Saturday, August 23, 2008

Mortgage Shopping, Incognito Sites Require Fewer Personal Details to Generate Quotes

(WP) Even though mortgage lenders have raised the bar on what it takes to qualify for a home loan, shopping for a loan online has gotten easier, if not necessarily less confusing.

Where mortgage-scouting Web sites traditionally required users to enter personal information to generate rate estimates, the newest sites offer a way to comparison shop for a loan under a blanket of anonymity.

This can help allay concerns about turning over personal information online or being hounded for weeks by mortgage lenders soliciting business.

But do these rates hold up once names, credit scores and other personal details enter the picture?

"My gut instinct is that there will be a wide disparity about what rates are quoted on these sites and what they actually end up with, and not necessarily due to the borrower," said Robert Statnick, chairman of the California Mortgage Bankers Association. "All the sites may not collect all the data that's necessary to give an actual price quote."

The lenders do collect the data they need to figure out what to charge for a loan, but these sites have made it possible to delay that step to give a borrower time to shop incognito.

Zillow.com and Mortgage Marvel.com have embraced this concept in the past year, though that's where their similarities end.

Mortgage Marvel bills itself as the mortgage-shopping version of travel sites Orbitz or Expedia.

The site, which launched in the spring, is operated by Mortgagebot, a Milwaukee-based provider of online loan-origination technology for banks and other lenders.

Like the online travel sites, Mortgage Marvel lets users enter details on the kind of mortgage loan they need and the site rounds up real-time rate and lender fee quotes from hundreds of lenders.

The site boasts that users don't need to punch in personal details to get real rates instead of teaser rates used to bait visitors. The catch: Users must have a credit score of 720 or better.

Mortgage Marvel says it can make this claim because it's tapped directly into 250 banks and credit unions' automated loan pricing databases. (It gets a fee every time a user fills out an application with a lender on the site.)

The site requires users to enter three pieces of information: the loan amount, the property's value and its Zip code. Users can toss in a few more variables, including specifying whether they're hoping to buy a condo or a detached home, whether they would prefer a 30-year, fixed-interest rate loan or an adjustable-rate mortgage.

The site then displays a list of any lenders offering quotes on the loan.

But that's where anonymity ends. To find out whether a borrower qualifies for the rate, he must fill out an application, providing personal information to the lender.

"It's easy, reliable, accurate and fast -- there's no bait-and-switch," said Dan Welbaum, chief marketing officer for Mortgagebot.

Zillow's Mortgage Marketplace page also doesn't ask for identifying information other than an e-mail address.

Instead, Zillow relies on the honor system, counting on users to fill in accurate information about their personal financial profile, such as their credit score -- unlike sites that ask for a Social Security number to run the credit check themselves -- annual income, money in savings and so on.

Zillow users are also asked to enter how much money they want to finance, as well as preferences on their loan type.

The site broadcasts this information to its roster of more than 3,300 participating mortgage brokers and lenders, which then e-mail loan rate quotes.

After selecting a broker, borrowers submit a formal application with personal information.

Zillow says loan queries will garner six rate quotes, on average, with 97 percent of all queries receiving at least one rate quote.

With several brokers vying for a sale, it's not hard to imagine that some might have incentive to low-ball their quotes in hopes of luring business.

Zillow, which makes its money by selling ads on the site, encourages participating mortgage brokers to "stick to your quote."

Spencer Rascoff, chief financial officer for Seattle-based Zillow, said the company guards against low-balling by encouraging consumers to give brokers ratings, much like the reputation rankings sellers rack up on auction giant eBay.

"All those [dubious] loan requests, they can be flagged by the community," Rascoff said.

Zillow's online forums buzz with posts from users discussing favorable and negative experiences with brokers. The site also highlights which brokers have amassed the highest positive ratings.

Since launching its mortgage search product in April, Zillow has reviewed hundreds of red flags and barred more than a dozen lenders for employing bait-and-switch tactics with their loan rates, Rascoff said.

That system has worked well on eBay, where a bad reputation can make it tough to unload even the most-prized items.

While not handing out personal information willy-nilly may be a relief, experts say it's best to keep shopping away from the computer.

"There is a plus in not having to give personal information, but you still have to ask yourself who's in and who's not included in the system," said Gail Hillebrand, a senior attorney for Consumers Union, the publisher of Consumer Reports.

"Just like some of the big travel sites don't have Southwest," she said. "You have to ask the same question. Who else is out there?"

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