operational policy steps, and even perhaps in an early morning or late evening state of tiredness, miss a phishing communication that can open the door to financial disaster.
As we all learn to adjust to the new normal when it comes to the mortgage industry, let us not forget to focus on the potential harm that data privacy and security breaches can cause to everyone.