LEAD GENERATORS -- Definition from Mimi.hu -- The
process of collecting contact information and extracting potential
sales leads. The process of finding people (consumer
or business) with a qualified interest in a certain product or service.
Jeff Belonger's definition of lead generators. Risky, sometimes false hope, misleading, low ball rates and or closing costs, bait & switch.
Spencer Rascoff wrote this post, Zillow Mortgage Marketplace Launches: FREE MORTGAGE LEADS. I am not here to knock Zillow and what they are trying to accomplish. I am here to help the average consumer understand how these lead generators work and the potential pitfalls. I have over 15 years of experience in the mortgage industry, and even though this is my opinion, I want people to realize what they might be getting themselves into.
I have many concerns, especially more than ever, because of how much the market has changed and so has getting approved for a mortgage. Lending Tree is a well-known lead generator. I know many lenders that have used this service and typically, the loan officer has baited the consumer with a low rate to capture their interest. I tried Lending Tree for 2 months. Most clients that I spoke to were offered much lower rates than I could offer. Yikes, and I get the money from the same place as all other mortgage companies. I have spoken to many consumers that have used these online sites and many have had bad experiences.
So, what concerns and issues do I have with these online services? You can't interview the client
before giving a rate quote. I physically need to speak to that specific
consumer to gather more than just a fico/credit score. With
conventional mortgages becoming stricter with their approval standards
and guidelines, it really leaves FHA mortgages as the last resort. And many brokers and banks aren't FHA approved
or don't have a good understanding of what they are looking at. Why can
I say this? I am working on my 5th client in less than 1 1/2 months
that applied with a lender or two, who told them that they could get
them approved with a FHA mortgage. I have closed 3 of these to date and I working with the other 2, which both should be closing soon.
How do these lead generators, online services work? They ask you, the consumer, to fill out a quick mini application. Several main questions would be :
- What is your credit score or the range of your credit score.
- What is your annual income.
- What is the house price that you would like to purchase or the range.
Why do I think that these services are not as good as advertised? You are having lenders compete against each other. Many of these loan officers won't be experienced in all types of mortgages and many will just be good sales people. Telling you what you want to hear to get you into the door so they can take your application. The bigger problems?
- Credit.... not just the credit score. I need to know how many lates that you have. When your last late was and to as why. Did you have a Ch. 7 bankruptcy just 2 years ago?
- Income... Your debt to income ratios. If you just started working for a company less than a year ago and you also get a bonus, 9 out of 10 times, I probably won't be able to use that bonus. I need a lot more job history information to determine what I can use.
- Goals.... are you planning on being there for 2 years? 5 years? Do you need the lowest payment now than later?
- Assets.... do you have more than what would be required, which would be called reserves. Are you getting 100% of the monies gifted to you? FHA loans are the only program that allow for 100% gift unless you are putting more than 20% down, which is usually not the case.
- Declining market values.... if you don't know where they are buying, this could be an issue. On conventional mortgages, you are automatically penalized 5%. On FHA cash-out refinances, there are new guidelines for this.
Here is a consumer that commented on Spencer's blog.
" When I went to buy my house, I started on LendingTree.com, and I instantly hated the experience, non-stop calls, not one rate was accurate compared to the web site. I had to start answering the phone with "If you are not prepared to honor your rate you claim on the site, I am not interested" everyone hung up... finally someone owned up to saying, those are teaser rates everyone does it, and no one plans to honor them."
Overall, many mortgages can't be approved with a click of a button. You need a person, someone that understands mortgages, FHA mortgages, and how mortgages work. Not just a rate based on your credit score and how much money you make. A lot of this takes at least 20 minutes when speaking to a consumer. It can't be done with a quick e-mail or just quoting a rate. In my opinion, just another time bomb for the consumer when shopping for a lender. I see these lead generators being more of a problem, than making the purchase or refinance transaction a pleasurable experience. Again, just my .02, but I have tried these before. My answer, you need a true mortgage professional. Possibly a referral from a friend or family member. If you seek someone online, do your research.
What do you say? Your experience as a consumer? As a loan officer?
Author of this blog : Jeff Belonger
e-mail : jbelonger@ihmci.com
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