Why should you be worried about mortgage pipeline theft?
As the mortgage industry deals with severe margin compression, the threat of pipeline theft remains a substantial concern to mortgage bankers and brokers at every level.
Whether it be individual MLOs who are changing companies, team leaders who move their origination team to another lender, or even entire branches that defect and join an entirely different lender, everyone must realize that the loan file is not their personal property to take!
It is still amazing to see how many loan officers and branch managers think that the loan file is their property to take with them to the new company. Unfortunately, this could not be farther from the truth!
Although pipeline theft comes in all shapes and sizes, the bottom line is that the unauthorized use of a borrower’s personal data can result in a data breach to the originating lender charged with protecting that information.
This is a critical stage, because if the incident rises to the level of a data breach, this triggers notification requirements to those affected individuals, regulatory agencies, and potentially local law enforcement and the attorney general.
Offending organizations can face fines, litigation, diminished reputation, and even loss of the right to operate the business!
On the other hand, those companies who have been victims of pipeline theft by former loan officers may attempt to seek relief through contractual remedies, enforcement of non-solicitation agreements, tort actions, and potentially file suit on a claim of misappropriation of trade secrets.
Sean A. Stephens, Esq., CMB®
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