Mortgage brokers are growing increasingly concerned about state laws that give consumers the ability to place a freeze on their credit files.

Allowing people to block creditors from viewing their credit histories is seen by well-meaning state legislators as a way to protect the privacy of their citizens and guard against identity theft.

But officials of the National Association of Mortgage Brokers warned at their annual convention in Minneapolis earlier this month that so-called "credit freeze" laws could backfire because their members will be unable to generate credit scores for their clients.

Without a credit score, lenders won't approve, which in turn could cause would-be borrowers to lose the house they want to buy to someone else or perhaps even miss out on a favorably low mortgage rate.

In many markets, houses sell so fast these days that if a would-be buyer can't produce proof of his ability to obtaining financing, the owner will simply move on to the next contract, warned Ginny Ferguson, an acknowledged expert on credit scoring who taught two classes on the topic at the convention.

"Most Realtors insist on formal credit approval with 10 days, but we don't have 10 days if we have to fiddle" with unfreezing a file, said Ferguson, who has held several leadership positions within NAMB. Assuming a borrower even remembers he froze his credit files or can find his PIN, it can take five days or more just to thaw a file, she explained. But if the consumer forgot that he put a freeze on his file or can't find his ID number, which are the more likely scenarios, the process can take much longer.

Currently, just two states -- California and Texas -- allow their citizens to block access to their credit files. But similar laws are about to take effect in Vermont, Louisiana and Washington, and NAMB says dozens of other states are considering legislation.

But Ferguson said well-meaning lawmakers "don't understand the mechanics of what they are trying to do." Rather than protect consumers, she said, the laws will only serve to "gum up the works."

"It's not just the mortgage broker who needs access, it's also the funding lender," she explained. "If they get blocked (from pulling a score) everything stops."

NAMB believe persons who are worried about credit fraud and identity theft should take advantages of Fair and Accurate Transaction Act amendments that were made to the Fair Credit Reporting Act in 2003 allowing consumers to red-flag their files.

The flag, a triggering instrument that has to be renewed every 90 days, puts creditors -- including mortgage brokers and lenders -- on notice that they must verify that the person applying for credit his who he says he is.

These "fraud alerts" are a "far better mechanism" to protect credit and privacy, said Roy DeLoach, vice president of government affairs at NAMB.

Credit freezing is popular among lawmakers "because it makes for good press," DeLoach said in another convention session. "But they prevent the federal mechanism from working, and they prevent consumer from spontaneously applying for credit."

Published: June 29, 2005

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When Lew Sichelman first started writing about housing in 1969, he was the youngest real estate writer in the country. Now, 37 years later, he's one of the oldest -- and most decorated. He has been rated the top housing columnist in the country by the National Association of Realtors as well as by his peers in the National Association of Real Estate Editors. Indeed, NAREE has recognized his work on numerous occasions. One year - due to his advancing age, he can't recall which one - he earned top honors in the annual NAREE Journalism Contest in three out of the four major writing categories. It was the first time one writer has won so many NAREE awards in a single year. Known for his ability to make even the most difficult topics understandable, Sichelman also has been honored by the National Association of Home Builders and the Mortgage Bankers Association. He began providing in-depth coverage of and consumer-oriented information about housing and housing finance at the Washington Daily News, where he was real estate editor. He held that same position for nine more years at the Washington Star, which purchased the News in 1972. The Star, a so-called "writer's newspaper" which also had the misfortune of being an evening paper, was put out of its misery in 1981, and Sichelman, who had begun self-syndicating his column in 1978, decided to become a full-time columnist. Today, his column, "The Housing Scene," is distributed by United Media to newspapers throughout the country. He also is on the staff of National Mortgage News, an independent newspaper which is considered the bible of the mortgage business. And he writes for numerous other publications, including MarketWatch.com, where he answers readers questions once a week, Sports Illustrated (don't ask), RealtyTimes.com, BigBuilder and others. Sichelman is married, the father of five and grandfather of eleven.