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Fingerprint Registry in Housing Bill- Are Borrowers Next?

Last week, I discovered a bizarre requirement for a fingerprint registrty in housing legislation that had just passed the Senate Banking Committee. In an OpenMarket post last Friday, I wrote that the provison had "almost escape[d] without notice."

I am now heartened to write that the database provision has now generated plenty of notice and interest. OpenMarket has gotten over 100,000 hits on this post, and, at last count, 375 concerned readers have posted comments. The post was linked to by the Drudge Report and by Reason magazine's popular blog, "Hit & Run." Also, over at CNET News, savvy tech writer Declan McCullagh dug up some interesting new info on the fingerprint provison in his own story.

The article struck a chord about lost privacy and lost liberties. The legislative origins of the fingerprint provision remain somewhat of a mystery, though McCullagh's CNET story traced much of the language back to an earlier stand-alone bill co-sponsored by 11 Senate Democrats and two Republicans. I have still not been able to find any debate or justification for it, but it seems now that fingerprint requirements are a simplistic way for polticians to argue that they are getting tough about a particular problem, even if it's questionable how much fingerprinting will contibute to solving the problem.

Some commenters were right to note that this is an issue concerning federalism as well as privacy. Through the CNET story, comments on the blog, and e-mails I have received, I learned about other state fingerprint registries of questionable justification for various professions. According to CNET, four states require "mortgage brokers" to be fingerprinted.

But as the article notes, this is a much narrower category than that of the Senate legislation, which applies to any "loan origninator" -- a category that is broadly defined (in CNET's paraphrasing) 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." This definition is so broad it could cover many part-time and seasonal employees who have a tangential connection to loan origination. And a state database by its nature is more limited than one that is backed by the federal government.

This gets to the famous "slippery slope." Many commenters predicted that mortgage originators were only the first step. Next would be be fingerprint requirements for borrowers. Actually, it's not that much of a stretch that borrowers could be next to be fingerprinted. Borrowers were the source of fraud in a significant number of mortgages gone bad. Some lied about their income. Other so-called "predatory borrowers" got a lower interest rate that mispriced the risk involved because they claimed the home they were obtaining was a "principal residence," rather than an object for speculation and flipping. It wouldn't be so difficult to turn the lender or broker rationale, thin as it is, into one that would fingerprint virtually all homeowners.

Yet another reason for legislators not to make a headlong rush into a questionable bailout and regulatory package just to fulfill their need to "do something."