(MONEY Magazine) – Chalk up another conquest for privacy-invading computers. A service called LoanWatch, launched in 1991 by the Walnut Creek, Calif. firm Foster Ousley Conley, is amassing financial information about people who apply for mortgages. Participating lenders feed information from your application into the computer system; in return, they can learn various things about you, including debts that you may not have noted on your application. But the system also flags people who have done nothing more sinister than apply to more than one lender, as many do to hedge their bets. Such borrowers could lose out. ''If we find a double loan submission from a customer we don't have a strong relationship with, we might reject the application,'' admits Todd Dal Porto, a senior vice president of LoanWatch user First Franklin Financial in San Jose. And privacy experts are also concerned that LoanWatch may become clogged with the kind of faulty information that fouls the files of credit reporting agencies. Says Evan Hendricks, editor of Privacy Times, a Washington, D.C. newsletter: ''The potential for abuse is great, especially if consumers can't correct errors. I see a replay of all the problems with credit bureau reports.'' Foster Ousley sales director Robert Walker says that the company puts great emphasis on quality control. ''The only people who need to worry are those who are doing something wrong,'' he says. LoanWatch will expand from California, where it is used by more than 30 lenders, to Florida this month and to Connecticut, New Jersey and New York this summer. Your only defense is to ask a prospective lender if it uses LoanWatch; if the answer is yes and you don't want to enter yet another data base, then consider taking your business elsewhere. -- E.F.

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