Another Victim of the Housing Market Meltdown: Your Privacy

During the recent housing bubble, millions of Americans purchased or refinanced their homes with mortgage lenders throughout the country. With the implosion of the housing market, many of these mortgage shops closed their doors permanently.

It probably occurred to very few applicants that their files -- loaded with all kinds of personal data, from Social Security numbers and bank statements to tax returns, retirement accounts and credit reports -- would ever be in danger. Yet the records of thousands have been compromised - and not from a gang of thieves breaking into these offices. It seems that once the business is shut down, some mortgage lenders are simply disposing of all these paper records in public dumpsters. According to MSNBC:

• First Magnus Financial Corp., one of the nation’s largest mortgage lenders whose headquarters was one of the biggest employers in Tucson, Ariz., threw away thousands of mortgage loan records in an unlocked trash dumpster in Ft. Lauderdale, Fla.


• The records of hundreds of former customers of the defunct Alpha Mortgage Services were left in a recycling bin behind a grocery store in Toledo.


• After Union Mortgage Services of Ohio shut down last month, confidential files on hundreds of people were thrown out in a dumpster behind a pizza shop in Cleveland.


• American United Mortgage Co. of Northbrook, Ill., left hundreds of borrowers’ financial documents in an unlocked dumpster, many of them in open trash bags.


• Sheriff’s deputies in DeKalb County, Ga., outside Atlanta, found the mortgage records of at least 1,200 former customers of Ameriquest Mortgage Co. in a dumpster behind an apartment complex in October, two years after the company, once one of the nation’s biggest subprime lenders, went out of business.


• In Honolulu last year, a handyman hired by the former president of the defunct Fidelity Escrow Services dumped 39 boxes of financial records in a recycling bin.

While the Fair and Accurate Credit Transactions Act, or FACTA, requires businesses to dispose of sensitive financial documents in a way that protects against “unauthorized access to or use of the information,” it doesn't actually require the physical destruction of the data. To date, only one case has been brought against a company by the FTC (American United Mortgage was fined $50,000 after continuing to violate FACTA after receiving a warning). The challenge is pursuing action against companies that no longer exist.

The breaches leave thousands of consumers at risk for identity theft. For former customers of now-defunct lenders, there isn't much recourse. The best safeguard is vigilant monitoring of your credit report.