SAFE

Summer of 2012, Mat Honan, a respected writer for WIRED Magazine had his digital world destroyed in 2 hours and the hackers never hacked, they “gamed” the system. Did I mention they were teenagers? Mr. Honan later made contact with one of the Hackers and who explained how they did it. 

People look at going paperless as a mandatory change in the way they process. People believe their new document management solution should be the process, known as workflow. Paperless is about converting the paper, not eliminating it. To embark today with the goal of never creating or receiving paper is not reality. The “paperless mortgage” should be clearly defined as the end process, all paper documents should be digital. Efficiencies are produced when you can reduce the amount of paper coming in the front door. Providing tools to people to convert paper to image before you receive it.

Imaging remains the most dominate electronic format for eliminating paper. Paper cost $1.30 per page cradle to grave. Paper scanned to image cost ~ $0.30 per page. By scanning paper as soon as you can, will save a dollar per page. E-Signing never produces paper and in the mortgage industry, its application can make for a paperless transaction. Adoption of E-Signing or E-Closing remains in single digits. In addition, most of the paperwork that produced the underwriting to closing process came in as paper, faxed or imaged and is sent via email.

In a previous column I talked about how apathy enables cyber crimes. Cyber crimes are now larger than all property crimes combined. Unfortunately this apathy leads most lenders and service providers in the mortgage industry to still believe that cyber crime might hit Target and other well know retailers but not the mortgage industry. Well, I hope these recent events may change your thinking. 

I see Cyber crime with the potential to shut down business on the internet in the next 5 years.  I say this for its shock value, or maybe not, follow me.  The world economy runs on the internet.  Cyber crime is now larger than all the property crimes combined.  Leading the charge is Identity Thief, the ability to collect enough personal information (i.e. SSN, DOB, Acct #, Names, Addresses, etc.) enables the thief to assume or create a new identity.  Their instrument is then some scam, something as simple as check & credit card fraud or more high value crimes like mortgage modifications, death benefit claims, vacant home rental hijacking and more.  Mortgage Lenders, Insurance Companies and Securities Dealer process consumer information across the internet every day.  The ability to capture this NPI without your knowledge is routine in the right hands.  The apathy within our business and government communities on cyber security is astounding.  I can kill you with statistics but my firsthand knowledge working with hundreds of companies leads me to this; a vast majority does not practice cyber security even when they have the tools available to do so.

Our story focuses on a Financial Services (Mortgage, Securities, Insurance) Company with 25 employees.  What this Company does in the supply chain is irrelevant; the fact remains the same, they manage non-public information (NPI) as a third party.  The Company is required by law, regulations or rule to protect third party NPI and log who had access to it.  The Company has the potential to do business with 200 trading partners as they conduct their business.  Now let’s see their secure email options and what they really cost.

For years Paperclip has been helping the securities and insurance industries go paperless. Paperclip follows the paper filing metaphor of Cabinet, Drawer, Folder, Document, Page and Annotations. Replacing the paper filing system with an electronic mirror version, training and adoption comes quickly. Projects involving elaborate workflow rules are lengthy deployments, hard to follow especially in the financial services industry and simply the wrong place to focus; workflow belongs in the data system, why, because that’s where all the data is. Now Mike Bridges, President of Paperclip, speaks out about how the mortgage industry can adopt straight through processing in a quick and easy way.

Do you have a plan to combat cyber threats? If you don’t, you need one. And any good plan should include assigning responsibility and accountability for system security. What should this cyber security expert do? Here’s some tips: Any potential system changes should go through this individual and get this person’s approval before the change goes live. You need to assign responsibility and accountability for system changes and maintenance. Testing, evaluating, and authorizing system components before implementation is critical. Address how complaints and requests relating to security issues are resolved, as well.

I’m here to tell you that all good cyber security strategies begin with a plan. The frequency of online attacks against U.S. business continues to increase, along with the cost of defending against those attacks and mitigating any resulting data breaches. Cyber-crime now costs a U.S. business $8.9 million per year, an increase of 6% from 2011 and 38% from 2010. Those findings come from the “2012 Cost of Cyber Crime Study,” which was sponsored by security intelligence tool vendor HP and released Monday (10/8/2012) by Ponemom Institute.

As we continue to talk about cyber security plans, we have to talk about The Red Flag Rule, which requires many businesses to develop and implement a formal, written Identity Theft Prevention Program for the purposes of detecting the warning signs, or “red flags”, of identity theft throughout their day-to-day operations.