Cyber Security, Regulation + the Future of Mortgage Servicing
Change is the only constant. This is a theme I heard repeated over several of the sessions I attended at theMBA Annual Convention in San Diego. Technology, demographics, regulation and the economy continues to change for the mortgage industry. Three of the key topics of the sessions I attended focused on regulation, cyber security and the economic and mortgage outlook.
Regulation and servicing
Of course the CFPB and regulation was a big part of many of the sessions at this year’s convention. Richard Cordray, Director of the Consumer Finance Protection Board, stated that the CFPB will be sensitive to the progress companies have made in their initial examinations. That was also noted in another session I attended, which focused on tips from industry experts on CFPB examinations. In that session, these tips were provided:
- Prepare for your review. Clearly articulate your process, ensure all documents are present and understand your data.
- The state of your compliance management system will set the tone for your examination because this is how the CFPB gets to know your business.
- Borrower communications and ancillary products continue to be an area of concern for regulators with continued focus on HAMP, foreclosure fees and claim processes.
Richard Cordray also strongly encouraged action and innovation around eClosings since their pilot program showed higher consumer understanding and empowerment of the electronic versus paper process. Venture’s position is that consumers will want to continue that eSolution experience through the servicing areas via email, interactive statements, preference centers and SMS. No matter what the channel is – print or electronic – providing choice empowers the consumer.
In all industries, attacks are increasing and resources to combat attacks are lacking. Attacking a company’s security is becoming easier as criminal websites provide “plug and play” options which are available for purchase with a guarantee to work. Additionally, the government is increasing scrutiny of security efforts. If companies take prudent steps, it will be recognized. Since companies will never eliminate the risk, they will only be able to manage it. The following strategies were presented to help mitigate the risk:
- Training is the number one way to reduce a company’s risk profile. It is a non-expensive and non-technical effort which can reduce the majority of the attacks; those that occur through social engineering such as phishing.
- Make sure you have a resilient process so that you can still conduct business.
- Turn off countries on your website that you are not doing business with.
- Develop your own internal security team. You cannot rely on outside help indefinitely for your cyber security.
- Determine your plan and reaction to a breach before one happens.
Economic and Mortgage Outlook
Both the economic and mortgage outlook has some positive changes and some continued challenges. The following were a few key takeaways from the MBA Annual Convention:
- The GDP is growing but remains in the 2% range. With household net worth growing, spending is increasing with housing being a real contributor to the overall economy. The number of new job openings is above the hire rate which will drive more wage growth in 2016.
- From a housing standpoint, home prices are about 1% down from the peak in 2007 and turnover is increasing as this negative equity is diminishes. With regards to foreclosures, the industry is at pre-crisis levels and delinquency rates are decreasing across all loan vintage years.
- From a lending standpoint, there is a declining number of lenders in the industry with the largest decline coming from banks. Independents are getting the biggest share of the volume in originations with credit unions seeing a slight increase.
- Loan profitability continues to be squeezed as all cost areas have been affected. Although direct servicing costs are down 3.5% they remain significantly higher than pre-crises levels.
Change brings opportunity. The MBA Convention provided the venue to discuss the future with the leaders in the mortgage industry. Venture was excited to be a part of this successful event and we look forward to future MBA events.