Mortgage Marketing Under Scrutiny
As a former mortgage broker, Adryenn Ashley thought she knew what to expect when she refinanced the home loan on her house in March.
Yet she was unprepared for one twist she encountered: A barrage of phone calls and e-mails from lenders vying to sell her a better home loan.
Some of the callers apparently knew just how much money she was borrowing. Others made misleading come-ons like “We need to update your information,” or “We need to complete your application,” Ashley recalls.
“I have privacy concerns over that,” she said from her home in Petaluma, Calif. “My information should be confidential.”
These days, mortgage loan seekers like Ashley are supreme telemarketing targets, thanks to “trigger leads” that the credit reporting bureaus sell to lenders once a consumer’s credit file is pulled by a loan officer.
So when Ashley’s home mortgage company checked her credit to prepare her loan, dozens of other mortgage companies were tipped off. These alerts can be had for a few bucks per name if bought in bulk.
This is legal — though not necessarily for much longer.
A few states have been exploring restrictions on the practice, and last week Minnesota’s governor approved a block on most trigger leads.
A ban is pending regarding Massachusetts mortgage loans.
Congressional action is potentially brewing, too, as the House Financial Services Committee, chaired by Rep. Barney Frank, D-Mass., is investigating the issue in advance of hearings.
The proposed ban in Massachusetts, for example, was floated by the state bankers’ association. Its COO, Kevin Kiley, fears “trust that has been established between the bank and the mortgage borrower is undercut” by trigger leads.
“Why should a bank be in a situation where it invests millions of dollars in a branch network and advertising, if I can go out and just buy leads?” Kiley said.
On Web message boards frequented by mortgage brokers, the act has a more colorful name: It’s called “snaking a deal.”
The National Association of Mortgage Brokers, whose membership includes many customers of trigger leads, officially at least isn’t a fan of them.
The mortgage brokers‘ president, Harry Dinham, laments that many buyers of the alerts aren’t really in a position to make a firm offer of credit, as required by the Fair Credit Reporting Act.
Even so, Dinham says a ban would be overkill.
He’d prefer to see the leads sold only on consumers who elect to put their names on the trigger lists. As it stands now, leads about your interest in a mortgage can be sold unless you bother to opt out from all prescreened credit solicitations.
Credit agencies defend the sale of trigger leads, arguing it promotes competition, which keeps mortgage rates down. That stance has support at the FTC, which says consumers can benefit from the practice.
“It is absolutely false to say the first lender or home mortgage broker a consumer goes to is going to have the best offer,” said Stuart Pratt, head of the Consumer Data Industry Association, the credit reporting agencies’ trade group.
Pratt insists that the credit agencies, led by the three largest groups — Experian, TransUnion and and Equifax — routinely check their trigger leads against anti-telemarketing Do Not Call lists.
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