Before starting 360Legal (a process serving company), we were purchasers of process serving while working for a large firm. During our tenure at the firm, we discovered that the significant national process service company we used had claimed all their work was done in the US. It was not. It was a bald-faced lie. An off shore company did the data processing and E-Filing end of their service of process company. Worse, we attested during a security audit for one of the mortgage banking companies we worked with that all work was done on shore based on this process server’s statements.
This perturbed us. First, they misrepresented the fact that they were entirely US-based; when sending work offshore. They lied. Lying to your clients is an unacceptable breach of professional integrity. Second, and perhaps more importantly, near shoring exposes your clients to privacy risks. Finally, we believe in being a US Based company. Since then, we left the firm, started 360Legal, and the “other” process server has changed its marketing to admit to “near shore” processing. It causes one to wonder just how different Nearshore is from Offshore.
For the record, 100% of 360 Legal’s services are done within the US. We do not use offshore contractors for any part of our IT or E-Filing. It might cost us a bit more, but we don’t worry about sanctions from GSE-backed mortgages blowing back on our clients.
The mortgage sector is facing a growing challenge quickly becoming an unforeseen threat: near shore processing. Near shore processing refers to moving data, services, and processes from one country to another, usually in close proximity. This process has become increasingly attractive for businesses looking to reduce costs and increase efficiency in their operations. However, it also poses a serious risk to financial institutions’ security and 
customers’ sensitive data.
Tell Me About The Dangers Of Near Shoring When You Have Government-Backed Mortgage Processing
Near shoring, which refers to moving business operations to a country geographically close to the company’s home country, can have several potential risks regarding government-backed mortgage processing. One significant risk is the potential for differences in regulatory requirements and compliance standards between the home country and the near shore location. This can make it difficult for companies to ensure that their operations comply with all applicable laws and regulations, which can lead to fines, penalties, and reputation damage. Additionally, near shoring can raise concerns around data security, as sensitive financial and personal information may be more vulnerable to breaches and cyberattacks in a foreign location. Finally, language barriers, cultural differences, and other challenges can lead to communication issues and misunderstandings between the nearshore location and the home country.
If You Are Working On A HUD Mortgage, Can You Be Specific About Using Near Shore Contractors?
When using contractors that work Nearshore for work on a HUD (Housing and Urban Development) mortgage, there are several specific risks and concerns to consider. One critical risk is the potential for differences in regulatory requirements and compliance standards between the contractor’s nearshore location and the United States, where HUD operates. This can make it difficult for the contractor to ensure that their operations comply with all applicable HUD regulations and standards.
Another risk is data security and the protection of borrowers’ sensitive financial and personal information. HUD has strict guidelines for handling personal information, and non-compliance can result in fines and penalties. However, if the contractor’s near shore location does not have the same data protection laws and regulations, it can put sensitive information at risk of breaches or cyberattacks.
Language barriers and cultural differences may also lead to misunderstandings and communication issues between the near shore contractor and HUD, resulting in errors and delays in mortgage processing.
Finally, HUD may have specific requirements for the use of contractors and subcontractors, such as certifications or qualifications. Using near shore contractors that do not meet these requirements could result in non-compliance and penalties.
It is crucial for companies to thoroughly evaluate the potential risks and compliance concerns before using nearshore contractors for HUD mortgage processing and have a plan to mitigate these risks.
Are These Issues Similar If The Mortgage Is Fannie Mae Or Freddie Mac?
The risks and concerns related to using near shore contractors for Fannie Mae or Freddie Mac mortgages are similar to those for HUD mortgages, as all three are government-backed entities with strict regulations for mortgage processing.
Fannie Mae and Freddie Mac, both government-sponsored enterprises (GSEs), also have guidelines and regulations in place for handling borrowers’ personal and financial information, as well as requirements for the use of contractors and subcontractors. Non-compliance with these guidelines can result in penalties and reputation damage.
Additionally, Fannie Mae and Freddie Mac have strict standards for the quality and accuracy of the mortgage processing work. Therefore, any errors or delays caused by communication issues or cultural differences with nearshore contractors could impact the quality of work.
Finally, Fannie Mae and Freddie Mac also have cybersecurity regulations and guidelines that contractors must comply with to protect sensitive information.
It is vital for companies to thoroughly evaluate the potential risks and compliance concerns before using near shore contractors for Fannie Mae or Freddie Mac mortgage processing and have a plan to mitigate these risks.
Is Near Shoring Any Safer Than Off Shoring When It Comes To Processing Mortgages For A GSE
Near shoring may have advantages over off shoring when processing mortgages for a GSE (government-sponsored enterprise) such as Fannie Mae or Freddie Mac. Still, it also has its own set of risks and concerns.
One advantage of near shoring is that the country where the nearshore contractor is located is typically geographically closer to the United States, making communication and travel easier and less expensive. Additionally, cultural differences may be less pronounced between the two countries, which can help avoid misunderstandings and delays.
On the other hand, near shoring does not necessarily eliminate the risk of regulatory compliance or data security concerns, as the contractor may still be subject to different laws, regulations, and security standards.
Whether near shoring or off shoring is safer depends on the specific circumstances and the company’s ability to manage and mitigate the risks. Therefore, it is important for companies to thoroughly evaluate the potential risks and compliance concerns before using near shore or off shore contractors for GSE mortgage processing and have a plan to mitigate these risks.
Is It Legal To Offshore Process Data Related To Mortgages For GSE-Backed Mortgages?
It is legal to off shore the processing of data related to mortgages for GSE (government-sponsored enterprise) backed mortgages. Still, some specific regulations and guidelines must be followed to ensure compliance with federal laws and regulations.
The GSEs, such as Fannie Mae and Freddie Mac, have guidelines for handling borrowers’ personal and financial information, as well as requirements for the use of contractors and subcontractors. These guidelines must be followed for the off shore contractor to comply.
Additionally, the off shore contractor must comply with federal laws such as the Gramm-Leach-Bliley Act (GLBA) and the Dodd-Frank Wall Street Reform and Consumer Protection Act, which have provisions related to data security and the protection of sensitive financial information.
The offshore contractor must also comply with the Fair Credit Reporting Act (FCRA), which regulates consumer credit information collection, dissemination, and use.
It is important to note that non-compliance with these laws and regulations can result in fines, penalties, and reputation damage. Therefore, it is crucial for companies to thoroughly evaluate the potential risks and compliance concerns before using off shore contractors for GSE mortgage processing and have a plan to mitigate these risks.
In conclusion, the dangers of near shore contractors in processing mortgages must be taken seriously. It is paramount that lenders, and by extension the law firms that represent them, carry out due diligence and ensure the safety and security of their customer’s data. Customers must be aware of potential risks with off shore data processing, such as reduced privacy and security, lack of control over data access, and inability to detect malicious activities. Companies should increase visibility into their processes and prevent unauthorized access to sensitive information.
