Could your Facebook friends determine whether you get a home loan?
If a certain patent belonging to Facebook is ever commercialized, yes.
Could social media kill your credit rating?
Possibly, if a patent owned by Facebook is commercialized someday.
Federal officials in August approved a new patent application by Facebook Inc. that would give bankers the ability take a snapshot of the credit ratings of your friends on the social media site.
Using the new “authorization and authentication’’ technology, lenders would be able to calculate the average credit score of your Facebook friends.
“If the average credit rating of these members is at least a minimum credit score, the lender continues to process the loan application,’’ notes Facebook on its patent application. “Otherwise, the loan application is rejected.’’
In its defense, the idea was not cooked up by Facebook, but was rather part of a portfolio of patents acquired in 2010 from now-shuttered social media startup Friendster.
The ability to vet the credit scores of friends, in fact, is just a few lines in a patent devoted to new technology to combat that scourge of all scourges, spam.
And tech and other companies commonly acquire patents for defensive purposes with no plans to actually use them.
A Facebook spokesperson declined comment.
Still, the potential credit rating device has raised the hackles of housing activists.
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Miriam Axel-Lute is editor of Shelterforce and associate director of the National Housing Institute. She contends the credit vetting technology now held by Facebook, should it ever be put to use, could make it that much harder for low-income families trying to move up the economic ladder.
A family looking to move out of a poor neighborhood to a middle class zip code, even if they built up a solid credit score, could get rejected anyway.
This could leave some families looking to improve their lot in life with agonizing choices.
They could stay in touch with families and friends from their old neighborhood and risk being rejected for a mortgage, or decide to systematically unfriend people to weed out anyone they suspect has bad money skills or simply bad luck, she argued.
“That would just be anathema to freedom of association,’’ Axel-Lute notes. “People want to stay close to the people they grew up with. We want people to know their neighbors more, not less.’’
Also concerned is Thomas Callahan, of the Massachusetts Affordable Housing Alliance.
“It’s reminiscent of saying we are not going to give you a loan because of this zip code you live in,’’ Callahan said.
Still, he argues there would be formidable legal obstacles for anyone trying to make use of this new technology.
While financial institutions were once able to write off, or red line, entire neighborhoods, refusing to write mortgages in them, such activity is illegal today and policed by state and federal banking regulators.
“It seems like it would be illegal if banks did it,’’ Callahan said. “I am not a lawyer, but I don’t think they can take into account your friends’ credit scores when you are getting a home mortgage or any mortgage.’’
“That should legally be a nonstarter,’’ he said.
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