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Technology
AI driven attack Artifical Inteligence EU Mortgage Industry Risk of Technology Technology

Using AI for Loans and Mortgages is Big Risk, Warns EU Boss

 

The mortgage lending sector is experiencing a significant revolution driven by advanced technologies like artificial intelligence (AI) and machine learning. These cutting-edge technologies hold immense potential to revolutionize the lending process. 
However, alongside the benefits, there are also valid concerns surrounding the potential implications for human employment and the need to mitigate bias and discrimination in AI-driven decision-making. 

In an interview with the BBC, Margrethe Vestager, who is the European Commission's executive vice president, emphasized the importance of implementing "guardrails" to address the significant risks associated with technology, particularly in the context of artificial intelligence (AI). 

She highlighted the need for such precautions, especially when AI is involved in decision-making processes that directly impact individuals' livelihoods, such as determining their eligibility for a mortgage. 

How is AI benefiting Mortgage Lending Industry? 

1. Better customer experience: AI enables personalized customer experiences, allowing mortgage advisors to understand customer needs better and enhance their overall experience. 

2. Automation of routine tasks: AI automates repetitive tasks like data entry and document processing, freeing up time for mortgage advisors to focus on more strategic activities. 

3. Predictive analytics: AI analyzes data from multiple sources to provide insights into market trends and customer behavior, empowering mortgage advisors to make informed decisions and anticipate market changes. 

4. Boost risk assessment: AI algorithms analyze vast amounts of data, helping mortgage companies make better risk assessments and underwriting decisions, reducing loan defaults, and improving efficiency. 

5. Process optimization: AI identifies areas for process improvement by analyzing past transactions, enabling mortgage companies to streamline processes, reduce costs, and increase efficiency. 

6. Fraud identification: AI uses machine learning to detect potential fraud in mortgage applications, safeguarding both mortgage advisors and customers and ensuring the integrity of the lending process. 

7. Document management: AI automates document management, simplifying storage, retrieval, and management of customer information and loan documents, minimizing errors, and improving efficiency. 

8. Overcoming sales obstacles: AI tools like ChatGPT can assist in generating content ideas, helping mortgage professionals overcome content blocks, and leveraging video and social media for effective sales strategies. 

What are the risks of AI according to the Margrethe Vestager? 

Recently,  Margrethe Vestager, said that implementing "guardrails" is crucial to mitigate the significant risks associated with technology. Specifically, she emphasized the importance of having these measures in place when AI is employed to make decisions that directly impact individuals' livelihoods, such as determining their eligibility for a mortgage. 

Although the risk of extinction due to artificial intelligence (AI) is minimal, there are other pressing concerns to address. Discrimination is a prominent issue, where individuals might not receive fair treatment based on their true identities. 

Margrethe Vestager emphasized the need to prevent bias related to gender, race, or location when AI systems are employed by banks for mortgage assessments or by social services in local communities. It is essential to prioritize fairness and equal treatment to ensure everyone is respected and valued.
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Mortgage Industry
Alvaria Customer Information Cyber Security Data Breaches Mortgage Industry

Inside the Carrington Mortgage Services Ransomware Attack: Compromised Data and Cybersecurity Measures

cybersecurity incidents in the mortgage industry

The Carrington Mortgage Services Ransomware Attack

Cybersecurity incidents have become increasingly common in the mortgage industry, with multiple lenders and servicers experiencing data breaches that compromised sensitive customer information. Carrington Mortgage Services is the latest player to be impacted, as a ransomware attack at its vendor Alvaria compromised the information of its customers, including partial Social Security numbers. 

In this blog post, we'll take a closer look at the details of this breach, as well as other recent cybersecurity incidents in the mortgage industry.

Details of the Data Compromised in the Attack

Last week, Carrington Mortgage Services announced that a technology company it uses, Alvaria, experienced a ransomware attack in March. As a result, the personal information of some of Carrington's customers, including partial Social Security numbers, was compromised. 

 Although neither Carrington nor Alvaria disclosed the total number of affected clients, a letter to state attorneys general indicated that at least 4,167 residents of Massachusetts were impacted. This is the most recent hack of a mortgage player, following a series of incidents across the industry last year. 

Alvaria's Response to the Breach

Alvaria responded to the attack by restoring its operations through backups and securing its networks. According to the Lowa letter, “the unauthorized actor obtained some data associated with the company maintained in the technical system log and temp files.” “While Alvaria performed its forensic investigation, the company completed its analysis of the affected data on April 4, 2023 

According to Carrington Mortgage Services, compromised data due to the breach at Alvaria includes clients' names, mailing addresses, telephone numbers, loan numbers and balances, and the last four digits of their Social Security numbers. 

However, when asked about Alvaria's reported data breach, Carrington's attorney declined to comment, while Alvaria's general counsel deferred to a company spokesperson. Alvaria did notify the FBI and took additional security measures following the breach, although the details of these measures were not disclosed. 

Impact of Data Breaches on Mortgage Lenders and Servicers

In an effort to mitigate the effects of the breach, Carrington is offering customers 24 months of free credit monitoring and fraud consultation from Experian. In a letter to the Iowa Attorney General, Carrington defended its information security diligence and stated that it had received positive reviews from state and federal regulators, rating agencies, and banking counterparts. 

The letter signed by the attorney for Carrington said: “Nevertheless, in light of this event, the company has begun an additional assessment of Alvaria's technical security measures to ensure that Alvaria has been providing and will continue to provide the security measures promised to the company and to help ensure this type of incident does not happen again.” 

Carrington Mortgage Services has been actively involved in the mortgage servicing rights market and purchased $62.3 billion in 2020, making it one of the top 25 services in the country. In total, it holds $122.1 billion in MSRs from 682,000 borrowers. This incident is the second data breach at Alvaria within four months, with the previous attack being disclosed in February and impacting 4,695 customers. 

Other Cybersecurity Incidents in the Mortgage Industry

The Hive Ransomware group was responsible for this attack, and in November, the group released corporate records on the dark web, though no customer data was included. It's unclear whether the November breach affected mortgage customer data. In 2021 alone, various mortgage lenders have disclosed cybersecurity incidents that impacted 191,000 customers. 

These attacks have ranged in severity, from incidents affecting as few as 600 customers to a third-party breach that impacted 139,493 customers of Hatch Bank in California. Several class action complaints against impacted companies remain pending in federal courts, including those against servicers such as Key Bank, Lower, and Overby-Seawell Company.

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