Making Certain You Shop Your Mortgage - Whether You Want To Or Not

Ken Harney has some welcome news on Move afoot to end uninvited mortgage pitches



To a certain extent, these are a good thing for consumers. However, it gets way overdone.



What happens is this. Let's sat I get a client into my office, they apply for a mortgage, and I run their credit. The three credit bureaus, Experian, TransUnion, and Equifax, then turn around and sell the fact that this person has just had their credit run under a mortgage inquiry code, together with some of their more easily obtainable information.



Result? My clients are besieged with mortgage pitches. For months, every time they answer the phone it's likely to be someone else who has paid the money for a red hot mortgage lead.



Needless to say, my clients aren't happy. I have had several clients come out and accuse me of selling their information to telemarketers. Now, the fact that I encourage folks who come here to shop their mortgage around notwithstanding, it would be shooting myself in the head to sell their information to other providers. I know what I've got, I know what I quoted them, and I know I intend to deliver. The only thing that will stop me is if they do not qualify for that loan. If someone is satisfied with what I intend to deliver, far be it from me to tell them to shop around because they might be able to do better. My family and I do have to live, you know. I won't stop or prevent or hinder them from shopping their loan around (which alone sets me apart from 90 percent plus of the loan providers out there), but telling them to do so is just not part of my job description at that point in time. It's like expecting the mechanic as he starts working on your car to tell you that you might be able to get a better deal somewhere else.



Indeed, if I had the option of paying extra for that credit report so my clients aren't besieged by unsolicited offers, I would take it every time. Not only would my clients be less harassed, but the prospective providers who pay for that sort of information are not precisely known for their sterling character, if you know what I mean. I've had clients tell me stories of people determined to sell them negative amortization loans without informing them of the drawbacks. I've had clients tell me of people determined to get their business that they told them of loans that do not exist, often with conspiratorial pitches like, "This is the loan they won't tell you about! You have to ask for it!" Well then, why are you offering it? By all means, put it out there on the table and let's compare the two loans by cranking the numbers, but the vast majority of the time it turns out the reason you have to ask for that sort of loan is that it's a piece of garbage and no self-respecting loan professional would expect you to accept such awful terms.



Now let me tell you about the numbers of such pitches. Because each of the big three credit bureaus is innocent of the actions of the others, it starts in three places, each of which pitches to the prospective providers that it sells the information no more than four places. I don't know why the number four became magic, but it seems to pop up everywhere in the mortgage leads industry. So each of them sells to four, and there are three of them. That's twelve people you're going to be getting a phone call from right there, and never mind that you're on the "Do not call" list.



But what's going to happen the majority of the time is that somewhere around ten of those who initially buy the information are resellers. They pay sixty bucks a pop, and turn around and sell the information to four other folks at twenty-five bucks a pop. Some of these places are in turn resellers; indeed, some of them got this information directly, which is all that keeps the whole process from snowballing until people are besieged by what seems like every last person with a valid mortgage license for the area. So twelve, forty-eight, hundred forty four, four hundred thirty two wannabe mortgage providers swarm each person I run credit on. I try to remember to warn them, but there is nothing I can do to stop it from happening, however much I might want to.



Now do not get me wrong. It is a good idea to shop your mortgage and I have even repeatedly told people who come here that they should actually sign up with at least two prospective providers, a main and a backup, because at the end of the process the power is all in the loan provider's hands and it is often abused. Having two loans ready to go defuses most of the potential for abuse, leaving aside the issue that I guarantee my quotes in writing when the client decides they want it and gets me enough information to lock the loan.



But there is a major difference between that and setting this pack of wild ravening prospective mortgage providers on my clients, willing to promise the sun, the moon, and all of the stars and planets if my clients will simply drop me and sign up with them instead. There is a major difference between agreeing that shopping the loan is a good idea, and throwing my clients to a pack of hundreds of telemarketers who call for months - sometimes as long as two years, so that they seem to be part of the next wave the next time those folks need a real estate loan - and bulk mailers who are almost singlehandedly responsible for global deforestation and accelerated filling of our urban landfills. If it does happen, I will be pleased to see it end.



I'm also gratified to see National Association of Mortgage Brokers on the correct side of this:

But the National Association of Mortgage Brokers doesn't agree. When credit bureaus sell overnight trigger lists to third-party lead generators, the brokers argue, they fail to comply with a key provision of the Fair Credit Reporting Act: that anyone receiving consumers' personal information must be in the position to make a "firm offer of credit" or have previously received permission from the consumer to obtain credit file data. Third-party lead generators obtain no permission and are in no position to make any credit offers, firm or otherwise.

UPDATED here