With the Senate poised to pass major housing legislation this week -- even as early as tomorrow -- critics are taking a harder look at some of the bill's lesser-known provisions.

If you have anything to do with making home mortgages, you might want to do so, too.

Though its details have gotten almost no media coverage, the legislation would create a vast new nationwide system of licensing and registration -- complete with mandatory fingerprinting for submission to the FBI -- for anyone who fits the definition of a mortgage "originator."

That means anyone who works for a bank and makes retail home loans. It also means the tens of thousands of mortgage brokers and loan officers at mortgage companies. And, in certain situations, it could also cover real estate brokers or agents who are paid by lenders to help originate loans.

Though it's probably too late to modify the plan, a politically diverse group of advocacy organizations -- ranging from the American Civil Liberties Union to the American Conservative Union -- sent a protest letter just before the July 4 recess to Senate leaders, demanding that the fingerprinting provisions be dropped.

"We are troubled by the scope of this requirement," wrote the groups, "and by the lack of a justification as to how this would serve the goal of reducing mortgage fraud." The fingerprint submissions to the FBI would be required of tens of thousands of American workers who have never been convicted of a crime, and have never been the subject of administrative actions by state or federal regulators.

Worse yet, the groups said, "the bill's lack of safeguards for the data collected" are especially troubling, given the increasing involvement of fingerprints in identity theft -- which "is becoming a major concern among data security professionals."

Proponents of the licensing and registration system argue that the only way regulators can track -- and crack down on -- predatory and fraudulent loan officers as they move from state to state is to maintain a national database with detailed information on prior offenses, consumer complaints, annual licensing and educational requirements.

They also insist that they can maintain the appropriate security measures to make certain that the privacy of loan officers is protected.

But critics see a new Big Brother hovering over the mortgage industry -- and potentially handing out sensitive information, right down to fingerprints, willy nilly to the wrong people.

If you have any connection with the mortgage industry, keep your eye on this controversy. But here's the basic reality: national licensing and registration -- along with personal information databases -- are almost certainly here to stay.

Published: July 7, 2008

Use of this article without permission is a violation of federal copyright laws.

Kenneth R. Harney writes an award-winning, nationally-syndicated column on housing and real estate from Washington, D.C. He is also managing director of the National Real Estate Development Center, a professional education company. He is a past member of the Federal Reserve Board's Consumer Advisory Council, a committee that by federal statute reviews all Fed actions on home mortgage, consmer credit and banking industry regulation. He served as a member of the U.S. Department of Housing and Urban Development's Working Group on Computerized Loan Origination (CLO) systems, and is a member of the Editorial Board of the Fannie Mae Foundation's journal, Housing Policy Debate. He is the author of two books on mortgage finance and real estate.