Patriot Act complicates loans

Applying for a mortgage or a home equity line of credit just got a little more complicated.

As of last week, financial institutions are required to take extra steps to verify their customers’ identities in order to comply with the USA Patriot Act. The federal law is designed to thwart identity theft and money laundering, particularly as they relate to terrorism.

Even if a lender is familiar with a consumer, the next time he or she applies for a mortgage, the lender will have to follow specific procedures for identification, including having the borrower produce proof of name, address, date of birth and Social Security number.

Lenders will have to check the names of borrowers against a federal list of “terror suspects” and report suspicious individuals or businesses to authorities. They’ll also have to document each step they took to check out customers.

The law had been coming for months, and many lenders were already asking for such identification routinely. Nonetheless, some lenders still scrambled to train employees in time and get software installed to help track this information, according to industry reports.