Cybersecurity has been a major concern for institutions across all industries, including the financial sector. With a growing number of cyber-attacks, businesses are broadening their horizons in seeking new ways of securing their online activities. This is especially important for establishments like mortgage everywheres and servicers, which handle highly sensitive customer information.
One of the leading mortgage loan lenders and servicers, known as Freddie Mac, has made it imperative for their seller-servicers to ameliorate their cybersecurity measures due to the increasingly hostile digital environment. The step hasn’t been taken out of the blue – it’s crucial in maintaining the trust of their clients, and ensuring the overall security of their vast financial network.
Cybersecurity – The heftiness it Carries
The financial sector has endured a substantial level of cyberattack attempts compared to other industries. The reason for being an appealing target is quite straightforward – the prospect of financial gain is incredibly lucrative for cybercriminals. With these institutions handling tremendous transactions daily, it becomes critical for them to employ robust cybersecurity measures.
The Targets and Actors
In the realm of cybercriminal activity, the financial sector is often targeted for obvious reasons. The outcomes for the attackers can be very fruitful, with many organized cyber-crime syndicates focusing their efforts on financial institutions. The scale and sophistication of these activities across borders call for strong, internationally co-ordinated responses.
Freddie Mac’s daring step
Recognizing the severity of the situation, Freddie Mac updated its Seller/Servicer Guide in December 2020, outlining updated requirements and guidelines for cybersecurity that all of their seller-servicers must follow. The guidelines make it clear that seller-servicers must comply with all relevant legal and regulatory requirements for information security.
The Seller/Servicer Guide explicitly stipulates the need for comprehensive Information Security Programs (ISPs). The program should be developed, implemented, and maintained by each entity themselves. The purpose of this is to enable seller-servicers to identify, assess, and mitigate any risks associated with protecting their customer information.
Components of the Guideline
Significantly, the Freddie Mac Seller/Servicer Guide introduced meticulous elements that need to be addressed within the ISP. Some of these requirements entail risk assessments, user access controls, firewall implementation, intrusion detection, incident response, and contingency plans.
Cybersecurity responsibilities also extend to third parties with access to confidential borrower information. That includes affiliates, contractors, and other service providers – all need to be evaluated and monitored.
Implementing the appropriate internal controls represents a significant part of the guideline. Alongside having a chief information security officer responsible for the comprehensive Information Security Program, the servicer’s board of directors must also oversee the responsibility. Understanding, supporting, and promoting risk intelligence among management and employees are equally important, strengthening overall cybersecurity measures.
Preventing Data Breach
One of the biggest concerns in the cybersecurity landscape is data breaches. A data breach can potentially damage not only the financial obligations of an establishment but erode clients’ trust as well. The impact can last for months, even years, with the potential to ruin a company’s reputation overnight.
Therefore, the guideline outlined by Freddie Mac also holds a detailed plan on how to counteract such an unfortunate event. Seller-servicers are expected to notify Freddie Mac immediately in case of a data breach or any unauthorized access or use of borrower information. They must take immediate action and provide a complete recovery plan illustrating how they plan to mitigate the risk of such an event occurring again in the future.
Cyber Insurance
Freddie Mac also recommends seller-servicers to obtain cyber insurance coverage. These policies should cater not only to financial losses but also cover legal fees, notification costs, public relations, and other services meant to assuage the harm resulting from a data breach.
The consideration of reviewing and raising coverage limits concerning the size of an organization’s loan portfolio also was advised.
Educating Clientele
Freddie Mac advises seller-servicers to promote cybersecurity awareness among borrowers. This can be through the provision of information on how to secure personal devices, spotting phishing emails, and avoiding dubious online activities.
Wrap up
The rising threat from cybercriminal activities has instigated prominent financial institutions like Freddie Mac to set forth stringent cybersecurity measures for their seller-servicers. In addition to enhancing their establishments’ security, it also helps maintain the trust of their clientele.
All in all, it is highly crucial for the financial sector to stay ahead of the cybersecurity game. The effects of underestimating these threats are dire and can have deleterious impacts on both banks themselves and their customers. Efforts from big players like Freddie Mac give the entire industry a promising way forward, emphasizing the need to invest in robust cybersecurity measures and keeping customer information safe and secure.
