WE’RE HEARING...That the National Security Agency spying scandal, sparked by news that the NSA has been monitoring phone and e-mail records of millions of Americans, could spill over into the mortgage industry.
Well, sort of.
Actually, the risk that the NSA will start peeking in at the mortgage records of millions of Americans is unlikely, industry sources told me. But the reason may not be too reassuring. It’s because the government already has easy access to personal mortgage records.
Much of the outrage sparked by the NSA revelations reflected the assumption that telephone records, e-mails and online activity are private matters. People already know that the lending and borrowing activity of federally-insured financial institutions are subject to regulatory oversight, attorney Thomas Sporkin, a partner at Buckley Sandler, told me. Buckley Sandler is a law firm that focuses on serving the financial services industry.
The NSA probably does not need to pry into the records of banks and the GSEs, he said.
“I’m not sure that a salacious story can be written as far as consumers’ financial records being accessed through the NSA or Prism,” he told me. “The information is reviewable through other means.”
If a financial institution sees something unusual with a customer’s account actions, such as potential evidence of money laundering, the bank is required to file a “Suspicious Activity Report” with regulators.
In the case of mortgage loans, Sporkin noted that the FBI has a
I asked Sporkin about all the consumer data held by Fannie Mae and Freddie Mac, which are now owned by the government. Does the federal government’s oversized rule in owning or insuring mortgage loans mean the government might be mining that information? Probably not from PRISM or the NSA, which were recently found to be obtaining records from companies such as Apple, Google and Facebook as part of an anti-terrorism surveillance program.
“The thing that caught the country by surprise was that these were private companies and the business policies they pursued were implicitly private,” Sporkin said.
But that doesn’t mean people should not be concerned about the government’s reach into consumer financial transactions under the broad scope of the NSA’s spying program, which was authorized by the Patriot Act.
“From our view, this certainly isn’t an area we’ve been focused on from the surveillance standpoint, but there is certainly a concern, maybe an abstract one in the mortgage context,” Patrick Toomey, national security fellow at the ACLU, told me. The ACLU has
He said advances in “big data technology” are driving the whole conversation, because the government would have had little use for millions of phone, e-mail and financial records without the tools to store it and analyze it.
“Those technology advances are driving this whole conversation,” he said. And that’s also making consumers increasingly wary about who is collecting information about their browsing and buying habits.
Toomey said that same tool used to justify collecting phone and computer records could be used to obtain financial data about consumers, and that credit card records may be the most likely first target for government snooping. What you buy can tell a lot about who and where you are, Toomey noted.
“That’s probably the first concern on the finance front. The government now has a record of every non-cash transaction you are doing.”
And he’s not convinced that the Patriot Act’s mandate that the surveillance be limited to anti-terrorism and foreign intelligence activities should give much comfort to consumers.
“Obviously, that provision has been interpreted in an extremely loose manner.”
Ted Cornwell has covered the mortgage markets since 1990. He is a former editor of both Mortgage Servicing News and Mortgage Technology.
