[Infowarrior] - Fingerprint Registry in Housing Bill

[Richard Forno]

Fingerprint Registry in Housing Bill!!!
Posted by John Berlau
http://www.openmarket.org/2008/05/23/fingerprint-registry-in-housing-bill/

Fingerprints are considered to be among the most personal of  
information, and fingerprint databases created and proposed in the  
name of national security have generated much debate. Recently,  
“Server in the Sky” — a proposed international database of the  
fingerprints of suspected criminals and terrorists to be shared among  
the U.S., U.K. and Canada — has ignited a firestorm of controversy. As  
have cavalier comments by Homeland Security Secretary Michael Chertoff  
that fingerprints aren’t “personal data.”

Yet earlier this week, a measure creating a federal fingerprint  
registry totally unrelated to national security passed a U.S. Senate  
committee almost without notice. The legislation would require  
thousands of individuals working even tangentially in the mortgage and  
real estate industries — and not suspected of anything — to send their  
prints to the feds. The database and fingerprint mandates were tucked  
into housing and foreclosure assistance bills that on Tuesday passed  
the Senate Banking Committee by a vote of 19-2.

The measure the committee passed states that “an indvidual may not  
engage in the business of a loan originator without first … obtaining  
a unique identifier.” To obtain this “identifier,” an individual is  
requiredto “furnish” to the newly created Nationwide Mortgage  
Licensing System and Registry “information concerning the applicant’s  
identity, including fingerprints for submission” to the FBI and other  
government agencies.

The fingerprint provisions are contained in a “manager’s amendment”  
that was hammered out by committee Chairman Chris Dodd, D-Conn, and  
Ranking Member Richard Shelby, R-Ala., on Monday and attached the next  
day to a broader housing bailout bill that had been scheduled for a  
comittee vote. That bill, the “Federal Housing Finance Regulatory  
Reform Act of 2008,” expands the lending authority of the Federal  
Housing Administration and the government-sponsored enterprises Fannie  
Mae and Freddie Mac to refinance the mortgages of troubled borrowers  
and banks.

The amendment adopted the fingerprint provisions in a section called  
the “S.A.F.E. Mortgage Licensing Act.” The fingerprints will be part  
of what the amendment calls “a comprehensive licensing and supervisory  
database.”

And the database would cover a broad swath of individuals involved  
with mortgage lending. The amendment defines “loan originator” as  
anyone who “takes a residential loan application; and offers or  
negotiates terms of a residential mortgage loan for compensation or  
gain.” It states that even real estate brokers would be covered if  
they receive any compensation from lenders or mortgage brokers. Since  
many jobs in both real estate and mortgage lending are part-time and  
seasonal, even some of the most minor players in the mortgage market  
may have to submit their prints.

Justifications listed in the bill for this database include “increased  
accountability and tracking of loan originators,” “enhance[d] consumer  
protection,” and “facilitat[ing] responsible behavior in the subprime  
mortgage market.”

I conducted a wide Internet search and found fingerprint provisions in  
some state bills, but I don’t know if any, or how many passed. But in  
my search, I could find no arguments explaining how, specifically,  
collecting the fingerprints of loan originators would better serve  
borrowers getting mortgages. I called the Senate Banking Committee  
asking this question, but my call has not been returned yet. (I will  
update OpenMarket readers when and if it is.)

I imagine that, yes, a fingerprint registry might stop an ex-con from  
handling loans, but I doubt it will make even a dent in the lending  
problems the bill aims to stop. And I would venture to guess that the  
vast majority of the problem mortages were handled by employees with  
no criminal record. Rather, this seem like another thoughtless idea  
that lets politicians brag that they are “getting tough” about a  
particular problem.

But this fingerprint database, in addition to the privacy violations,  
might create a host of new problems of mortgage fraud. Identity theft  
involving fingerprints is becoming a major concern among data security  
experts. Security consultant Bruce Schneier has argued that hackers  
can steal electronic images of fingerprints directly from the  
databases they are stored in. And there is virtually nothing in this  
bill about security procedures that would apply to this database.

It amazes me. We have wrenching debates about privacy and freedom vs.  
national security when it comes to proposed anti-terrorist programs.  
But then a smililar scheme is done in response to an economic problem,  
and it almost escapes without notice. A similar thing has happened  
with anti-money laundering requirements that mandate that banks  
effectively spy on their customers for possible violations of  
everything from drug laws to the tax code.