Lead-Generation Sites

A mortgage Web site designed to provide leads to lenders.

A “lead” is a packet of information about a consumer in the market for a loan. Lenders pay for leads, and these sites are an important source of them.

Prospective borrowers fill out a questionnaire covering the loan request, property, personal finances, and contact information. The sites use this information to select the lenders to whom the information is sent. Lenders then prepare offers to the borrower based on the same information.

Lender Screening: Lender selection by lead generation sites should be valuable to borrowers with one or more challenging features, such as poor credit, incomplete documentation, or little cash. Such borrowers can avoid wasting time soliciting lenders who won't deal with them.

Lender screening also provides some protection against falling into the hands of rogues—lenders or mortgage brokers out to extract as much revenue as possible from every customer. The sites have every reason to bounce a lender who attracts multiple complaints from borrowers.

Promoting Lender Competition: Lead-generation sites are sometimes called “auction sites” because they purport to provide a group of lenders, usually up to four, who will bid for the borrower's business. Selecting from among lenders provided by an auction site, however, is as difficult for most borrowers as selecting among any other group of lenders.

The sites don't require that the initial price quotes provided by their lenders be sufficiently complete to allow borrowers to make
intelligent choices. It is no easier to get settlement cost data, or the complete specs on an ARM, from these lenders as from any others. Neither can the sites protect borrowers against “sharp practices” by lenders during the period between initial price quotes and the time when the price is “locked.”

Guidelines for the Most Effective Use of Lead-Generation Sites:

• Decide beforehand whether you want a fixed or adjustable rate mortgage, as well as your preferred loan term, down payment, and points. If you are uncertain about any of these, do some homework.

• Fill out the questionnaire as accurately and completely as you can. That information is used to match you with the lenders
most likely to be interested in your loan.

• Mortgage price information comes from the lenders who contact you, not from the site. The amount of price information they give you may depend on what you ask for. Remember that on fixed-rate mortgages you need the interest rate, points, and dollar fees. While some lenders are not in the habit of providing their dollar fees in initial price quotes, you can insist upon it.

• If you are interested in an ARM, you need to know more than the rate, points, and loan fees. See Adjustable Rate Mortgage (ARM)/Gambling on Future Interest Rates/Required ARM Information.

• Receiving price quotes over the telephone is looking for trouble. Ask lenders to e-mail or fax their prices to you.

• The interest rate and points quoted by a lender apply only to the day you receive them. The prices that really matter are those quoted to you on the day you “lock” the loan with the lender. The lock means that the lender is committed to the prices. Lender locking requirements vary widely, ranging from very little, to a signed application, to a signed application plus a non-refundable payment. You are entitled to know at the outset exactly what each lender's requirements are, and how long it should take if you do everything expected of you. Ask!

• Since you selected the lender based on the initial price quote but it is the locked price that you are going to pay, you have a right to know how the lender will set the price on the day you lock. The lock price should be the same as the price the lender is quoting to new customers on the identical loan on the same day. Ask if the lender has a Web site that contains up-to-date prices that you can use to monitor your price day by day. If it does not, ask the loan officer how he intends to demonstrate that you have received the correct price.

• Unlike rates and points, loan fees are not market driven. Unless you change one or more of the loan characteristics, there is seldom a good reason for these fees to change between the time you receive the initial price quote and the time you close. Some lenders will guarantee their fees in writing if you ask. Lenders can't guarantee the fees of third parties, but they may be willing to include appraisal fees and credit charges in a guarantee because they order them and know how much they cost.

For a list of lead-generation sites in 2003, see Mortgage Shopping/Solicit Price Quotes/Sources.

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Did the lead-generation site send you a follow-up e-mail to confirm your inquiry?

It's 10 p.m. do you know where your trademark is?

Broadly, multilender mortgage Web sites fall into three categories, which I call "referral sites," "lead-generation sites" and "shopping sites." Referral sites provide Internet-based portals into the existing mortgage distribution system.

LEAD-GENERATION SITES: Lead-generation sites provide leads (potential borrowers) to lenders.

Lead-generation sites collect personal financial information from consumers.

Lead-generation sites can be a time-saver for consumers with special needs, including those with significant credit problems or those looking for second mortgages.