Ellie Mae Inc., the provider of software used by lenders to make home loans, said a technical breakdown caused by a cyber attack this week has prevented some mortgages from closing.
There was no data breach and company technicians are working to restore service, the Pleasanton, California-based company said in a statement today. About 20 percent of all mortgage originations in the U.S. are processed through Ellie Mae, according to the company. It uses a network that connects lenders, brokers, appraisers, insurers and credit companies.
In the past year, the networks of retailers Target Corp. and Neiman Marcus Group Ltd. were breached, while JPMorgan Chase & Co. and other U.S. banks have defended against attacks aimed at knocking their computers offline. The hacking at Ellie Mae has prevented some lenders from closing homes loans, delaying buyers and sellers from completed their deals.
“Our business is at a standstill,” said St. Louis, Missouri-based USA Mortgage loan officer Bob Rutledge, who has half a dozen clients who have deals on hold. “It doesn’t just affect homebuyers. It affects home sellers too. They have purchases lined up too, and they can’t close on those deals if they can’t sell their house. The domino effect is astronomically huge.”
Hackers from the U.S., Russia and Ukraine have developed a thriving trade in software and commands that takes advantage of computer bugs and glitches, according to a March 25 report by RAND Corp. and Juniper Networks Inc. Stolen data, such as credit card numbers and technology designs, are bought and sold through illicit forums, with as many as 80,000 members that only can be accessed through virtual private networks, according to the report.
Intercoastal Mortgage Company, which made $915 million in home-loan transactions last year, mostly in the Washington D.C. area, had 12 loans worth about $5 million expected to close yesterday. The closings are on hold due to the technical problem, according to Tom Pyne, the firm’s president.
“All the vetting had been done,” Pyne said. “All that was left to do on the 12 transactions was to send the closing documents. Potentially you had borrowers in moving vans without the ability to close on their homes. There is nothing worse in our industry.”
The majority of loans impacted are purchase mortgages. This means that borrowers’ are inconvenienced and there could be 2 or 3 deals that are affected if people buying and selling a house are closing on the same day, Pyne said.
Ellie Mae, which was founded in 1997, grew from a startup in the San Francisco Bay area to a major provider of technology used in processing U.S. residential mortgages. Last year, the company booked $128.5 million in revenue, with $12.6 million in profit.
Ellie Mae shares fell 1.6 percent to $28.39 in New York trading. The stock has gained 22 percent in the past year.