January 2017 - The World's Local Bank

TheMReport — News and strategies for the evolving mortgage marketplace.

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TH E M R EP O RT | 5 MTECH providers or use multiple provid- ers to get what they want. These consumers expect to be able to transact basic banking and finan- cial business anywhere, anytime, from the palm of their hands." The Focus on Cybersecurity Becomes Increasingly Intense THE CFPB SEEKS COMMENT ON CONSUMERS' ACCESS TO THEIR PERSONAL FINANCIAL DATA AND THE SECURITY RISKS THAT SURROUND DISTRIBUTION OF THIS DATA. C ybersecurity has become an increasingly pressing issue in all industries that store personal information, particularly after a cyber-attack in 2014 against JPMorgan Chase that compromised some 83 mil - lion accounts. Protecting data has become a larger concern to mortgage professionals in recent years as the industry has become more and more digitized—many mort - gage loans now are completed electronically so no paperwork is involved at all. On top of that, mortgage lenders collect more personal information on custom - ers than any other sector in the financial services industry, making them prime targets for hackers. Digital data security came to the forefront again in mid- November as the CFPB made an announcement that it is seek - ing input from stakeholders on consumer access to their personal financial data—particularly, how much access consumers have to that data and how secure the data is when it is being shared. As digital data is becoming more difficult to protect—after all, the CFPB's Office of Inspector General listed information secu - rity as one of the bureau's biggest challenges—companies that handle sensitive information are going to great lengths and expense to make sure that data is safe. "Our IT's department's No. 1 priority is protecting data," said Mark Mackey, CEO of International Document Systems. "You wouldn't risk security for anything. It wasn't as big of a deal 10 years ago because you didn't hear about it as much." Mackey continued, "We try to put in as much security as we can from all sides. We put a lot of safeguards in place. Everything that can be encrypted is encrypted. We have to take everything to the extreme, unfortunately." DocMagic CEO Dominic Iannitti said of his company's security procedures, "DocMagic employs a multifaceted defense in-depth approach to ensuring customer-sensitive data is always protected. Multiple next genera - tion firewalls are used to keep out unwanted traffic and intruders. Additionally, an intrusion detection and prevention system is used to analyze traffic and alert network security personnel of suspicious activity. Advanced encryption is used when data is transmitted to or from DocMagic servers. Secure Document Delivery to partners and third-party providers is provided through the WebDocs platform. This system utilizes a secure combination code along with a client-configured challenge password that is entered prior to downloading documents." James Deitch, CEO of Teraverde Management Advisors, noted to MReport earlier this year that things have gotten easier for hackers: "They are usually invited in by having an employee click on an email that has an attachment or go to a website which has mal - ware contained on it. And that malware can be downloaded onto a machine simply by browsing on the website." Should a data breach occur, Deitch said, "The first item is to do a pretty broad risk assessment and just understand what the risk elements to the company are. One can do a social engineering suscep - tibility test that are fairly straight- forward. They can either be done by the company or independently. The second is just to go through what is called 'patch manage- ment' just to make sure that all the updates on software, servers, or computers are all done, and to train employees on the techniques that hackers use to get in." How Blockchain Will Revolutionize Mortgages IMAGINE A SINGLE, RELIABLE, VERIFIABLE, UP-TO-DATE, SECURE, AND ACCESSIBLE SOURCE OF MORTGAGE LOAN DOCUMENTS; IT'S POSSIBLE WITH BLOCKCHAIN. T he past decade has seen frenetic change for the mortgage industry. In the early 2000s, the industry started experimenting with exciting new technologies. Digital signatures, eClosings, SmartDocs, CRM in the Cloud, and others started to increase the level of innovation. Then the crash… Since the crash, the innovation budgets for lenders have disappeared with compli - ance becoming the sole focus of technology budgets. The invest- ment in these and other innova- tive technologies was seriously sidelined. Finally, the industry has begun to look again at tools to innovate and improve the mortgage process and the final assets created. Where will the innovation focus this time around? Every so often, technology comes along with the promise to so dramati - cally change the way we work that we cannot help but take notice. The late '90s brought the internet, the past decade brought us social networks and mobile apps. Now on the horizon is the blockchain. For the technophobic crowd, the blockchain may seem like a foreign term that is related to Bitcoin—that funny, fake money approach that only hackers care about. But once understood, it's clear how blockchain and the re - lated technologies can revolution- ize the real estate industry. It has the potential to allow us to finally move from a process governed by easy-to-change and easy-to-lose paper and databases to a single source of accurate, unchangeable shared data. How the Blockchain Works The first thing—and simplest thing—anyone needs to know about the blockchain is this: It is a database that cannot be altered. No one can alter an entry in it, not even administrators or system overseers. In addition to being permanent, every record is trans - parent and verified by anonymous sources. In layman's terms, it's like having a single ledger or spread- sheet (the blockchain) that anyone can see, with each entry (block) being publicly audited for accuracy prior to writing it permanently. This technology was originally devised for the banking industry with an effort of maximizing both transparency and permanence, things that ensure records cannot be tampered with—and thus, fi - nancial records are secure and ac- curate. That level of permanence ensures stability for a currency. This complete view of the end-to- end process minimizes fraud and mistakes while expediting transac - tions and transfer of knowledge. It eliminates challenges in the exist- ing weak audit trails and provides a single resource that is the shared truth, all in a distributed model that creates a universal owner- ship that self-corrects rather than individual arbiters over single internal databases. Imagine how much smoother real estate trans- actions would be if every party shared the same data had 100 percent confidence in it and knew it hasn't been altered or lost; that's the power of the blockchain. The Power of Single Sourcing In real-world terms, the ripple effect of blockchain benefits comes down to documentation—namely, eliminating most of it, along with the hoops people have to jump through to handle it. Paperwork affects different parts of the in - dustry, from titles to contracts to mortgages and more. Mortgages are complex financial instruments with many moving parts. To process a mortgage from start to finish, you're looking at many documents, all with multiple versions created by multiple parties and multiple entities editing and revising. Combined, that could be thousands of document versions, datapoints, all variable to revision and timestamps. Through the blockchain, documents and data

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