The Growing Threat: Cybersecurity Risks & Legal Penalties for Mortgage Companies

The mortgage industry has become a prime target for cybercriminals seeking to exploit vulnerabilities and gain unauthorized access to sensitive customer information. Several factors contribute to the attractiveness of mortgage companies as targets for cybercriminals:

• Abundance of Personal and Financial Data: Mortgage companies process and store a wealth of personal and financial information about their clients, including Social Security numbers, credit scores, income details, and other sensitive data. This trove of information is highly valuable on the dark web, making mortgage companies lucrative targets for hackers.
• Financial Transactions: Mortgage transactions involve significant financial transactions, making these companies a prime target for cybercriminals seeking immediate financial gain. Unauthorized access to mortgage systems can enable attackers to divert funds, commit fraud, or engage in other financially motivated crimes.
• Lack of Cybersecurity Preparedness: Many  mortgage companies, especially small and medium, do not have robust cybersecurity measures in place. Cybercriminals often target organizations with weaker defenses, exploiting vulnerabilities in their systems. Inadequate cybersecurity practices can include outdated software, weak passwords, and insufficient encryption.
• Transactional Nature of the Business: Mortgage companies engage in numerous transactions, including loan approvals, fund transfers, and communication with various parties involved in the home-buying process. This frequent exchange of sensitive information creates multiple points of entry for cyber attackers.
• Third-Party Relationships: Mortgage companies often collaborate with third-party service providers, such as appraisers, credit reporting agencies, and title companies. These relationships can introduce additional vulnerabilities if the cybersecurity practices of these third parties are not up to par.
• High Stakes and Urgency: Homebuying transactions often involve high stakes, and there is a sense of urgency, especially as closing dates approach. Cybercriminals may exploit the urgency to launch attacks when organizations are under pressure to move quickly, increasing the likelihood of success.
• High Potential for Ransomware Attacks: Cyber attackers will also more likely deploy ransomware to encrypt critical data and demand payment for its release. Mortgage companies, with their reliance on data and the urgency associated with transactions, may be more inclined to pay a ransom to quickly regain access to essential systems.

Mortgage companies are not only responsible for managing the financial aspects of loans but also for ensuring a secure and seamless experience for their clients. Given the multifaceted nature of the mortgage industry and the valuable information it handles, mortgage companies must prioritize robust cybersecurity measures to protect both their assets and the sensitive data entrusted to them by clients.

Significant level of vulnerabilities detected in Mortgage Companies

CyberCatch’s scan of 19,375 small and medium organizations websites and Internet-facing assets in North America, which included mortgage companies, detected significantly high level of vulnerabilities, that attackers can easily exploit and make intrusion into the network, steal data and install ransomware:

• Spoofing – 83%
• Clickjacking – 61%
• Sniffing – 21%
• Session Riding – 47%

These vulnerabilities are caused from human errors such as server or application misconfigurations, poor coding such as server side request forgery flaws, authentication failures, failing to use encryption of data at rest and in transit, among others. Attackers can easily exploit these vulnerabilities, unless proper cybersecurity controls are implemented to thwart the attackers.

The Impact of Cyber Attacks: Legal Penalties

An undetected cyberattack that leads to a data breach can cost a company more than the compromised personally identifiable information.  A case in point is Lakeview Loan Servicing. Recently, more than two and a half million customers data was stolen in a cyber attack and the company was hit with multiple class action lawsuits. 

Mr. Cooper, one of the largest mortgage companies in the U.S., was targeted with a cyberattack that forced them to lock down systems — which temporarily disabled customers’ ability to make mortgage payments through their online accounts. Multiple class-action lawsuits alleged Mr. Cooper did not adequately safeguard the confidential personal information of its approximately 4.3 million customers. The suits contend that the company’s negligence allowed the data breach and also claim the company did not notify customers of the breach in a timely manner.

This is why the Federal Trade Commission (FTC) has established the Safeguards Rule to protect consumer data and privacy. FTC compliance is not just advisable but imperative for mortgage lenders, non-compliance can result in hefty legal fees. In 2023, the maximum civil penalty for each count of non-compliance increased to $50,120.

Non-compliance carries financial and reputational risks. When consumer data protection standards are not met, severe penalties can be incurred. In extreme cases, the FTC may seek to revoke the ability of a mortgage company to engage in certain business practices. This could have significant implications for the company’s operations and may even lead to its closure.

The FTC has now amended the Safeguards Rule, requiring not only implementation of cybersecurity controls but also reporting of a cybersecurity incident to the FTC.

By embracing and implementing the FTC regulation, mortgage lenders not only fortify their defenses against cyber threats but also uphold the trust and integrity of their operations.

FTC compliance does not need to be costly, stressful or complicated. With CyberCatch, you can attain full compliance in 2 weeks or less and stay safe continuously.

CyberCatch’s innovative FTC Compliance Manager solution enables all non-bank financial institutions, including mortgage companies, to cost-effectively comply with FTC.

CyberCatch’s solution comprises of:

• Workflow engine for compliance risk assessment
• All prescribed controls organized by domains
• Compliance tips
• AI-advisor for detailed guidance and to answer any questions
• Policy and procedure templates
• Charts, reports and evidence repository

With CyberCatch, you can quickly complete the compliance assessment accurately and document attainment of compliance and attain cyber safety.

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