Senate Committee Votes To Fingerprint Lenders

tjstork recommends a blog post up at Openmarket.org on the passage by a Senate committee of a fingerprinting provision in a foreclosure assistance bill. The provision would require thousands of people connected with the mortgage industry, even tangentially — possibly including part-time and seasonal real estate agents — to send fingerprints to the feds for storage in a database. No explanation is in evidence as to how this would help the problem of loan fraud. The measure passed the Senate Banking Committee by a bipartisan majority of 19 to 2. "The measure the committee passed states that 'an individual may not engage in the business of a loan originator without first... obtaining a unique identifier.' To obtain this 'identifier,' an individual is required to '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."

Comments

Knee-jerk

[Shadow Wrought]

No explanation is in evidence as to how this would help the problem of loan fraud.

Uh, how about, so they can track the people making fraudulent loans regardless of what identity they assume? Maybe?

Re:Knee-jerk

[mpe]

It's the start of a national database, where everyone's fingerprints will be on file.

With certain exceptions, including police, politicans, elite criminals and terrorists.

Re:Knee-jerk

[hey!]

When most loan fraud is done via identity theft, how does this initiative assist in finding the people committing actual fraud? Well, consumer credit is a different thing. What they are dealing with is the home equity crisis. While it's not unheard of, it's hard to fence a house -- in the felonious sense of the word. So insiders who are inflating their sales and commissions by falsifying aspects of loan deals are a bigger fraction of the fraud being committed than in something like credit card fraud. So the idea is that this keeps a sharp operator from committing fraud, then skipping town and setting up shop in a different place under an assumed (or stolen) name.

Unfortunately 99% of this crisis fits the standard market bubble paradigm. The difference is that this hits people ... er... where they live. Once the irrational exhuberance is taken out of the market, the opportunity for fraud is greatly reduced.

In fact, we have the opposite problem: investors are spooked. Coming down hard on fraud might help a tiny bit, but primarily investors are spooked by their own collective insanity.

If it makes investors a bit less risk averse, it's worth doing, but I doubt it will. We need to get a bit more momentum going in the credit market. Financial markets have about a ten year memory, so the time to really come down hard on fraud will be in about five years.

Re:Knee-jerk

[unlametheweak]

This is just another excuse for tracking people. It's a Total Control/Total Surveillance initiative. Haven't heard of it yet? It's happening slowly throughout the world. In the "free" world it happens slowly and in the guise of protecting people.

Of course an educated and relatively egalitarian public (that is a public were economic abuses and monopolistic practices don't occur) will be naturally immune from abuses. But this is not what the Elite wants. The Elite would rather have a small percentage of poor people selling drugs and robbing liquor stores to excuse their abuses. Yep mortgage fraud may not be in the same category, but it is still an excuse.

Sometimes I wish that the people who are so adamant about their right to bear arms would actually demonstrate their rights against those that wish to oppress them (well not them, but the common folk). I can't see this happening however as power massages power.

naturally

[v1]

haven't you heard? when you can't find a way to solve the problem, you do the second best thing. Solve some other problem instead, and market it as a solution to the first problem.

Re:naturally

[Hankapobe]

haven't you heard? when you can't find a way to solve the problem, you do the second best thing. Solve some other problem instead, and market it as a solution to the first problem.

I would just call it a knee-jerk reaction which is the typical operating and decision method of our Congress. Of course, if they actually stopped to think and get their facts straight, they would immediately be accused of not doing anything or not acting fast enough.

Re:naturally

[Yvanhoe]

You mean that the job of a politician involves problem solving and that it can be hard ? Maaan, we should better start to favor competence over ideology in politics then...

Re:naturally

[aurispector]

Never happen.

This trend of creeping fascism has to stop.

Just like some other law I can think of...

[PC and Sony Fanboy]

No explanation is in evidence as to how this would help the problem of loan fraud. ... you mean, kinda like the PATRIOT act cutting down on terrorism?

Re:goodluckwiththat

[surmak]

Chances are they are already on file.

Solves *A* problem

[zippthorne]

But it doesn't solve the kind of problem that makes a "foreclosure assistance bill" seem like a good idea.

What they should do is pass a bill that requires new loans to be made under the following term:

For collateral backed loans, turning over the collateral relieves the debtor's obligation.

That forces the banks to assume the risk of risky loans instead of the borrower. Which is right and proper because they'll have a better understanding of what those risks are, anyway. Of course, they'll have to charge more for their money, and that will mean that some people won't be able to buy the house they want (and housing prices will drop somewhat to accommodate *some* of those people), but those are the people that would have found themselves homeless with thousands of dollars of debt after a pretty-likely future foreclosure, anyway.

Re:Solves *A* problem

[znu]

How would that ever work? The bank would effectively be assuming all risk for a decline in property values, but wouldn't share in any upside.

Re:Solves *A* problem

[znu]

In order for it to make sense for a bank to assume the same level of risk that would be involved in a direct real estate investment, it would have to charge an interest rate so high that it stood to make at least as much money as it would make from a direct real estate investment. (A "direct real estate investment" here meaning the bank just buying the property in its own name, and probably renting it out while waiting for it to appreciate in value.)

Charging interest rates that high wouldn't just put home ownership out of the reach of a huge fraction of buyers, it would also remove a major incentive for home ownership. You'd be paying interest rates so high that they would, on average, offset any appreciation in the value of your property.

There would be virtually no takers for such loans. As a result, housing prices would probably drop significantly (there would be much less demand), but you'd basically have to pay for a house with cash up front. Financial institutions and those few individuals with hundreds of thousands of dollars or more in liquid assets would end up snapping up all the property at severely reduced rates, and everyone else would simply have to rent, ultimately resulting in a massive ongoing wealth transfer away from the middle class.

Oops.

Fingerprint everybody

[PingXao]

Take DNA samples, too. Add cameras EVERYWHERE. Why pretend that isn't the goal, or that the majority of people are against it? One day, it might help the children by catching ch1ld pr0n predatr0s. Or catch that mafia guy down at the loan store who talked me into that loan I can't afford. Or the creep that sold me that gas guzzler last year.

Here's something I would really like to see: Drug tests for every elected office holder, every day. Make the results public as soon as they're available. No exceptions. Another would be to implement transparency on all elected office holders' bank accounts. Let the sun shine in.

Typical American Response. Ignore the real problem

[GISGEOLOGYGEEK]

Yes, Americans run out and throw away your privacy as fast as you can without thinking about it! The mortgage crisis was caused by a lack of fingerprints? Right!

You should have done what Canada and many other countries did DECADES ago to protect your citizens from the banks, protect your banks from your citizens, and to ensure the market could not be manipulated into such a crisis .... enact regulations that require a loan company to ensure:

- that mortgage applicants actually have the income needed to support paying back the mortgage! DUHHH!
- that a large enough down payment is made that if a small drop in the home's value happens, it won't eliminate the collateral the mortgage was secured on. (currently minimum 5% downpayment)
- that if a downpayment is not significant (under 25%), the mortgage applicant must have mortgage insurance.

Too many Americans still ignorantly believe that the mortgage crisis was accidental!

It was entirely predictable and preventable. It was entirely based on the greed of your unregulated banks!

Your housing market had prices that were rising so fast ... driven by easily obtained mortgages ... that your banks could make a killing by intentionally handing out mortgages to people who couldn't make the payments, forclosing on the mortgages and reselling the houses at a higher price to the next sucker!

I spoke to a young up-and-coming American mortgage broker recently who was not just entirely blind to the damage his industry had caused to the American (and world) economy for a short term again, he was dumbstruck with adoration and respect for the professors of American business schools that had come up with the idea and was going to attend a conference hosted by them soon after! He referred to his favourite mortgage applicants as NINJA's ... No Income, No Job Applicants!!!

Once the market turned, and prices stopped increasing, the mortgage pyrimid scam became unprofitable. Suddenly your banks couldn't resell all their stolen houses, suddenly your banks were stuck with huge amounts of debt that they couldnt carry.

But instead of stopping and minimizing the losses, and preventing the ruin of the American economy, they kept going! They intentionally carried the scam so far that not only could they not be punished for it lest it destroy your banking system, you as taxpayers were forced to bail them out for your own protection!

So you got scammed into mortages you couldnt afford, got your houses stolen back by the scammer, and are now paying off the debts through your taxes! It's the great American way! Life, Liberty, and the pursuit of being a victim of fraud perpetrated by other Americans!

So go out and submit those fingerprints. It will solve EVERYTHING!

A better idea: Fingerprint CEOs

[davidwr]

Fingerprint the CEOs and anyone with the final approval to accept or decline a lone, and leave everyone else alone.

If your bank uses an automated approval process, then designate some human being to sign off on the rules the automated process uses, and fingerprint him.

Even better, skip the bureaucracy and don't fingerprint people, just hold the companies responsible if they don't do due diligence on their hiring.

Geesh, this is banking, not munitions transport.

Two men sit in a train...

[JamesTRexx]

..from New York to Philadelphia. One of them keeps throwing pieces of bananas out the window and after a while the second man asks why he does this.
Why, it keeps the elephants away.
-But there are no elephants here.
See how good this works?

Get the point? :-)

Re:Typical American Response. Ignore the real prob

[rossz]

- that mortgage applicants actually have the income needed to support paying back the mortgage! DUHHH!

A friend of mine is a mortgage broker and explained the problem. The Feds demanded the mortgage industry provide more loans to minorities. All too often, minorities applying for loans did not have sufficient income to qualify. If they turned them down, AS THEY SHOULD HAVE, they would have been accused of discrimination. This whole mortgage crises was created by the Feds forcing the industry to give loans to people who had no chance of paying them back.

A secondary problem was idiots rolling over interest-only loans, hoping the market would keep going up. Interest-only loans aren't much different from gambling.

Sounds similar to SEC fingerprinting regulations

[malchus842]

I work for a large financial services firm. Everyone who comes to work there is required to undergo a background check and criminal records check, which includes fingerprinting (and running those fingerprints for matches in criminal and disciplinary databases). The goal with the SEC is, at least partly, to ensure that someone who has been convicted of securities fraud cannot sneak in after suspension of their license, etc.

Note, I'm not a licenses broker or any such thing - I'm in IT. But the rules apply.

Re:Typical American Response. Ignore the real prob

[scbomber]

OK, you're (or your friend's) fundamentally confused.

1) Most of the people defaulting on loans are not, in fact, minorities.

2) All the anti-discrimination provisions of federal housing law are public. Try http://www.ftc.gov/bcp/edu/pubs/consumer/homes/rea08.shtm for a start. None of it has anything in it about lowering standards, only prohibiting discrimination.

3) People can accuse of discrimination all they want; if they can't prove it who cares? There's no way defending those cases would be as expensive to mortgage companies as having the loans blow up.

So, sorry, but this problem cannot be blamed on the economic actors in the situation who had the LEAST control over what was happening. Aim Higher!

Big Deal

[Kostya]

Work for any financial firm (and if you write software for in a big city, odds are you are or have worked for a financial firm at one time) you have to get fingerprinted. No one throws a stink about that. After this ridiculous mortgage crisis, is it any surprise they extended it to include lenders?

Maybe I'm just used to it, so I don't see the big deal. But I think I have been fingerprinted at least 4 times over the past 10 years in order to work for financial firms.

Meh. Perhaps it is something to get worked up over. But it isn't really a new thing--perhaps it is to many here? This practice, or something like it, has been in place for years in the greater financial market.

Mirrored surveillance is no solution to this mess

[Anonymous Brave Guy]

Mirrored surveillance will never be a complete solution to the Big Brother problem, for the simple reason that power to act on the information is not equal on both sides. You can write a blog post about how unfair some cop busting you was, but you're still spending the night in jail and he's still at work the next day. The authorities, on the other hand, can abuse information to set you up, and you're still spending the night in jail and they're still at work the next day. Whichever side appears to have the information upper-hand, you're the loser.

Remember, you (assuming you're in the US) have a president who thinks your constitution is scrap paper and is busily ignoring it whenever it suits his purposes. We're not doing any better here in the UK: we have a Prime Minister who gained the office on an almost unbelievable series of political technicalities and has no popular mandate, who is busily trying to push through lots similarly abusive and unpopular legislation. Everyone who watches the news or reads a paper knows this, but what good does it do when there is now way to remove such people from office, or put them in a court where they must defend their actions or face the consequences?

When in doubt, blame the poor

[Nicolas MONNET]

The feds didn't demand anything, this is complete BS. This crisis is just the result of the financial system lobbying for and obtaining the relaxing of regulations.
Said regulations were enacted initially as a result of the 1929 crisis; when they got turned off, well, no surprise, what was supposed to happen, happened.