by Brian Brady
Commercial Real Estate Finance Expert
Structured Debt and Equity
Licensed Real Estate Broker in AL, CA, and FL
Zillow Mortgage MarketPlace rang the opening bell and loan requests came flying in the door. I was pleasantly flabbergasted! It’s no secret that I’m a Zillow-phile; I believe they are leading the way to transparent loan and real estate transactions.
I’m tenuous, however, about spending too much time there. My comments at BusinessWeek:
Brian Brady, managing director at San Diego’s World Wide Credit, a national lender and broker, said he signed up for the Zillow mortgage marketplace a few weeks ago and has mixed feelings about it.
Advice Needed?
He said it has the potential to be a great tool for both consumers and lenders. But he’s concerned that borrowers will be seeking quotes without first getting advice from mortgage professionals about the loan that best fits their needs.
He’s also concerned about the kinds of leads the site might generate.
“Zillow is going in the right direction, in that the consumer gets to rate us as [loan] originators,” Brady said. “I certainly wish it were a mutual rating system because customers need to be rated, too.”
Take a second look at my final comment. Consumers should be rated, too. The challenge for quality originators, today, is time. With so many loan applications that are unable to be funded, we have to be judicious about where we spend our time. My concern is that I’m shooting craps with loaded dice when I engage in anonymous quoting; I have little upside. If I deliver a great quote, I am rewarded with an opportunity to “sell” a new customer. If the customer is disingenuous about her information, I am accused of delivering a “phony quote” and am rated poorly, within the community.
Wade Young expands upon my concern on Lenderama:
When I pull the actual credit, I’m not going to be able to make good on what the Zillow consumer will most definitely consider to be a “promise” made by me via my rate quote. The lady gives me one star (undeservedly, of course), and I move on to other things.
Wade is more concerned about the reputation management tool than I am. I know a little something about online consumers. Online mortgage shoppers would make a loan application with Lucifer if they thought they could save $432.50 on closing costs. I think they’ll look past the “number of stars” if they thought the rate was low enough.
That’s not to say that I WANT to be rated poorly nor is it a suggestion that I’ll engage in deceptive practices to gain consumers. I’m just hip to the mortgage shoppers’ game- it’s an online dating site where the participants can misrepresent their vital statistics, in hopes of “snaring” some unsuspecting but hopeful mate. Ken shows up to meet Barbie and both are disappointed. Ken has an extra 40 lbs around his midsection and Barbie chain-smokes. Both walk away even more jaded than before.
Jeff Corbett talks about the Marketplace being a COMMUNITY but doesn’t think originators are prepared to play:
Stating the obvious…what Zillow has created is a community for mortgage professionals (Mo-Pro), a community that requires said participating professionals be of a certain grain of salt, checking their state licensing information as well as a social security number for a cursory level personal background check. These two stop-gaps insure a baseline quality standard and validate the community as (more) trusted and viable for a consumer as opposed to them walking into the many lender traps that currently exist on the web.
A community, however, isn’t based upon cloaked disclosure. It is based upon trust; trust through transparency.
Let me give you an example. The median credit score, last year, was 680. This means that half of the country was BELOW 680; a year ago. Mortgage applicants, as a data group, have a LOWER median score than the general population. Why? The higher credit scores belong to the well-heeled, retired people- low users of mortgage credit. Today, that median score, for mortgage borrowers, dealing with adjusted ARMs, rising foreclosures, and declining values, MUST be considerably below the 680 median.
Engage in a loan request search on Zillow. Fully two-thirds of the borrowers, in California, are disclosing to be ABOVE the 680 credit score limit. As an originator in the eye of the credit hurricane, I know that specific data sampling is skewed. The Marketplace then, is the equivalent of a one-sided dating site. The ladies have agreed to submit honest pictures and have their facts verified while anonymous middle-aged men are acting like fraternity boys, with no honest intention whatsoever.
The Zillow response could be smug. They could say that they attract only well-heeled customers. Online mortgage shopping attracts the desperate, as much the the well-heeled. Despondent folks are notoriously optimistic and shop anywhere and everywhere to find an originator to help them. Either Zillow has done an AMAZING job at deliberately dissuading the desperate consumer or the consumers are, well…gilding the lily.
Jeff proves my point, about intent, with this paragraph:
Consumers are notorious voyeurs. I’m one of them. I submitted my anonymous info to Zillow today and received 3 quotes in less than an hour. The info I provided was extremely attractive and easy to qualify.
What the hell is Jeff doing in the Marketplace? Jeff has no intention of securing a loan within the next 90 days yet he engaged in a mortgage search. Jeff is an “interested party” so I’ll cut him some slack. However, Jeff represents the “notorious voyeurs” about whom he writes. These “voyeurs” are the equivalent of a frustrated housefrau, seeking attention from eligible bachelors on MySpace, to bolster her mundane life.
Is there a solution? There always is and I know that Rich, Spencer, Drew, and David will listen for it. I believe the solution is reputation rating FROM originators, about the consumers. Information submitted on the consumer loan request forms can be commented upon, by the originator community, so that better decisions can be made about whom to engage. Zillow did as much when they allowed consumers and industry professionals to update incorrect tax information on property profiles- they can do the same thing with the Zillow Mortgage Marketplace.
Transparency doesn’t guarantee good behavior but it acts as useful deterrent against bad behavior. Nobody wants to be branded a con artist, especially online. I believe the very concept of originators commenting about loan proposals, in public, would act as a suitable deterrent against “gilding the lily” and a truthful announcement of “intent”. For example, if Zillow required consumers to define their “intent” to secure a mortgage, originators would give it the appropriate attention. Serial abusers of the marketplace would be vetted by the originator community and their requests would be ignored.
Zillow created an amazing Bourse, yesterday. Good, honest originators are willing to do business ethically. Can we get the consumers to behave ethically, as well?
JeffX says:
Novel suggestions Brian but this is the rub of anonymous transparency and Zillows mortgage community.
You can’t fault a ‘voyeur’ such as myself for checking to see ‘where the market is’, this is the allure of Zillow community…I want to ‘see’ where rates are w/o being hounded (no pun intended considering the forum we’re in ;)). My intent is ‘I want to know’…I have every right to shop the community, the info I entered was correct to the dollar and point. Granted, I’m not in the market for a mortgage tomorrow but that may change tomorrow.
If my rate is X% and I want to know when rates hit X% because thats where economics dictate I should refinance, and I want to remain anonymous for the well stated benefits, repeated peeping Jeffs are inevitable. This doesn’t make me a bad consumer or participant in the community, I’m using the community for it’s intended purpose. Rates change daily, sometimes twice (singing to the choir, I know), in other commodity markets I can get real time pricing anonymously and consumers are looking for the same in mortgage, granted it’s not that simple in mortgage qualification, but consumers are not sympathetic to the mortgage professionals information processing short-comings. This is a matter of fact and forceful evolution.
Under traditional non-transparent conditions, where I must give up personal information, the professionals have tools where they can put me on a ‘drip’ where I’m notified when my situation qualifies for the rate I’m looking for…but we know this model is broken at best.
The #1 by-product of anonymous transparency is voyeurism…this isn’t unethical, its the way the Zillow system works. Zillow ‘erred’ to the side of the consumer, good, bad or otherwise, and completely subjective to the participating party…
Zillow has opened Pandoras Box for the consumer a little further and mortgage professionals are not properly equipped to handle it, not yet…an inconvenient truth.
In the end, Zillow allowing professionals to control their consumer traffics ability to shop the community is counter to their business model and that, my friend, is a dilemma for the mortgage professional to solve on their own, not Zillow.
April 4, 2008 — 11:28 am
Brian Brady says:
“Under traditional non-transparent conditions, where I must give up personal information, the professionals have tools where they can put me on a ‘drip’ where I’m notified when my situation qualifies for the rate I’m looking for…but we know this model is broken at best.”
I disagree, Jeff. It works quite well. If you were on my “drip” system, you’d be notified of market movements so that you could meet youstated refinance goal.
“Zillow has opened Pandoras Box for the consumer a little further and mortgage professionals are not properly equipped to handle it, not yet…an inconvenient truth.”
Wholly untrue, Jeff. Originators were gamed by consumers, for years; just look at the mess we’re in.
Consumer were taught that anonymous shopping, using the leverage of stated income loans, and easy money policies, could get originators to “play ball”. Every Tom, Dick, and Susan populated sub-prime telemarketing rooms in Southern California, because of the virtual feeding frenzy we had.
The problem? Today, the ethical originators are highly suspicious of consumers. With good reason, as well.
I want to know a few things about the people whom are asking for my professional expertise. Simple things, like:
1- Can you afford to repay this loan?
2- Have you paid your bills in the past?
3- and most importantly, are you serious in your intent? Why do you want this money?
Jeff, the answer to the mess we are in is transparency; transparency is a two-way street.
Zillow is the single best forum to exhibit this transparency and clean up lending. We hold the power to clean up lending from both the user and provider side, at the Zillow Mortgage Marketplace.
The Marketplace isn’t for “shoppers”, it’s for transactors. Shoppers should go to Bankrate
April 4, 2008 — 12:16 pm
Brian Brady says:
I have a follow-up thought for everyone. There will be a great many people who LOVE the idea of originators spinning their wheels. People will love the “turnabout” the ZMM affords the consumers. No longer will borrowers be preyed upon by unscrupulous originators.
“Viva la consumer! Stick it to the jerks!” will be the cry.
Here’s the problem with that line of thought. The jerks are all gone. The survivors in the mortgage business, today, are COMMITTED professionals. Zillow Mortgage Marketplace is attracting the creme de la creme in the industry; ethical, hard-working folks who have ALWAYS subordinated their interests to the consumers’.
I’ll admit that I’m being dramatic with my analogies but this idea, the Zillow Mortgage Marketplace is too damned important to screw up. Consumers, as well as quality originators need to know that market participants are honest and forthright in their intent.
Transparency and honesty will clean up this business- that’s a two-way street.
April 4, 2008 — 12:24 pm
Sean Purcell says:
Brian,
Transparency and honesty will clean up this business- that’s a two-way street.
And the truth shall set you free..
Zillow Mortgage Marketplace is too damned important to screw up. Consumers, as well as quality originators need to know that market participants are honest and forthright in their intent.
I don’t see it happening from here, but my thoughts are more post than comment, so a post it will be.
April 4, 2008 — 1:03 pm
louis@homegain.com says:
Check out comment 7 on Dustin’s blog:
Someone doubts the long term viability of Zillow’s “Revolutionary Zinnovation”
http://4realz.net/2008/04/03/zillow-took-the-fun-out-of-mortgages/#comm
April 4, 2008 — 2:14 pm
Brian Brady says:
I checked the comment out, Louis. The commenter brings Legg Mason (home of Bill Miller), perhaps the finest “value investors” on the Street, in as a straw man, to support his tenuous argument.
My point is this; what Zillow has created is too large to ignore AND the potential to be an open marketplace is revolutionary. Benefits can be drawn through transparency in a central exchange. If consumers willingly come to the exchange with an intention to “buy”, my marketing costs, to “sell”, drop. Lower costs to the providers are beneficial to the consumer.
The commenter has a basic misunderstanding about Zillow’s offering. ZMM is not a “crowded lead gen” model; it’s a Bourse.
April 4, 2008 — 2:27 pm
Louis Cammarosano says:
I’m still very skeptical
http://blog.homegain.com/homegain-cries-flattery-zillow
April 4, 2008 — 2:30 pm
JeffX says:
Brian,
You are an anomaly (compared to the mortgage industry over the past 5 years) and can easily defend your professional actions against my broad suggestions.
““Zillow has opened Pandoras Box for the consumer a little further and mortgage professionals are not properly equipped to handle it, not yet…an inconvenient truth.”
Wholly untrue, Jeff. Originators were gamed by consumers, for years; just look at the mess we’re in.”
Brian…come on…you can’t tell me with a straight face that consumers ‘gamed’ originators. It went both ways (at WORST)…Originators (and lenders) invented the games, then taught consumers how to play and were paid handsomely to do so. I’ll pretend you didn’t say that.
A good originator can smell a dead fish from a mile away and can turn one away at the drop of a hat. I have never been ‘duped’ into doing a loan by or for a consumer, ever…and doubt you have either. Both participants have always been willing (and able).
You may want the Zillow marketplace to be one of transactors, but then they’d have to change their name to Zutopia…
I love the fact they are offering transparency at the level they are, I’m all for the transparent movement, I practiced and preached it incessantly before Zillow was a twinkle in Rich Bartons eye…
Other contributors to this blog called me an ‘idealist’ and a ‘white elephant’ when I started to write about transparency for the mortgage industry almost 2 years ago.
With this paradigm shift comes new rules which require new tools, this is why I say the mortgage professional today is not ready for what Zillows community is fostering, they don’t have the wares or wherewithal to service it.
I agree with your assessment that Z’s mortgage place is too important to screw up. But, at this point it’s immature, it needs time to grow up issues need to be fleshed out. As is Zillows mantra, they are consumer centric not originator centric…and it looks like consumers are coming in droves to ‘kick the tires’, which I’m sure they’re elated about.
April 4, 2008 — 3:49 pm
JeffX says:
Your call for greater ‘consumer transparency’ resonates with me Brian…it strengthens the overall community. You’ve caused me a good thought, thanks…
April 4, 2008 — 6:30 pm
Brian Brady says:
You and I are always a beer away from a workable solution, Jeff.
April 4, 2008 — 7:14 pm
Rhonda Porter says:
I’m one of the few LO’s at our company who does not take up-calls for the same reasons, Brian. And at least an up-call, they person is truly interested in getting a mortgage…however odds are they are still in the “kicking tires mode”.
You hit the nail on the head that Mortgage Professionals have little to no extra time to deal with this, let alone the huge amount of time it takes to wade through ZMs “leads”.
I’m betting that a majority of the LO’s who will be spending time at ZM are those who have time available. Perhaps their new or just don’t have referral business. Maybe they used to buy leads (and I have my theory about LOs who are not able to earn referral or repeat business) and now they can get them for free.
April 5, 2008 — 6:59 am
Dave Shafer says:
Interesting posts! Still don’t quite get how Zillow is changing the business model? But, I am in the wait and see mode. I am personally ignoring the “leads generated model” as still lacking in transparency from both ends that I crave.
April 7, 2008 — 1:45 pm