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Congress must act in wake of massive data breach


By Jeff Lazerson


What I think: Mortgage borrowers are more of a sitting duck than you could ever have imagined.

A recently discovered security lapse exposed more than a decade’s worth of highly sensitive mortgage data from the likes of CitiFinancial, HSBC Life Insurance, Wells Fargo, CapitalOne and the U.S. Department of Housing and Urban Development.

Zack Whittaker, security editor of TechCrunch, recently broke the story, explaining how millions of documents were mishandled and exposed. In a follow story, TechCrunch reported a second trove of data containing original documents also was exposed.

Nobody has a more complete record of your net worth and your financial habits than your mortgage loan officer. Your driver’s license, detailed bank statements, tax statements, mortgage contracts and much more (an average loan file contains 800 pages) get imaged into machine-readable files called “optical character recognition,” or OCR.

How many ways can your mortgage file be passed around and exposed?

Roughly 14 ways, according to Bill Lehman, director of mortgage strategy practice at CC Pace.

Among them are loan origination (which includes laptop, tablet and paper files as well as online portals), loan processing software, underwriting software, credit bureaus, mortgage insurance companies, data storage companies, due diligence companies, loan servicers, sub-servicers, ratings agencies, government agencies such as Fannie, Freddie and Ginnie Mae and other lenders.

Generally, the original lenders involved in the TechCrunch articles denied responsibility, claiming “that isn’t our data anymore,” Whittaker told me.

So, it’s good luck, Charlie if your data gets exposed. Even if you can decipher from this mortgage maze which parties were involved, it doesn’t solve your problems if your data has been exposed.

“One problem is that the courts are in disarray on whether increased risk of injury even gives standing to sue for data breaches,” said Laguna Niguel attorney W. Michael Hensley.

Hensley noted that Section 1031 of Dodd-Frank gives the Consumer Finance Protection Bureau authority to act against companies not taking adequate security precautions.

“It’s an eye opener for the industry,” said Alok Datta, president of SLK Global America.

When fraudsters possess your sensitive data, they are able to integrate themselves into your life because they possess information you believe to be private.

Borrowers are torn between disclosing information essential for getting the loan approved and protecting their treasure trove of confidential and personal financial data. They are forced to rely on lenders to protect our privacy.

The FBI advises you to be wary of unsolicited calls or emails from people or businesses you work with.

If you suspect a fraud attempt, immediately disconnect communication. Then contact your known business entity using an already known number or address.

Initiate credit freezes or credit locks with the credit bureaus if you believe your information has been compromised.

Security standards are uneven among mortgage industry stakeholders. Congress has to step in to mandate data security standards with severe repercussions for non-compliance.

And Congress needs to empower mortgage borrowers to just say no when a lender wants to sell the borrowers’ loan to yet another loan servicer.

What’s up with mortgage rates? Jeff Lazerson of Mortgage Grader in Laguna Niguel gives us his take.

Rate news summary 

From Freddie Mac’s weekly survey: The 30-year fixed averaged 4.41 percent, down five basis points from last week. The 15-year fixed rate averaged 3.84 percent, also down five basis points from last week.

Bottom line: Assuming a borrower gets the average 30-year fixed rate on a conforming $484,350 loan, last year’s payment was just $15 lower than this week’s payment of $2,428.

What I see: Locally, well-qualified borrowers can get the following fixed-rate mortgages at a zero point cost: A 15-year conventional at 3.625 percent, a 30-year conventional at 4.125 percent, a 15-year conventional high-balance ($484,351 to $726,525) at 3.875 percent, a 30-year conventional high-balance at 4.375 percent, a 15-year jumbo (over $726,525) at 4.125 percent and a 30-year jumbo at 4.625 percent.

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Jeff Lazerson - Mortgage Columnist since 2011