A trade group formed by competitors of Fannie Mae and Freddie Mac has won a victory as Congress hammers out final wording of the privacy provisions in the financial modernization bill.

The government-sponsored enterprises had been exempted in the original bill from a rule against sharing customer information -- and remains so in the current version.

Sources said Fannie Mae pushed for extra language, which Rep. Spencer Bachus, R-Ala., offered as an amendment. But congressional negotiators watered down that amendment after the anti-GSE trade group, FM Watch, complained that Fannie was trying to stage a "midnight raid" to escape privacy restrictions.

At issue is the use of an enormous amount of consumer data that Fannie and Freddie collect from the mortgages they buy .

"Their systems, one way or another, have a look at a very large fraction of the home-owning public," said Jonathan E. Gray, an analyst for Sanford C. Bernstein & Co. Mr. Gray estimates that the two companies receive data on about 50% of all new home mortgages made in the United States, giving them access to information on approximately 30 million households.

Rep. Bachus' amendment would have exempted "institutions chartered by Congress specifically to engage in securitization or secondary market transactions, so long as such institutions do not sell nonpublic personal information to nonaffiliated third parties."

FM Watch called the Bachus amendment "anti-consumer" and suggested that Fannie had a secret agenda for using consumer data -- an agenda that would be promoted under the amendment.

"Why did they need that special exemption after they were already included in the underlying bill?" asked Mike House, executive director for FM Watch.

Rep. Bachus did not respond to requests for comment.

The latest language has two key changes to the Bachus amendment.

A change introduced by Rep. Edward J. Markey, D-Mass., would prevent Fannie and Freddie from selling or transferring information. The language also now specifies that Fannie and Freddie are exempt only if they do not deal directly with consumers.

The Mortgage Bankers Association said that it wished Fannie had engaged the industry in a discussion of these issues earlier in the process. "It has caused some stir among some of our members," said Gene Swanzey, director of legislative affairs for the MBA.

The language preserves a provision in the Bachus amendment to give regulatory power over Fannie and Freddie on privacy issues to the Federal Trade Commission -- instead of to the government-sponsored enterprises' financial regulator, the Office of Federal Enterprise Oversight.

A spokesman for Fannie Mae said that Fannie lobbied for the amendment because "we believe the Federal Trade Commission is the appropriate consumer protection agency if we ever came under the law."

"If we ever got into the business of sale or transfer of consumer information, we would come under this law," he said. But "we have absolutely no intention of getting into that business."

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