Fundingshield Newsletter 120 – Importance of Fin-tech/Reg-tech Investments in Mortgage Bank M&A & Consolidation

Total loan value of verified, validated and certified loan closings to end of year 2016

Total $ amount of transactions identified as erroneous / fraudulent &  corrected or redirected with FundingShield Certification Cost of FundingShield Certification versus Dollar Value of Potential Client Loss Exposure: Top 25 mortgage lenders clients serviced
~ $108 Billion+ ~ $19 billion+ >0.05%


Importance of fin-tech / reg-tech investments by mortgage banks in mergers or entities seeking consolidation.

The Mortgage banking market continues to go through consolidation where a number of our clients and prospects in our development & on-boarding pipeline have found value in fin-tech solutions provided by Fundingshield during the merger integration.  For those firms that are targets or seeking a sale/merger reduced costs and enhanced controls leveraging technology are driving factors in enhancing enterprise value pre & post-merger.  Solutions such as Fundingshield’s Guardian, WAVs or SPC products offer solutions around automated third-party oversight, wire controls and confirmation of protections from cyber-based wire diversion threats in addition to maximizing in place title and cyber insurance policy value.  Further today’s market has a rising amount of aging principals nearing retirement, small to mid-size mortgage banks seeking competitive advantages and acquirers & sellers forming a valuation thesis where investment into fin-tech solutions will be a key component of enterprise value for all parties.

Stratmor’s February newsletter WHAT PROSPECTIVE SELLERS CAN LEARN FROM TODAY’S M&A MARKETPLACE included “The Top 10 Worst Seller Characteristics” which included, “The existence of a major legal matter or regulatory action which cannot be resolved or settled prior to the closing date.”  This extends to lack of effective controls pertaining to data security, funding / settlement processes and wire verifications in a market with enhanced cyber threats that Fundingshield combats daily.  Merger integrations offer additional risks where processes, procedures and management of expanded footprint and personnel can create inconsistent and changing policies that create gaps for fraud and cyber criminals to prey on.  During this process, it is paramount to have effective information security protocols across TargetCo & AcquisitionCo that are uniform. One such best practice is to have a unified wire authentication and control system such as FundingShield’s Wire Account Verification System (WAVs) or our Guardian loan closing certification service to provide organizational risk reduction, assure compliance with regulatory guidelines and reduce the overall total operational costs associated with an expansion/merger and thereafter.

Fundingshield provides a prevention strategy where if a breach affects the settlement process, the existing CPL coverage is verified to be enforceable against transaction level closing documents (which have been further validated and recognized by the title insurance parties).  These same documents when coupled with a lender’s cyber security policy and the organization’s control policies and procedures can be used to demonstrate that adequate controls are in place to make a substantiated claim against the cyber security policies lenders have.  

With the added control and documents in place from Fundingshield the lender will have the data information to:

  • Fully demonstrate to regulators, plaintiff bar or others that controls are in place and being used.
  • Show remediation strategies are in place for recouping funds and that the losses are valid.   
  • Provide law enforcement officials with a detailed track record of information at the loan level and the network / data layer to triangulate and record the event which can lead to more successful investigations and prosecution.  

Operationally, the organization has removed a significant level of risk from the table and they can get back to the business of originating loans and cyber criminals are left to look for more vulnerable targets.

About FundingShield

FundingShield is a leading Financial Technology company and the only provider of active loan level diligence for closings to the residential mortgage industry.  The Company’s array of services provides active verification and validation at the loan level for mortgage closings and detailed analysis of the documentation used as well as systems to manage 1000’s of third party relationships. Our products & services include:

  • Verification and validation services at the loan level of closing documents for lenders, insurers and title companies
  • Confirmation of title insurance coverage for lenders backed by FundingShield’s GUARDIAN CERTIFICATE
  • Automated audit compliance management systems for 3rd party service providers of lenders, title & state agencies & appraisers.
  • Cyber security playbook, Cyber threat management,  online brand reputation monitoring and brand protection, 24/7/365 tracking of key property, personnel & vendors with threat reporting automation leveraging millions of public data points.
  • Specialized underwriting services to insurance companies and lenders as well as closing process audit reviews.

For More information on FundingShield, to schedule a WebEx demo or to see what other services we provide the residential mortgage industry please email or call (800) 295-0135 x2