How Terrorists Affect Your Mortgage Application Process

Here's how current laws that were developed to stop/detour/minimize terrorist activities affect you when you apply for a mortgage:

The Patriot Act is a U.S. Federal law that was designed to assist in the prevention of money laundering by terrorists. (Money laundering occurs "when criminals attempt to characterize the proceeds from illegal activities as funds derived from a legitimate enterprise."*) Terrorist financing is only one aspect of money laundering. But the events of September 11 has made our government aware of how crucial it is to block terrorist access to the U.S. financial system.

According to the U.S. Treasury, identifying and curtailing terrorist financing isn't easy. This is because transactions may originate from legitimate sources and involve relatively small amounts of money. So efforts to contain terrorist-related money laundering must be both broad and comprehensive.

The Patriot Act covers a wide range of activities, from simply opening up a checking account to taking out a home loan. All lenders -- including Compass Mortgage -- must comply with this law. (And as mortgage brokers, we must also meet the "due diligence" practices of the many companies whose programs we offer.) But what does this mean to you when you apply for a new mortgage or attempt refinance an existing one?

The Patriot Act requires us to verify your identity when you ask us to help you obtain a loan. When you apply, we'll ask you for your name, address, date of birth, and other information that allows us to identify you. We'll also ask to see your driver's license/passport/military ID (or other form of government-issued photo ID).

After you provide us with the information we need, your name is then checked to determine whether it appears on any government-provided lists of known (or suspected) terrorists/terrorist organizations. Your current home address and place of employment are also verified; the source of funds used for the transaction are also considered.

Additionally, we're required to keep an eye out for borrowers who
-- provide insufficient or suspicious information
-- have funds inconsistent with their income
-- have suspicious movements of funds from one bank into another

The overwhelming majority of most lenders' customers and transactions are not considered "high-risk", so is the Patriot Act and similar legislation really necessary? Some people believe that the personal information they are now required to provide when conducting financial transactions represents an invasion of privacy. Regardless of whether this is true, the fact remains that the Patriot Act is a law that all lenders -- including Compass Mortgage -- are required to follow. Also, most borrowers recognize that the satisfaction of home ownership far outweighs the inconvenience of having to provide additional proof of identity.

*Source: Findlaw.com