Loan applications a lode of personal data

Nation's Housing

Internet brings risk of others mining it

June 20, 1999|By Kenneth R. Harney

HAVE YOU ever wondered what happens to the highly personal information you're required to submit when you apply for a home mortgage?

What happens to your income disclosures, tax return data, bank account numbers and balances, employment history, credit-card payment histories and other confidential information once the loan goes to settlement?

Who has access to it and for how long? Can it be passed along or sold to telemarketers and database compilers?

Questions like these are at the core of an important debate under way this month in Congress over your financial privacy rights. Though the issue on Capitol Hill is focused on what banks can or cannot do with your account information, the subject of mortgage application and payment data held by nonbank lenders or brokers is lurking just below the surface.

That's because, of all the disclosures most Americans ever render voluntarily, nothing is more intrusive and comprehensive than a mortgage application. It's the financial equivalent of a strip search.

From your application, loan brokers or lenders know you intimately: How much you've made for the past couple of years, where you work, how frequently you've changed jobs, how much tax you've paid, your Social Security number, banking and credit-card account numbers and balances.

For self-employed applicants, the disclosure is even more probing. Loan officers typically demand not only actual tax returns for the past couple of years, but the tax filings of your business and details about your major assets -- stocks, real estate, partnerships.

But what happens to this extremely personal information that marketing experts consider the richest, most concentrated lode they can obtain on most consumers? You might be disturbed to learn that no federal statutes prevent mortgage brokers or independent mortgage companies from storing your income, employment or personal assets data electronically and selling it to anyone who wants it. This is true even for applications withdrawn or rejected.

As a practical matter, small- to medium-size mortgage brokers or local lenders traditionally haven't harvested application data for sale to third-party marketers, according to mortgage industry experts, because of the costs and hassles of electronic imaging and storage that are necessary to do so. But with more applications submitted electronically or via the Internet, the door is opening fast to cost-efficient harvesting, even by small-scale firms.

Large mortgage companies, on the other hand, often have sophisticated systems to store and use every relevant bit of data about you from the mortgage application and subsequent monthly payment histories. The very largest in the field, such as Countrywide Home Loans and Norwest Mortgage Corp., not only use their computer databases to target-market other products they sell, but also have strict privacy policies to control who gains access to your data.

California-based Countrywide, which originated $88 billion in new home mortgages last year, maintains a state-of-the-art, electronic data warehousing operation on its 2.2 million active customers. It also has adopted key internal policies on customer privacy, according to Andy Bielanski, the company's managing director for marketing.

Bielanski said that: First, Countrywide does not provide its data to commercial interests outside the corporation. Second, it retains no application data from applicants who've been rejected or whose loans didn't go to closing. And finally, the firm offers every new loan customer the right to "opt out" -- that is, to keep personal data out of the reach of Countrywide affiliates.

Besides funding home mortgages, Countrywide affiliates sell mutual funds, life insurance, property and casualty insurance, home equity loans, title insurance, appraisal services and credit reports. By slicing and dicing its internal database, the firm can "identify which of our customers might be interested in a particular product or service," Bielanski said.

In a bellwether suit this month, the Minnesota attorney general's office charged U.S. Bancorp with sharing customer credit-card account data with third-party telemarketers for commissions.

U.S. Bancorp denied any wrongdoing.

But the red-hot financial privacy controversy pushed giant Bank of America last week to announce new policies prohibiting sharing of customer account information with virtually anyone outside the bank.

The upshot of all this for you as a home mortgage borrower or applicant? Ask prospective lenders about their privacy policies before submitting an application. Look for clear privacy statements on Web sites. And ask about "opt-out": If you don't like being pitched, yank your name out of the game.

Kenneth R. Harney is a syndicated columnist. Send letters care of the Washington Post Writers Group, 1150 15th St. N.W., Washington, D.C. 20071.

Pub Date: 6/20/99

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