Hows that for a title...
There’s been a storm of activity in and around Zillows mortgage community (ZMC) since they launched a mere 72 hours ago. Based on David Gibbons’ claim that Zillow has received over 4500 ‘leads’ in their first 48 hours, consumer interest is definitely there. Reading Zillows blog, they’ve done their research and are delivering what the consumer wants: an anonymous, transparent vehicle to receive mortgage quotes.
A fact worth reiterating about Zillow before addressing the wants and needs of the other half of this community, the mortgage professionals, is that Zillow is an advertising and media company. Advertising and media companies are keenly interested in the demographical nature of their traffic, the more refined this data is the more valuable it becomes to their paying customers: 3rd Party Advertisers.
By collecting and ‘cookie’ing’ the web-browser of (almost) anonymous members relatively succinct financial and credit information, Zillow is aggregating some very valuable data for sale, just not to mortgage originators. Advertisers will pay a premium to appear in front of people who represent they can afford and are likely buyers of their products. Very well thought out by the brass in Seattle.
Mortgage originators on the other hand seem to be less than enamored with Zillows offering for reasons identified in my last post…they will likely have to farm through a mountain of rate voyeurs to find a client. Some well respected Mo-Pro’s feel that consumers should be held accountable to a degree of transparency as well. I’m a staunch advocate in transparency for the mortgage industry (read my very first post from 19 months ago, not the best written piece but I’ve left it unedited for effect) and agree the sword must cut both ways in order for a ‘transparent marketplace’ to work. Both sides must open the Kimono.
The dilemma with transparency has traditionally been: ‘How can one be transparent without being taken advantage of?’ For too long consumers have been forced to strip in front of a consortium mortgage originators, ZMC switches this around, making Mo-Pro’s disrobe first, and they don’t like it.
Things have obviously changed, so here we are today pointing fingers, losing business and otherwise trying to figure out the best way to make a business a successful one out of the business that’s left.
For their own clever benefit, ZMC is turning the transparency buzz into advertising dollars. If ZMC does nothing else, it increases traffic to their domain. They’re pleasing the consumer and pissing off the top notch Mo-Pro in the process. This may work for awhile but it would appear to be a matter of time before the good Mo-Pros turn their head to ZMC because the lead pool is deemed a dead pool, even though it has all the attributes of viable transparent marketplace for consumers and originators to conduct good business. As stated, Mo-Pros simply don’t have the capacity to work within ZMC very effectively, yet.
An ideal form of transparency, one that serves both consumer and professional, is akin to being naked with a bag on your head. You get to see all the goods but can’t put a face to the…well, you get it.
Take the time to read Mortgage 2.X and the concept called C2B (Consumer to Business) marketing. The company that was tooling with this concept is now out of business but was ahead of it’s time. In 2003, during a time when mortgage (and interest) rates (in general) were plumeting, transparency wasn’t even a thought because Mo-Pros could charge four points and lower a consumers interest rate by 2%.
So here’s where the novel idea comes in, for all I know Zillow may have already considered what I’m about to suggest, if they haven’t…I’m not in a position to do anything with the thought and someone might as well…
The consumer transparency theory…
In order to enter the ZMC a Mo-Po must submit some verifiable information to prove they are viable. Coupled with the promise of anonymity, the dynamic is very alluring to a consumer.
Zillow can require something similar of consumers. Offer two levels of consumer participation, the current low barrier level and an ‘authenticated’ designation.
Upon enrollment into ZMC from the consumer side, validate their credit score by having them acquire their ’score only’ from the repository of choice, all three offer this service for free to the consumer. This is often the biggest unknown from a consumer standpoint, I can’t tell you how many times someone’s self-estimated vs actual credit scores were off by over 100 points. I’ve had people tell me they’ve had credit scores ranging from “one hundred fifty, I think” to “one thousand something”. Zillow wouldn’t be privy to a members social security number under this scenario either, the information goes straight to the repository, score returns, consumer fwd’s repository doc (minus ss#) to Z…
Have consumers send over signed verifications of income, assets, type of employment et al (could all be done electronically). Although these aren’t meant to replace the docs what a mo-pro will require in any way (see Zestimate), the docs would foster a stronger commitment level and code of coduct enforcement policy by consumers.
The prevailing thought here is Zillow could substantially firm up the quality of consumer information to the community and still insure their anonymity. From a business model position this would be a brilliant move for Zillow as they could then represent the same to both mortgage originators and advertisers.
Quality mo-pro’s would flock to the marketplace to serve this quality of ‘lead’, consumers would be incentivized to provide the information based on the increased likelihood of attention an ‘authenticated lead’ and (most importantly to Z) advertisers could be compelled to spend more $$ for uber-high quality consumer financial and credit demographic placed ads. There is an opportunity here for Zillow to become the trusted marketplace to begin a mortgage transaction and make a lot of $$ in the process while holding to their current business model.
Theoretically, this would create a quality of mutualism and transparency not available in any other online mortgage community. From an advertisers standpoint, one would think they wouldn’t mind paying to promote their products and services in front of such refined, targeted eyeballs.
For fundamentally the same reasons mo-pros can’t effectively service ZMC today, they would have a tough time servicing this Zutopian marketplace as well. Most mo-pro shops are not equipped for volume based loan production, thus cannot afford to charge less per transaction. Typical mortgage industry business and commission split models make the economics of only charging $2000 in broker/banker fees impractical…this another thread for another post, although the topic has been covered previously on this site.
Zillow could be on the cusp of something special…an anonymous transparent credit and personal information eXchange between mortgage professionals and consumer, to create a highly trusted mortgage transaction community…and they could make a lot of money doing it without charging for ‘the good leads’…
Jeff,
I cannot believe there are not a thousand comments here already. I hope this post is featured.
It is all about the consumer. It is not about the people onthe other side of the RE transaction.
Steve
I have already lost interest. The quotes I'm seeing by "chop/shop" companies are yielding an average of $250 to LO's. The quotes are so outrageously low ball it is unbelievable. My perspective is that less than 1 in 100 closed loans through this mechanism will equal the quote given in terms of rate or fees.
The other frustration is that Zillow does not educate the shopper to understand that rates change mid day on many occassions, and that the quote they get is as good as a guess. I've been contacted by 2 consumers that I provided quotes to and both of them gave erroneous information that completely changed the accuracy of the quote. They were WAY off on the appraisable value of their home AND it was a cash out refi, NOT a rate term.
Garbage in, Garbage out. Zillow has to put some tougher filters in place.
Damn X, I'm just commenting on the use of "Zutopian". That my friend is priceless.
Now back to the post. I think you have laid out some very good points. In this new world of "transparency" it now seems to be a one way street which by it's very nature is NOT transparency. It's more of a "I'll show you mine but you don't have to show me yours" thingie.. In the world I'm from (the deep south) this kind of a measuring won't work, at least not for long or effectively. If I'm going to show you mine I at least want to be able to have a peak at what you got. I can only leave it hanging out there for so long before I zip up and go home.
By the way.....did you know I can stand flat footed and pee over a mac truck? Now that's transparency:)
@BB: "I can only leave it hanging out there for so long before I zip up and go home. By the way.....did you know I can stand flat footed and pee over a mac truck? Now that's transparency:)"
LMAO!!
X...Y...Here...
And I am LMAO at Blog Boy. I can vouch for the fact that he can do the Mac Truck Trick.
He Jingles too but then again so do you :)
OH. Was I supposed to read the post?
Well. I ain't gonna. BB gave me the RD version and I know I agree with what ever you the two of you say :)
Shhh...Don't tell anyone I'm that easy :)
Go ahead...Delete me :)
TLW...ROAR!
I forgot to mention...
Yesterday was BB's B-Day. You so need to read the post I put up for him.
You're gonna likey :)
P.S. As always...Commenting is optional :)
TLW...ROAR!
Jeff, Great Post Thanks for Posting.
Craig
www.10kpermonth.com/craigcooper
I think you are off base on this whole zillow thing. You can't quote a rate until you know the client's scenario. It is as bad as quoting a price for a car. It is never the same when you walk in a dealership. It would be like posting a picture of a Mercedes on the TV and the client coming out with a Yugo. It will be the same situation. Sure some mortgages will close.
But as a mortgage originator I don't want to hear that somebody else is quoting a client 5.25% when they don't know that you have 580 scores and need to take cash out of the house up to 90%. Many clients don't know their credit score, what their house is worth, or many times even what they make a year. Clients many times forget to tell you important information like they took 6 months off. Until you get a value check from an appraiser that you trust you can't depend on a client's home value estimate. It is never going to happen today.
You can quote any rate you want whether a consumer ever truly get that rate will be in the minority rather than the norm. You need to have pulled credit and do a value check before any quoted rate will be realistic.
You should have to understand the mortgage business before you can sell them or help facilitate the process. Zillow is just adding to more consumers getting a bad taste in their mouth from mortgage people.
How is Zillow going to weed out the bad mortgage apples. Lending tree and others at least get feed back.
@Russ: I don't think you read the post...I'm advocating 'authenticating' consumer information on par with the mortgage professional. Have you been to Zillows community either? They provide wide open feedback...You must be on the LendingTree drip...
@TLW: You know I don't delete comments :)
Jeff C... we have had our differences in the past. It was good to meet you in NYC back in January... overall, I liked the path that you took on this. Some of the comments crack me up, because I didn't see you saying that the Zillow site was transparent and is great. From how I read it, you stated that this could be a great thing in transparency. The only problem with that and where I will disagree is that there would be too much work for the consumer to make sure that all information was revealed. Most that shop through these online sites, want to spend as little time and get quotes quickly. Another reason is because the car industry can do this. What people forget is that this is different than buying a car.
I know you have your thoughts on transparency. I truly don't care nor believe if the consumer sees what their costs are that it would stop what is going on in the mortgage industry. And that is failed promises.. cheap or expensive, many lenders aren't delivering their product on time or at all. I am on my 4th client in 30 days that went to another lender and wasn't denied until the day prior to closing.... at least 3 were.... the other, probably on his way, because his commitment letter is due this Friday and I got him to leave the other lender.
My point there...well, that could be another post. Getting back to something else that you said, for better transparency. Credit.... even using one of the major bureaus won't help 100%. Those models aren't exactly what is used when it comes to mortgages. Obtaining cars, credit cards, and mortgages all use different models. The 3 major bureaus use a generic formula. More now than ever, credit scores when obtaining a mortgage need to be more precise. Besides... and I am very stern on this.... if your credit score is less than 680 and you are putting less than 20% down, 99% of the time you should be going FHA... hands down. I have people argue with me on this, but I have done 5 posts on this with 5 different scenarios and FHA was the best every time. So.. my point... you need a lender that is FHA approved.. AND... once you start getting into lates, lates after a BK, knowing when a BK was... etc. etc... you need details about the credit and not just the score.
I liked your idea about getting certain documents to the lender.... but that would take time on the consumers side....
In any case, I could be here forever... one point that you did bring up which I agree 110% with is that even if Zillow fails with this model, they still didn't fail. They would have gotten more visitors than ever. And with that, more advertisers. Advertisers mean more money, hence why they are able to offer this mortgage product for free. Isn't there a saying, "nothing is free in life"? Well, to the loan originator, your time is still money. But from Zillow's perspective... more views, more clicks by the consumer... it will drive up volume and the potential for more advertisers. I did write about Zillow and my opinion... you should check it out, because I was attacked by one loan officer... kind of funny on how he missed my point and went for the juggler. see you around...
Good to meet u too Jeff. You make a bunch of good points...
Zillow has taken an important step in moving toward greater overall transparency. Its far from perfect, but its a start. I hope they consider that by making their community more viable they can help turn a misunderstood and maligned industry down a better path...They're an advertising company but I also believe they're open minded enough to see the bigger picture.
Peace...
I must say, I'm shocked to not see more mortgage professionals sounding off about this topic and their experiences thus far in the ZMC...
Real estate professionals have so much to gain from this insight as well...*sigh*
This program, while on the surface appears to offer consumers a number of benefits when getting quotes online, is still seriously flawed and I doubt it will survive in current form.
One thing they allow that breeds manipulation is to let originators see what everyone else is quoting. I submitted a quote request and got for 4 replies for a 30 year FRM. Three quoted the same lowball rate (below par) and they all had the same APR which just so happened to be the same identical percentage as the loan rate. Give me a break!
On top of that, one shyster listed that at this less than honest rate, there were no lender fees or discount points to get the loan. He even went so far as to not put in any estimated fee for the appraisal or other 3rd party fees.
Also missing from quotes received are any estimates for title and closing relating fees which of course is another ball of wax altogether.
So what you end up with at the end of the day is a coming together point where the honest mortgage guys get to battle it out with the scum of the industry. You can check of you are going to abide by a code of ethics and all the rest of that blah blah blah but it has about as much meaning as crossing your heart and hope to die.
Jeff C... I will agree with many of the loan officers sounding off negatively though about ZMC... I have talked to several that have 10 + years and they all agree with me. ZMC is good for those loan officers/lenders that aren't busy... have an open shop with no business. Other than that, if busy, it would be a waste of time. Read some of the loan officers comments who have already tried this. I won't link my blog in here, unless you say it's okay.... I did link yours in mine though... but in several comments on my post, several have already shown their displeasure.
I spoke to David Gibbons about this and I just have my own opinions... and I just won't compete against loan officers with plenty of time on their hands to low ball.
Sure, ZMC is not perfect and they are working out the kinks.... but in today's market, you will not get true value. Meaning... many of the good loan officers won't waste their time on this, free or not. Too many low balls... a lot of information lacking both from consumer and loan officer... it is a mini lending tree and will stay that way, no matter how many bells and whistles are implaced... or ways to better the site. It won't be fool proof, it will just be full of fools. :o) Hungry fools with low bids.... Just my .02.
I have to agree with many of the comments here. Any experienced loan officer with a solid book of business will not have time to duke it out on Zillow mortgage over an .125% and 50 bucks in lender fees. The only LOs who are going to be using these services are those with no business or experience. This is will further damage the creditibility of those of us who have made a career out of this business because consumers are not going to be happy as there is no way to meet their expectations with these types of systems. This industry needs to get away from encouraging consumers to treat their largest financial transaction as a commodity and selecting lenders solely on rate. It is damaging to the lenders and consumers alike.
"Upon enrollment into ZMC from the consumer side, validate their credit score by having them acquire their ’score only’ from the repository of choice, all three offer this service for free to the consumer."
A few questions on this. Other than Equifax don't the other 2 repositories supply a credit score that is different from the ones a morgage lender would receive? And while they will by law provide an annual free copy of a credit report, don't they all charge to get a credit score? Finally don't the majority of lenders typically require 3 credit scores, selecting the middle score to use when credit scores are an issue?
I would like to know if my information is wrong on this.
"Other than Equifax don't the other 2 repositories supply a credit score that is different from the ones a mortgage lender would receive?"
Yes the other two repositories (typically) report different scores than Equifax.
Are the scores you receive from a repository different than what a mortgage lender would?
That depends...the 'get your free credit report' companies traditionally provide 'consumer' credit reports which yield different scores than what can be called a 'mortgage worthy credit report'. If you get your scores straight from the repository, Equifax, Trans-Union or Experian its likely to be the same as what a mortgage lender would pull.
"And while they will by law provide an annual free copy of a credit report, don't they all charge to get a credit score?"
Equifax charges, TU and Experian offer free access to your scores subject to a subscription on some level to their services (which are free for a period of time, you can cancel before billing starts if you remember...)
Yes, lenders require all three credit scores and typically use the 'middle score' when qualifying a consumer for a mortgage. In some cases where a consumer only has two scores, the lender will use the lower of the two.
The idea is that a repository provided score is better than a guess, which is what (95% of the) consumers are doing now when engaging ZMC.
Consumers should own their credit data and know it well. Mortgage professionals have been known to use what a consumer doesn't know against them. Understanding exactly what your credit looks like (not just the score) is akin to taking a weapon out of the unscrupulous mo-pros hands.
Gosh, all the fight's out of the AR originators; you done beat us into submission.
The Zillow Mortgage Bourse isn't about low-balling; it's about using technology to lower origination costs. I'm going to give you an example and it won't apply for me or Jeff Belonger or the other established mo-pros.
What if you're in this business for 2 years or less? What's the best way to build a lasting career? Build a database of raving fans. You should be focused on building that database during the first three years; not worrying about gross per loan. Originators should focus on funding ten loans monthly. Adding 300 customers to your database, over the first three years, will help you get 1000 potential customers in your database (referred contacts from your 300). Get 1000 good contacts in your database? You'll fund 100 loans annually. You can raise your gross per loan as you raise your value in the customers' eyes.
Raise value by being a financial planner, an educator, an expert, or a trader. You WILL elevate your value to the level where you can charge 1.5-2.5 times as much as the Zoriginator. Why? You'll probably save your customer a lot more money than the Zillow clients get because you'll be proactive to life and market events.
Originators with an established client base should ALWAYS be raising their fees to test the elasticity of demand. Maximizing that elasticity maximizes profit and THAT, folks is the ONLy reason a business should exist- to earn profits.
Forget the value propositions of the ZMB- the customers there are interested in price and price alone. USE that community to gain customers. Most of the consumers there know very little about financial planning and are starved for that information. You can "buy" a client, on ZMB, and get valuable experience doing it. What you do with the client AFTERWARDS determines the value he perceives in the relationship- That value is what will move you FROM a Bourse platform and into an advice-based platform.
In short, ZMB is a cheap way to prospect. Why wouldn't an originator try it?
hellSoCal, Jeff- the eye of the credit hurricaneThanks Brian...i've lived in worse places ;) and what better place to foster a shift toward the positive in mortgage than the epicenter of the debacle...
I expected a barage of debate and constructive dialog but have been generally disapointed, sans your comment.
<I expected a barage of debate and constructive dialog but have been generally disapointed>
I guess you've forgotten that you scare the crap out of the average Man :)
TLW...ROAR!
TLW...Thank you, I think..? ;)
Not trying to scare anyone, just looking for some good conversation :)
LOL...
It was a compliment :)
If there was such a thing as 'too' smart...You'd be it :)
TLW...ROAR!
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