Month: February 2024

Title companies are custodians of large amounts of sensitive data, from payment records and tax information to social security numbers. This makes it crucial to implement data loss prevention strategies that can act as a bulwark against cyberattacks. Worryingly, instances of cyberattacks against title companies are increasing. In a 2022 survey, 86% of respondents said that the volume of threats they have faced remained the same or grew in the last two years.

The increased reliance on digital technology has contributed to this trend. Automation platforms, cloud data storage, and employee portals can all be potential threat vectors for cybercriminals. Title companies need to weave cybersecurity into their overall mortgage risk management strategy to prevent irreversible damage to their business processes from cyberattacks. This strategy includes:

1. Using a virtual private network (VPN)

VPN technology masks your IP address so that cybercriminals cannot identify where sensitive title data is hosted, how it’s being transmitted, and exploit techniques to intercept it. Today, with remote and hybrid work being the norm in many title and mortgage businesses, employees may access sensitive data from outside of the secure corporate network.

By implementing VPN software as part of your data loss prevention strategies, you can thwart criminal attempts to break into your legitimate network traffic and intercept sensitive communications. VPN software is relatively affordable and most enterprise-grade network solutions can integrate them seamlessly.

Read more: The Impact of Digital Immune System on Mortgage Operations

2. Investing in powerful encryption

Encryption is a cryptographic coding system that converts sensitive data into an indecipherable format that can’t be unlocked without the encryption key.

Most enterprise data storage systems support encryption for data at rest — but title companies also need to pay attention to the encryption of data in motion. That way, even if a threat emerges, unauthorized users would find it impossible to understand the contents of sensitive data sets without having the encryption key at hand.

Encryption should also be enforced for employee communication and collaboration systems. For example, integrating a secure communication platform (as opposed to consumer-grade chat apps) that ensures end-to-end encryption of any data that employees exchange.

3. Practicing network segmentation

This is one of the lesser-known techniques for mortgage risk management in the context of cybersecurity, but nevertheless, a crucial step with so much of information being shared across enterprise networks.

Segmentation entails that an organization slices network pathways into multiple tunnels, each dedicated to a different form of application traffic. It makes lateral movement impossible within your network, thwarting cybercriminals, even if they manage to breach the system. For example, title companies can maintain a dedicated network segment for payments and transactions and a separate one for customer communications.

Read more: Adaptive Security Architecture: A Must-Have in Today’s Technology Landscape

4. Following vendor risk management best practices

Title companies typically work with multiple stakeholders both downstream and upstream, and these can add to existing threat vectors. Therefore, an important data loss prevention strategy is to choose your outsourcing partner wisely with an eye on their security posture.

It may be tempting to select the best-cost offshore firm by simply looking at savings opportunities — however, this can give rise to new risks. Instead, look for vendors who are ISO certified (such as Nexval) and comply with SOC Type II benchmarks, which are globally recognized certifications for data integrity, security, and confidentiality.

5. Conducting disaster recovery planning (DRP)

Mortgage risk management involves both preventive and post-crisis mitigation measures, and DRP helps your organization quickly recover if the data loss prevention strategy fails for any reason. As part of disaster recovery planning, essential customer data must be backed up to multiple locations, preferably in different forms of storage. You also need a redundant network infrastructure that can support you if the primary network is under attack.

The DRP should also include a robust communication plan to help seamlessly make the necessary disclosures in the event of a data breach. Employees must be trained in post-breach actions so that they know how to respond and prevent compound damage.

6. Adopting cloud security solutions

Today, the lion’s share of sensitive information resides in the cloud and an increasing number of mortgage industry stakeholders are moving to cloud-based systems. As a result, title companies too must provide cloud interoperability, which requires their own approach to data loss prevention strategies. In addition to traditional intrusion detection systems (IDS), title companies must invest in cloud access security brokers (CASB) and secure service edge (SASE), purpose-built for protecting the ever-widening enterprise perimeter.

Read more: Best Security Practices for Title and Escrow Companies

Discover Secure Digital Transformation

Digital technology holds tremendous potential for title companies and industry regulations are leaning more on electronic systems, such as the recent legislation on modernizing borrower communications. However, title companies need to prepare for the additional risks arising from digitization, such as high data volumes, increased remote access, and reliance on public networks.

Instead of curtailing digital transformation plans to prioritize mortgage risk management, title companies need to forge an innovation-friendly yet cautious pathway toward digital transformation. At Nexval, we incorporate security best practices into our next-gen solutions for title companies that deliver efficiency without compromising on security and data loss prevention. This enables a more sustainable transformation model that factors in the sophisticated nature of cybercrime faced by the mortgage industry today.

To know more, speak with our data loss prevention strategists.

A strong mortgage quality control (QC) function is essential for lenders not only for compliance risk mitigation – it also helps improve loan portfolio performance and inspires greater investor confidence. In the aftermath of the 2008 financial crisis, QC is deeply embedded in the industry’s regulatory framework.

From the Fair Housing Act (FHA) to the Home Mortgage Disclosure Act (HMDA) and the False Claims Act, there are several regulatory prerequisites to bear in mind when evaluating a prospective customer for a mortgage. And, the compliance burden is steadily increasing – for example, Bank of America recently had to pay a $12 million fine for misreporting mortgage data, easily avoidable through the right compliance risk mitigation steps like partnering with an experienced mortgage QC vendor.

Here’s how partnering with a leading compliance risk mitigation and QC firm can help your company:

1. Reduce operational workloads

Mortgage companies need to follow a rigorous checklist from the pre-closing stage to post-closing and mortgage servicing. This entails a substantial amount of manual effort, such as document verification, calculating debt-to-income ratios, collecting borrower information, and reviewing credit reports. In the post-closure stage, there’s effort involved in verifying loan file integrity, document accuracy, and record confirmation.

At a time when lenders’ bottom lines are already stressed due to rising interest, volatile volumes, and other market pressures, the operational workloads associated with mortgage QC can certainly take a toll. In this scenario, a QC partner can step in and provide the staffing and technology assistance needed. It allows mortgage companies to carefully complete their end-to-end QC checklists without cutting corners or making any quality trade-offs.

2. Manage costs

An average loan file will cost several hundreds of dollars in QC reviews, comprising both data verification and appraisal expenses. This cuts into lenders’ revenues, which are already declining. A report found that the average profitability in mortgage went from $18.8 billion in 2021 to $5.8 billion in 2022, making it imperative to find new efficiencies like savings in the compliance risk mitigation process.

A third-party vendor will offer competitive terms like outsourcing to a best-cost location. At the same time, they will ensure the availability of highly experienced, certified mortgage QC executives who can conduct detailed and reliable loan checks at a fraction of the original cost if the compliance risk mitigation process is managed intelligently.

Read more: 7 Factors to Consider When Choosing a Risk Management Platform

3. Benefit from the latest technologies

Due to the effort and data-intensive nature of mortgage processes, it is a prime candidate for technology transformation. Several of the regulatory and mandated mortgage QC steps can be performed by mortgage automation and other digital tools. The rise of artificial intelligence (AI) further increases the potential of technology for quality control. Unfortunately, most lenders lack the skills or resources needed to tap into this transformation.

A compliance risk mitigation partner will bring proven technology expertise to streamline QC processes with optimal effort and investments. For example, AI can sift through massive volumes of information, including raw data on income sources. This improves the quality of QC checks and minimizes the chance of onboarding bad loans into the portfolio. An external partner doesn’t just help lenders stay compliant; they can improve portfolio performance to drive overall business growth.

4. Stay ahead of compliance rules

As the Consumer Financial Protection Bureau (CFPB) increases its regulatory scrutiny with a growing commitment to resolving fair lending issues, lenders need to adapt their compliance risk mitigation practices. In the last couple of years, the CFPB has intensified its questioning of banks regarding their fair lending practices. Mortgage companies can no longer approach compliance as a reactive function and need to stay ahead of changing rules.

In this context, a third-party quality control partner can provide invaluable assistance and expertise. Lenders need not spend on the fixed capital costs of hiring compliance experts but still have an arsenal of compliance experts at hand. An outsourcing partner can help conduct detailed audits against mandatory and recommended guidelines. They can ensure that disclosure timelines are met and the findings are shared with the right stakeholders.

Read more: How to Avoid Mortgage Compliance Issues: An Actionable Guide

Meet Nexval, your mortgage quality control partner

Choosing the right outsourcing partner can be a challenge as lenders need complete trust and visibility into third-party operations, the technology stack, and projected costs. That is why it is important to choose a certified and experienced firm that not only offers a cost advantage but also extensive industry understanding. Further, they need to bring technology expertise to support the growing digitization of mortgage QC.

At Nexval, our team of 1000+ SMEs works closely with America’s top mortgage companies to streamline QC, improve portfolio quality, stay compliant, and continuously improve operations based on the data generated. We ensure that compliance risk mitigation accrues maximum value for mortgage providers at both pre-fund and post-close stages.

To learn more, speak to our mortgage QC experts.

As servicing costs continue their upward trend, businesses need to adopt mortgage process automation services from experienced vendors such as Nexval to offset the impact on their bottom line.

This has never been as important as it is in 2024. In the last four years, the cost-to-service ($ per loan) has increased by over 9%. Servicing expenses for distressed loans are particularly high, going from $1,226 in 2020 to $1,994 in 2022. On top of that, the mortgage servicing rights (MSR) market is going strong, adding to servicers’ operational burdens.

By taking proactive steps to drive servicing efficiency, especially for first-time buyers and delinquent loans, mortgage companies can maintain their productivity and increase the value generated from each customer relationship. Efficient servicing processes are also easier to adapt to different regulatory regimes and staff constraints in bearish periods.

To achieve this, Nexval offers a wide range of mortgage process automation services and digital solutions:

1. Integrated mortgage process automation services and ecosystem

One of the key reasons for servicing inefficiency and rising costs is the siloed nature of data and operations. When information resides in disconnected systems and workflows run independently of each other, it results in duplications, redundancies, and errors. This is mainly because mortgage companies rely on a sizable legacy stack and, at the same time, want to benefit from new-age infrastructures like the cloud.

That is why mortgage transformation partners like Nexval help create an integrated ecosystem where disparate components can exchange data through application programming interfaces (APIs). This allows events and actions to act as triggers for mortgage process automation and servicers can benefit from a single pane of glass when it comes to mortgage data access.

Read more: ChatGPT and the Future of Mortgage Servicing: A Look into Intelligent Chatbots

2. Maintaining documentation hygiene for mortgage servicing rights

MSRs can provide an additional source of revenue to lenders and offset some of the natural production costs associated with a typical mortgage. Unfortunately, MSR transfers are riddled with inefficiencies of their own, including difficulties in capturing fair value, tax accounting, collecting and updating documentation, etc. With mortgage companies still relying on manual documentation processes, accruing sufficient value from mortgage servicing rights can be challenging.

To address this, Nexval offers advanced document management solutions powered by the same technology that informs our mortgage process automation services. It uses AI techniques like optical character recognition to reconcile different data formats, both structured and unstructured. It provides a centralized repository for audits, accounting, and reporting requirements related to mortgage servicing rights so that companies can maximize their revenues from MSR transfers.

3. Business intelligence systems for better decision-making

Actionable business intelligence allows servicers to make smarter, more cost-efficient decisions – however, this can be difficult in the absence of an integrated data stack, such as a data fabric. Servicers should be able to fetch, ingest, process, and analyze information from origination systems, risk mitigation portals, CRMs, modeling tools, and more to preempt and prevent revenue leakage. BI can also act as the foundation for mortgage process automation services by executing actions based on data triggers.

At Nexval, we offer intelligent data extraction tools with multi-screening information validation to enrich servicing business intelligence and converge disparate data sources for proactive analysis. Servicers can benchmark performance, capture leads, identify servicing risks, and improve their portfolio performance through data-driven decision-making.

Read more: How Servicers Can Modernize Communications with Default Borrowers

4. Digitally enabled best-cost support solutions

Several bullish and bearish periods have followed the 2008 recession, making it difficult for servicers to maintain an optimal headcount. Today, systems (18%) and customer service (17%) are the two most significant contributors to servicing costs, and optimizing headcount through either mortgage process automation services or outsourcing to best-cost locations can provide some relief. In this context, selecting the right outsourcing partner can also make a difference to the bottom line.

Nexval offers end-to-end support across the servicing value chain, covering core servicing, loss mitigation, default operations, REO support, records management, and servicing QC and audits. By paying special attention to non-performing loans, it is possible to reduce one of the key contributors to servicing costs today. As interest rates remain high, outsourcing will be an important alternative for servicers looking to manage distressed loans efficiently.

Read more: Reshaping Mortgage Servicing: Embracing a ‘People First’ Digital Framework

Towards a Digitally Powered Servicing Function That Prioritizes Cost Reduction

Despite overall economic growth, the housing market and the mortgage servicing industry has come under various kinds of cost pressures in the last few years. This has taken a toll on productivity – for example, the average number of loans serviced per employee shrunk from 900 to 723 between 2019 and 2021. As employees try to engage customers and prevent delinquencies in a challenging market, servicers are feeling the pinch.

Given that corporate and admin costs make up nearly 20% of servicing expenses, mortgage process automation services can play a major role in avoiding non-value-adding, non-production expenses. Additionally, Nexval’s offerings for documentation management, data extraction, risk and compliance can also amplify the value obtained from mortgage servicing rights. Ultimately, this relies on a strong digital bedrock comprising cloud infrastructure, access to technical skills, and next-gen data systems.

Speak with Nexval’s mortgage servicing experts to know more.