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 By: Sherwood Lawrence |
The Red Flags Rule as set forth by the Federal Trade Commission (FTC) is due to go into effect May 1st, 2009. The FTC guide “Fighting Fraud with the Red Flags Rule – A How-To Guide for Business” indicates that it’s important to fight the battle against identify theft on two fronts: “First, by implementing data security practices that make it harder for crooks to get access to the personal information they use to open or access accounts, and second, by paying attention to the red flags that suggest that fraud may be afoot.”
As part of the implementation of your Identity Theft Prevention Program, you are asked to address how you’ll protect the personal and confidential information of your clients. You’ll want to spend time documenting how you will prevent unauthorized access to sensitive data during the loan process. You’ll also want to spend time documenting how you will prevent unauthorized access to sensitive data after the loan closes.
One excellent suggestion for how to accomplish the later is to use a data archiving service to preserve and protect your physical loan files after they are closed. Physical loan files are a goldmine of sensitive data and should be handled with great care for as long as they exist. The benefit to using a 3rd party vendor for archiving is that loan files (and the personal and confidential information contained therein) are no longer stored in your office and are no longer in reach of employees and staff. This reduces your security footprint, risk of identity theft, and provides secure online access to loan files only to those who have proper authorization.
In this partnership model, your role is to preserve and protect your customer loan file until the loan is closed. The data archiving vendors role is to preserve and protect your customer loan file after the loan is closed.
A data archiving service or vendor should provide the following:
- A trackable shipping mechanism to send loan files to them
- 24×7 secure online web access for authorized personnel only
- 24×7 secure physical storage
- Multiple levels of physical and electronic security measures
- Email notifications when a borrower or authorized person accesses a file
- Safe shredding of documents after mandatory storage requirements have been met
- Full background and security checks on every hire, inc. criminal, credit, and drug screens
- Substantial Criminal Theft and Errors & Omissions insurance policies
- Committment to aggressively cooperate with authorities to prosecute offenders
The security of your borrower’s data and private information should be everyones number one concern and the Red Flags Rule reinforces this by now requiring you to have documented plans and procedures in place. The benefits of integrating a 3rd party vendor into your business model to mitigate the risks of identity theft are very real and very compelling. It also allows you to focus on what you do best, which is closing loans, instead of trying to become a security expert.
At Top of Mind Networks, we consider the security of borrower data to be an absolutely critical and vital business function. If you’re not using a data archiving service like ours as part of your Red Flags Rule implementation, please make sure you have fully and completely understood what is now required of you to satisfy these new regulations.
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Sherwood Lawrence
Sherwood joined Top of Mind Networks in November 2004 after working seven years at Microsoft; providing rare but powerful evidence that it is possible for an individual to emerge from the collective even after full assimilation has occurred. When he is not listening to ambient, electronica, dance music or reading a scifi/fantasy novel, he loves to transform great ideas into compelling products and services. |
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By: Sherwood Lawrence |
The environment within the mortgage and finance industry has improved “a bit” the last month or two, but don’t allow this to change your view on whether the thirst for regulation and enforcement has slackened in the minds of the public, especially since mortgage late payments and mortgage defaults are expected to continue to rise in the next 12 months. The mortgage broker is still in the desert and they can still be sacrificed for the “greater good” on the way to economic recovery.
Leading a horse to water…
Mortgage Brokers, did you know that…
The Mortgage Bankers Association (MBA) has developed a proposal “for reforming lending and servicing practices and streamlining and improving consumer protections. This proposal, the ‘Mortgage Improvement and Regulation Act’ (MIRA), would establish a new, comprehensive framework for national regulation of mortgage lending to protect borrowers and improve the mortgage process nationwide”? – MBA website.
Did you know that the proposal contains numerous provisions that would impact the mortgage broker, including, but certainly not limited to, further restrictions on YSP and possibly new criminal penalties for enforcement of these restrictions?
Did you know that the MBA has been actively sharing this proposal with Congress and that the proposal has been sent to both the House Financial Services and Senate Banking Committees in an attempt to gain widespread support for its passage into law?
This is a concerted effort by the MBA to define the landscape of the mortgage industry and regulation in the very near future. If you want to know who is leading the congressional horse to water, it’s the MBA.
The politics of thirst in the desert…
It’s pretty simple actually, if you’re in the desert and you’re really thirsty, and someone offers you a direction that will lead you to water, you’re going to go, and you will be grateful when you get there. Do not maintain a belief that the horse won’t drink deeply at the well.
Where is The National Association of Mortgage Brokers (NAMB) comprehensive proposal to Congress that would equally protect borrowers and protect the freedom of competition in the mortgage industry? Where is the concerted and coordinated effort to define the landscape of what mortgage regulation should look like? Usually what I hear about is lawsuits and defense funds and how NAMB is going to “respond” to proposed legislation.
If brokers want to shape and define the direction of the mortgage industry toward one that is not going to sacrifice them to necessity, I think they have to do their fair share of “proposing” legislation and offering to lead the horse to water as well. They obviously need to be part of every dialogue going on in Congress and they need to communicate much better about what they are doing to their members and what they want their members to do.
On NAMB’s website for instance, there is no mention of MIRA in their weekly briefs and their stated policy agenda for Congress (under government affairs) is dated from 2007 for last year’s 110th congressional session. Quick news flash, we’re in the 111th congressional session now and it’s 2009. That’s just weak representation and coordination of resources. As a broker, you should be alarmed by this level of organization and be angry; that is of course, if you’re contributing at all. If you’re not, you have no right to complain.
Mortgage brokers, grab the reigns and help drive the direction of the policies being implemented in this industry. And by that, I mean don’t just try and pull up on the reigns of a thirsty horse and say “whoa, slow down, those are just mirages out there”. I mean lead by understanding the thirst for change and the abuses of the past and take part in helping to choose and mold this industry in a way that will work for everyone involved. That also means knowing when someone else is leading your horse in a direction you may not want to go.
Make no mistake, the horse is going to charge ahead somewhere and in some direction to slacken a dire thirst, it WANTS to be lead to an oasis in the desert. Brokers need to be an integral part of that change and direction or risk ending up abandoned in the desert without a ride.
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Sherwood Lawrence
Sherwood joined Top of Mind Networks in November 2004 after working seven years at Microsoft; providing rare but powerful evidence that it is possible for an individual to emerge from the collective even after full assimilation has occurred. When he is not listening to ambient, electronica, dance music or reading a scifi/fantasy novel, he loves to transform great ideas into compelling products and services. |
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By: Sherwood Lawrence |
In the last few weeks I’ve attended two legislative Lobby Days at the state capital here in Atlanta, Georgia. One was hosted by the Georgia Association of Mortgage Brokers (GAMB) (Correction by Sherwood: It turns out Brokers Lobby Day was actually hosted by the Georgia Mortgage Brokers Political Action Committee (GMBPAC) and not GAMB. While it doesn’t change the core message of this post for GAMB and its lobbying efforts, I do owe GAMB an apology for the mis-attribution and have made corrections in red.) and one by the Mortgage Bankers Association of Georgia (MBAG).
The contrast in preparation, organization, attendance, and overall professionalism was dramatic and cannot be overstated.
GAMB (GMBPAC)
In my first lobby day experience, we met in a room; there was a general sense of disorganization. Attendance was not impressive. I don’t know the actual number, but I would be surprised if more than 20 brokers showed up. We were given handouts and a brief overview of some of the key elements of a new bill that the group wanted to oppose and told we were supposed to go talk to our representatives about “our” opposition. The overview of the bill was good, but no position statements or talking points had been written to help the group stay on message and provide a unified front. In fact, we were asked to look at the overview and try to determine what our own talking points were going to be when we went to talk to our representatives. Interestingly, 8 of the 10 overview points of the bill I was actually in favor of, so I wasn’t personally sure how to lobby against it. Anyway, I tried to take the issues that I did oppose and determine what a concise communications strategy would be for a legislator. I suggested that we at least do a “rude Q&A” before people went into the field so that people would be prepared to counter some possible objections a legislator might have, like hypothetically, “uh, why is accountability bad?”, but since there were really only two or three other people in the room at the time, I don’t know how effective that was. No appointments with senators or representatives had been scheduled for the attendees, so we were all kind of flying by the seat of our pants.
One noteworthy item; there was one meeting with the bill sponsor that some people went to, but some of us kind of missed that window because we felt so unprepared and didn’t want to embarrass ourselves. I did hear later that this meeting went well, but it’s unclear to me exactly how “constituents” like us influenced the result. The few senators who were tentatively scheduled to come by the room and meet the group, well, they just didn’t come; I guess more important things came up. There wasn’t much structure to the day, so me and two other individuals just went Rambo and ended up cornering a poor senator from our district in a dark hallway for five minutes and tried to present an ill-practiced and ill-prepared set of talking points on why the bill was flawed (made more difficult because this particular senator wasn’t even aware of the bill yet). After that really awkward experience and somewhat feeling like an imposter in the capital, our task was thankfully over with and we just went home. I’m not sure why, but our lobbyist was pretty much quiet the entire time and provided no guidance to the attendees. To this day, I’m still not entirely sure who was running the show.
MBAG
In my second lobby day experience, we met in a room, it was very well attended, 70+ I believe, including individuals from Savannah, Macon, Augusta, and other places from around the state. Our lobbyist took immediate control of the day, told us exactly what was going to happen and when. First thing on the agenda was a legislative overview from both:
- Rob Braswell, Commissioner, Georgia Department of Banking and Finance
- Rod Carnes, Deputy Commissioner, Georgia Department of Banking and Finance
Next was an overview of the entire legislative process, starting from when the lobbyist got wind of something in the works, to the legal review that occurred next, to the actions the legislative team takes upon getting involved in the process, etc. etc. The legislative team was asked to stand and be recognized, nice touch when there are 7+ people who stand up in the crowd in addition to the 4 at the head of the room (and the lobbyist got slightly peeved because by his count, they were missing some people, another nice touch!). This was followed by general remarks about the bill at hand under discussion, what was good, what was bad, what was happening to it, etc. as well as some of the background to how the legislative process works during the rest of the year mixed in. Somewhere in there was a pep talk about how great next year was going to be for everyone. While all of this was going on, we would have occasional interruptions as various high profile politicians dropped by to share their perspectives on the current bill(s) under consideration, sharing their respect and admiration for how well the organization was represented within the capital, and how they hear the associations concerns on a regular basis. These were individuals like:
- Casey Cagle – Lieutenant Governor of the State of Georgia
- Chip Rogers, Chairman, Senate Finance Committee
- James Mills, Chairman, House of Representatives Banks & Banking Committee
There were a few others, but sadly, I neglected to write down their names. All had glowing statements for the association and iterated several times that the issues and concerns of the association were being heard at all levels of government; most offered a few minutes time to answer any questions from the group. The Commissioner and Deputy Commissioner from the Department of Banking and Finance stayed the entire time to help with any questions as the day progressed. After the high profile guest politicians had come and departed, the entire room got up and walked down and took a group picture on the Senate floor of the capital (Initially, I didn’t think that was going to be cool, I was wrong.) This time I didn’t feel like an imposter, I felt like a guest. Apparently, there was also supposed to be a picture with the Governor, Sonny Perdue, but that was cancelled at the last minute (but, maybe next time!). At no time were we ever asked to go find our local representative and lobby them with a personalized, random, off-message, and un-rehearsed set of talking points, because, well…
… you could tell things were being handled. The three politicians and two regulators I mentioned above are probably the most influential in the state in terms of passing, modifying, and/or killing finance regulations, and they were clearly involved. You also had at least 11 other people in the room (and apparently there were more) on the legislative committee who were actively working issues throughout the year. This association felt confident enough in its lobbying position that they could afford to spend their time during Lobby Day educating their members, inviting high profile politicians to come by and share their thoughts, and schedule fun photo opportunities for the group. It felt like a fieldtrip and not an incursion into enemy territory.
Now, if this had been your experience, would you have felt it was then incumbent upon your short time in the capital to go brace some poor legislator from your district, in a dark hallway, without an appointment, who may not have even heard of the bill yet?
Yeah, I didn’t either.
In Agreement
Interestingly, in this case, both associations were opposed to the same bill. But what a world of difference organization and leadership make to the success of an organization.
Which group would you rather be a part of?
These are both volunteer organizations, both important constituents in the mortgage industry, and both driven by member donations and time. So which association would you rather have at your back? Which one do you feel would be able to get your interests heard at the capital? If GAMB (GMBPAC) and MBAG were ever on opposing sides of a bill, who do you think would win the hearts and minds of legislators? Who do you think would get the royal shaft?
Judgment Day
Mortgage brokers are being assaulted from all sides right now, from state and federal regulators, consumer groups, mortgage insurance companies, and lenders. Your role in this industry is in serious jeopardy. To slightly augment a Terminator line, “Listen to me if you want to live”.
Get active in your lobbying associations, for mortgage brokers in Georgia, that’s GAMB and nationally that’s NAMB. (Correction by Sherwood: Although GAMB and GMBPAC can support each others lobbying efforts, they are technically separate legal entities, thus leading to my original attribution mistake. Join and/or participate in either one, they both seriously need your help). I am telling you; you are not being represented well enough right now for you to survive the public onslaught because your role in this industry is an abstraction, your association doesn’t have the right message or enough resources, your leaders are floundering, and you are not involved and accounted for. You will be regulated out of business if your state and national presence doesn’t radically change. Give these organizations your money, but more importantly, give them your time; right now, or you won’t be around in twelve months. And if you find your leaders aren’t getting it done, raise bloody stinking hell until those leaders are replaced. And if you can’t find quality replacements, step up and lead yourself. I’m completely convinced that your survival in this industry depends on it.
And don’t mistake this as broker bashing and jumping on the public bandwagon. While our company does enjoy a healthy roster of lender clients, mortgage brokers still represent a majority of our business. We have no incentive or interest in seeing brokers fail. We would very much like to see you succeed and our involvement in your associations over the years reflects that commitment. But the sober analysis of our balance sheet is crystal clear; lenders are thriving and brokers are dying.
For you to survive, you must radically and immediately change the conditions on the ground, you must improve:
- Your lobbying
- Your messaging
- Your involvement
To be clear, your state and national associations are the only advocates you have right now against a tidal wave of opposition. Without GAMB (or state equivalent) and NAMB, you are alone and you will be swept away by the coming tsunami. You must vigorously and rigorously get involved, right now, if you want to continue to survive in this industry.
Otherwise, in the court of public opinion, you will be weighed, you will be measured, and you will be found wanting. You will also be out of a job.
< Flame Retardant Suit: ON >
Comments/feedback welcome.
| About the author: |
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Sherwood Lawrence
Sherwood joined Top of Mind Networks in November 2004 after working seven years at Microsoft; providing rare but powerful evidence that it is possible for an individual to emerge from the collective even after full assimilation has occurred. When he is not listening to ambient, electronica, dance music or reading a scifi/fantasy novel, he loves to transform great ideas into compelling products and services. |
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