Author:
Partha Pratim Dutta
VP Operations of Nexval
Like any financial services provider handling large volumes of personally identifiable information (PII), mortgage companies are at risk of cyber attacks. According to research, 78% of lenders believe cyber security to be a top risk that needs “escalated prioritization.” A cyber security risk assessment becomes even more important in the age of digital transformation, with so many lenders using mortgage automation, mortgage AI, and other data-intensive systems to streamline processes.
The Magnitude of Risk Faced by the Mortgage Industry
While the occurrence of cybercrime has grown in general – partly due to the accelerated digitization during the pandemic – the mortgage industry is especially vulnerable. In 2021, the incidence of fraud jumped by 65%, costing the industry millions in losses. Alongside this, data-driven operations due to mortgage automation and AI adoption add to the existing threat vectors.
In 2022, a leading mortgage servicer suffered a data breach affecting more than 2.5 million customer records. In a similar incident in 2021, another mortgage company had to pay $1.5 million in fines for failing to report a data breach on time. This high degree of risk is due to the fact that most companies rely on risk controls that are set in place and then forgotten, instead of undertaking continuous risk assessments and strengthening precautionary measures at regular intervals.
Read more: Can Mortgage Automation Help Detect and Prevent Fraud in 2022?
The Scope of Cyber Security Risk Assessment in Mortgage
A cyber security risk assessment aims to cover a wide range of attack vectors and vulnerabilities, related to both technology and human error/negligence. It also considers growing risk in relation to new and emerging threats, as well as the context of new solutions that are implemented – for example, a mortgage AI bot for document management, which now stores data in a centralized place.
The key areas covered by a cyber security risk assessment include:
- Endpoint protection – Ensuring that the laptops, mobile devices, virtual desktops, web applications, etc., used by employees are free from security vulnerabilities, with a focus on remote endpoints and tools used by outsourcing partners.
- Software-related risk management – Limiting the authority to make software and configuration level changes, instituting a patch management practice, and minimizing shadow IT.
- Human risk mitigation – Assessing the workforce and third-party vendors for the possibility of human error/negligence, including cyber security awareness training, hiring due diligence, and access level controls.
- Cyber security policymaking – Enforcing new policies in response to the results of cyber security risk assessment, including information security policies, network management policies, business continuity & disaster recovery (BCDR) plans, and audit practices.
- Change-related risk assessment – Gauging the risk associated with major technology implementation, such as training a mortgage AI algorithm on consumer data collected over 5-10 years.
- Risk quantification – Assigning a risk score to each identifier vector in terms of monetary fines or penalties, damage to reputation, loss of business, and interruptions to ongoing business processes.
Typically, a lender would undertake a risk assessment such as this right before an independent audit or on the occasion of a major organizational change, such as a merger or acquisition. However, this leaves you unprotected as new vulnerabilities emerge in the due course of business, and cyber criminals come up with sophisticated attack tactics to exploit any and every weakness.
Read more: 7 Factors to Consider When Choosing a Risk Management Platform
How Can a Cyber Security Risk Assessment Provide You with Protection?
There are several reasons why a cyber security risk assessment is so important in 2022:
1. Reduce your exposure to ransomware attacks
A 2021 survey found that more than a third of companies worldwide have experienced a ransomware attack, and to get their data released, mid-sized companies had to pay $170,404 on average. Mortgage providers that use automation and AI systems will have centralized data repositories that house reams of sensitive and fiscally valuable data on customers.
A cyber security risk assessment will reveal any gaps in your data security posture that could be exploited by cybercriminals. This will prevent the data from getting into the wrong hands in the first place and will ensure there is a proper backup in place in case of an attack.
2. Cut down losses from fraud
In the first quarter of 2022 alone, wire or title fraud was detected in 1 in 3 transactions. By accessing information such as the social security numbers of borrowers, cybercriminals are able to complete fraudulent transactions without being detected. A cyber security risk assessment will reveal the root cause of fraud incidents, paving the way for course correction. For example, mortgage AI and mortgage automation can map trends, detect tampering, rule out false positives, and raise red flags in real-time.
3. Futureproof your workforce
A lot of the risks currently plaguing the mortgage industry are related to modernization and human readiness. To take a simple example, executives new to customer communication via email will be more likely to fall prey to social engineering attacks like phishing. Similarly, video platforms that are now used for remote customer servicing come with their own share of risks.
A cyber security risk assessment will include a thorough audit of your workforce’s digital maturity, and the vulnerabilities caused therein. You can then minimize risk by replacing manual effort with mortgage automation, wherever possible, and by providing training in other scenarios.
Read more: 5 Signs it’s Time to Upgrade Your IT Infrastructure
Have You Undertaken a Cyber Security Risk Assessment in 2022 Yet?
The US mortgage industry is in a dynamic position, and the next few quarters will determine the road ahead. The rise of millennials as a key borrower demographic has led to new challenges and opportunities. Side by side, there is market demand and regulatory policies around crypto, which will influence your risk compliance posture. Finally, as mortgage AI and automation systems become a staple for most operations, data anonymization, security, and access will need special attention.
A field-proven and certified partner can help conduct a timely cyber security risk assessment so you can identify and address any vulnerabilities arising on your growth journey. At Nexval, we conduct stringent assessments in compliance with CFPB (Consumer Financial Protection Bureau) laws, encompassing RESPA, TILA, ECOA, Safe Act, HMDA, GLBA, and FCRA. Our cloud-based solutions smoothen the audit and assessment process with minimal effort overheads for you.
To undertake a cyber security risk assessment today, speak with our Tech Gurus.