In the spirit of Independence Day, the all-American ideal of homeownership and election-year enthusiasm, the Senate says it is determined to approve a substantial piece of housing legislation – the Housing and Economic Recovery Act of 2008 – even if it means cutting into the Senators' own holiday celebrations.
After all, ‘People I don't think want to leave here, hanging bunting around and eating hot dogs and hamburgers knowing every day thousands of Americans are falling into an abyss, losing their housing,’ Sen. Chris Dodd, D-Conn., told the New York Times.
(Whether Dodd will be able to fully savor his grilled delights on the Fourth of July now that everyone has heard about the alleged preferential terms and treatment he received on his own mortgages is undoubtedly a question for another Blog View.)
What is concerning right now is that within the Senate's bill itself – amid the familiar talk of refinance plans, expanded borrower counseling and government-sponsored enterprise modifications – lurks a buried tidbit that could have major ramifications for mortgage professionals from all facets of the industry.
Under the terms of a bill component called the SAFE Mortgage Licensing Act, sponsored by Sen. Dianne Feinstein, D-Calif., and Mel Martinez, R-Fla., anyone involved in originating a loan would be required to obtain a state license and meet a number of education-based and legal-related qualifications – including submitting fingerprints to the Federal Bureau of Investigation (FBI) for a national registry of industry employees.
How will fingerprinting loan originators – which the bill defines as ‘someone who accepts a residential mortgage application, negotiates terms on a mortgage, advises on loan terms, prepares loan packages, or collects information on behalf of the consumer’ – heal housing-market ills?
According to a statement from Feinstein, the reasoning is simple. ‘This will help put an end to abusive lending practices,’ she proclaimed. ‘It will ensure a high level of professionalism, and it will help rebuild confidence in the American dream of homeownership.’
A number of politically diverse organizations, including the American Conservative Union (ACU) and the American Civil Liberties Union (ACLU), promptly questioned Feinstein's logic and pointed out the potentially dangerous privacy violations that could result from such a system.
‘The rationale for this new fingerprint registry is thin,’ said John Berlau, director of the Center for Entrepreneurship at the free-market Competitive Enterprise Institute (CEI), in a recent Wall St. Journal editorial. ‘Were a significant number of bad loans made by ex-convicts?’
In a letter sent to Sen. Harry Reid, D-Nev., Mitch McConnell, R-Ky., the CEI, ACU, ACLU and other co-signers urged the Senate to reconsider its fingerprinting plan.
‘We think it is highly unlikely that proposed fingerprinting requirements will have any tangible benefits in solving problems associated with subprime lending,’ the groups stated. ‘Most of the lower-level employees targeted in this bill have little to do with the creation of mortgage products in question. And there is little, if any data, connecting risky lending to employees with criminal backgrounds.’
In addition to criticizing the intrusion of privacy created by requiring fingerprints, the organizations also expressed concern over the lack of any specified data-security safeguards for the fingerprint registry, as proposed in the bill. Identity theft involving fingerprints has emerged as a increasing concern, they note.
Finally, to avoid any surprises if/when the FBI shows up at your door with an inkpad, you may want to keep a close eye on the Senate's housing bill and the specific parts included in its final version.
According to a CNET.com piece by Declan McCullagh, so far, this fingerprint registry is heading toward creation in a disconcertingly stealthy manner. Any mention of it is absent from the official summary of the revised Senate bill, as well as the House version of the legislation, and in a departure from normal procedure, no copy of the revised Senate legislation was placed online. Happy Independence Day.
– Jessica Lillian, Commercial Mortgage Insight
