After foreclosure-gate, will WikiLeaks data be the next blow?

It appears that foreclosure-gate, that media dust storm that contributed substantially to cutting distressed real estate sales by one third in the third quarter, is finally waning. What, for a moment, looked like a hurricane that would see millions of house keys blown into the hands of defaulted borrowers who hadn’t paid a dime on those homes in over a year has now degraded into more of a tropical storm, still dangerous but not necessarily deadly. Of course, it’s just when you think you’re doing well that the knockout punch finds its way through your defenses. Foreclosuregate was a blow to the gut for many servicers in the industry. Unfortunately, those punches are usually followed up by a left hook to the jaw. I fear that’s what the Wikileaks story will become. When Wikileaks founder Julian Assange told Forbes magazine’s Andy Greenberg that he could publish documents that would prove an “ecosystem of corruption” inside a big US bank, people began slowly turning toward Bank of America. It’s common knowledge that there are plenty of problems with the loans the bank acquired from Countrywide. Any institution that bought a portfolio of subprime or Alt-A product has already experienced that kind of pain. But then, that would be nothing compared to what Assange is threatening. The rumor mill puts the portable drive with the allegedly incriminating e-mail correspondence at about 6 gigabytes. By now, attorneys all over the country are wondering if this treasure trove of information might really be available. It’s plausible, even if we’re not talking about BofA. There were plenty of institutions that were hurt and then acquired during the downturn. Any executives that lost a career, a pension and a bonus could have been angry enough to steal the sensitive information. It could have happened, but it shouldn’t have been possible. We don’t know if Assange has the information or whether the institution is BofA. Nor do we know whether there is really anything damaging in the information. However, we should realize that executives working in a financial institution have a fiduciary responsibility to keep certain information private. We are concerned that someone is threatening to use information that is purported to be damaging and then standing by while the stock prices for institutions that might be involved take a plunge. Evidence of an alleged illegal act should be presented to the authorities, and consequences for illegally obtaining that information, if it was obtained illegally, should also be addressed. The worst part is that we have the technology and the know-how to secure our financial institutions. While most firms are highly secured, not every firm his has been careful enough about safeguarding their data and systems from this type of intrusion or data theft. Computers on a network can be configured so that external drives, including flash drives, will not be recognized. Server software can ensure that any e-mail sent outside of an institution is tracked and audited so that management can tell exactly where it originated and where it went. We’re living through difficult times. People will become disgruntled. What if the information reveals a pattern of behavior that calls into question the validity of the mortgage loans these institutions originated? I certainly hope that’s not the case here, as that would be a blow the industry might find very hard to withstand. The author requested anonymity for legal reasons. Have an issue you want to sound off on? Email the editor of HousingWire.