Credit Freezing 'Gums Up the Works' by Lew Sichelman
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." | 
