There sure have been a lot of posts recently regarding Zillow Mortgage Marketplace. Greg Swann gave us a pre-opening preview here, the advertising aspect here, and the capitalist and cookie aspects here and here. Brian Brady takes a “the last shall be first” attitude here and presents Zillow Mortgage as online dating here (this is the Great and Powerful Oz so, trust me, he ties it together). I have been following this closely and am, in fact, one of the “approved” lenders on Zillow (I still pay many of the bills originating). But, in my search for the Emerald City of Transparency, I am still looking for the yellow brick road.
Before commenting on transparency and the great Zillow experiment, let’s quickly dispense with the true purpose of Zillow Mortgage; it was made clear two days ago by Greg Swann when he wrote:
What this means is that Zillow will be able to deliver highly-targeted advertising to its users, zeroing in on products and services that would be most appealing to that user’s sex, age, income and other demographic characteristics. This by itself will make Zillow extremely profitable to advertisers, who seek assurance that their promotional efforts are aimed at the right prospects.
Despite the conclusion one reaches when we “follow the money”, there is still an important tool being implemented here and I hoped it would be a step down the yellow brick road, but it is instead only a blueprint. I am talking about the consumer’s ability to rank the originator. The most common comparison made is to Ebay, but here is the problem with that comparison. Ebay works because both parties have a horse in the race. They are both interested in performing some transaction and can be judged for their behavior. Not so with Zillow Mortgage. The originator has an interest, she, in fact, has a couple of interests: creating business, protecting reputation, creating a raving fan for future referrals and even, possibly, the noble interest of helping others. How much of that can be said for the potential borrower? If these leads are anything like the standard internet lead, you are looking at a lot more liars than buyers. “Mr. Client, you don’t like the fact that the quote changed after we learned your income was undocumented and you had no assets? Grade me as a poor originator.” In a civilization slowly sinking under the “me first” philosophy that finds distaste in accepting responsibility or ramifications for our own actions (yet another boomer legacy: The Baby Boomer Generation: A Gift That Keeps on Giving), a one way rating system is hardly the doorway to transparency.
One suggestion would be to actually make the loan transparent. Instead of responding to the public’s request for a loan, why not post specific loans that we would be willing to do? We could list minimum credit scores, documentation types, areas of the country, etc. and the rate and fees (guaranteed) that we would charge. This would cause the borrowers that were interested to contact the originator and would move the legitimacy scale of the borrower. This would also place the onus on the originator to be honest and legitimize the one-way rating system to some degree. Of course, this does not create the opportunity for cookies and advertising does it? With either system the problem of retaining the professional originators that Brian refers to remains. Both systems plays best to those who are willing to “drop their drawers” and scrape the bottom. While this is fine with a fungible product, it is not the answer to increasing lender credibility. When I was an options trader we screamed prices in an “open out-cry” pit (absolute, free market capitalism in action) and that worked great because the product was the same no matter who sold it and more importantly: who bought it. With mortgages the end user and their unique needs alter the product by their very touch. A professional mortgage advisor must view her profession the same way a financial planner, lawyer or doctor views theirs. Trying to be the cheapest is not a business plan and no way for consumers to make a judgment regarding what is very possibly the largest investment of their lives.
Now I do not believe in doing this much whining without contributing to the mousetrap and in that spirit I have this suggestion. Require the potential borrower to tie their loan request to their actual home on Zillow and provide a customer ranking module or at least a lender comment box in which we may rank them. This is, in large part, Brian Brady’s concern as well and I don’t pretend to be the first to suggest it. Why not create the wherewithal for both originators AND real estate agents to comment on the homeowner? This could be run with the same rules and courtesies as the lender ranking system.
Zillow Mortgage is a vehicle to create target advertising and little else. Will loans come from this venture? I have no doubt. But this is high time cost, low yield marketing. I would assign a junior originator on my staff to man the internet and respond in large numbers – the better to wade through the looky-loos, the liars and those longing for a better lot in life. I am a player in Zillow Mortgage, at least for the time being. Anytime something this big and different comes along we have to jump in and see if it will work. But, to continue Brian’s metaphor, the bloom is already off the rose.
Cathleen Collins says:
I’m with you on this, Sean: What Russell calls the Antisocial Personality will have too much power to hurt reputations unless there’s a way to track the person who is rating the originator. But your solution, as I understand it, doesn’t take us there… when the borrower doesn’t already own, what Zillow house will he be connected to?
April 4, 2008 — 2:56 pm
Sean Purcell says:
Cathleen,
You are right of course. I did not allow for first time home buyers. The last four of SS# would work just as well.
With either idea someone can probably leech onto another person’s address or make up a number and game the system, but that is the inherent problem. I’ll show you mine but you don’t show me yours is a boring game. 🙂
April 4, 2008 — 3:33 pm
David G from Zillow.com says:
Hi Sean,
You’re contradicting yourself here. eBay is a fact a strong parallel for the Mortgage Marketplace. eBay used to let sellers rate buyers but recently realized their error and decided to do away with that feature. It’s important to note that the ratings on Zillow.com are a conversation, not a one-way street. If you don’t agree with your review, you can respond to it and say so. It’s the web2 way. In fact, I’m doing just that right now. 🙂 If you’re unfairly reviewed, flag the review for our attention and we’ll remove it if necessary.
“why not post specific loans that we would be willing to do?”
That’s exactly how the Mortgage Marketplace works for lenders. No-one’s forcing you to quote loan requests that don’t smell right. In the marketplace you set up filters called saved searches – those filters describe the loans you do. Then we e-mail you every time a loan request meets your criteria. You do have to compete for that business (that’s life) but you only compete for the business you want. Let me know if I can help you set up your saved searches.
You and Brian are both totally off base on this consumer rating idea. It didn’t work at eBay where many people shop constantly so why would it work to support a transaction that takes place every 7 years? Even if rating consumers made sense and it had worked at eBay, a reputation potentially earned from one event every 7 years obviously has no value. It’s physically impossible for such a system to accrue enough data to be useful.
Zillow’s attracted 4500 loan requests in less than 48 hours. Borrowers LOVE to because we put the consumer in the driving seat. I know that we’ve switched things up on you guys and appreciate your feedback but one thing’s clear; many borrowers will consider this their yellow brick road.
April 4, 2008 — 3:43 pm
JeffX says:
Well put David…thx for saving me the time to write a diatribe of a comment.
April 4, 2008 — 4:17 pm
Mike Farmer says:
Good luck with it, David, I hope it works for you guys.
April 4, 2008 — 4:25 pm
Sean Purcell says:
David,
Before I disagree with you, allow me a quick stroke. You are out here in the trenches commenting, arguing and basically putting yourself in front of your consumers. THAT is the web2.o way and I respect you for it.
The idea of rating the consumer (and I speak only for myself here) is not to generate an historical perspective on the consumer for future reference (7 years down the road); rather it would serve as an indication to other originators what they were getting into before they even quoted the person. E.g. are they just shoppers? was their score well below their estimate? when they say they are full doc do they mean ever since they got out of jail last week? and so on. 🙂
For me the discussion is getting a little stuck on the potential fix (rate the consumers) rather than the problem: transparency (in mortgages) must be a two way street.
A rate based on the consumers opinions rather than actual credit reports, pay stubs, etc. is fantasy. The people in this profession that view it as a profession do not pretend with their clients and I think we must do more to educate the public on what they should expect and demand from a lender.
As for posting the specific loans we would do, I think you misunderstand. That is the very opposite of what you are doing now. What I suggested is that the buyers do not make any kind of request. Instead the lenders put out and update the specific loans they will do under a half dozen or so specific criteria (e.g. credit score > 680, full doc, ltv < 80%, rate & term refi: 30 year fixed at 5.75% with a flat fee of $4000) and post that for all the world to see. Consumers who fit the bill would contact me directly. The benefit of this is two fold: the consumers initiate the action based on their belief of suitability, which lowers our susceptability to a poor review AND it creates true transparancey across the board. The lenders would have to guarantee their fees and so on to maintain standing with Zillow so that will knock out anyone left who still is not professional.
Bottom line problem though, as I stated, was that these systems reward and even encourage the bottom suckers and they are no better for the business than the lawyer advertising on TV that they will do our divorce for $99 or the Doctor on the radio talking about their low, low, low prices on plastic surgery. Uh… I don’t think I want that guy cutting me.
By the way, we do agree on one thing. Many borrowers will consider this their yellow brick road; why shouldn’t they. They get to throw out scenarios and see what comes back. It is not a waste of their time. 😉
April 4, 2008 — 4:28 pm
Sean Purcell says:
Jeff,
Not sure what your diatribe would be. We are both pushing, pulling and fighting for the same thing: transparency. Coming from a securities background the mortgage business looks like a lawless frontier town to me. Open book lending is the answer. I just do not see Zillow’s Mortgage community as the big step you do. I sure as heck see it as a step (actually I think I called it a blueprint: some good ideas but in need of more work).
As it stands you have lenders that passed the bare minimum test of entry (and believe me I am as glad as you are that someone is even doing that) offering rates and fees based on information that does not warrant actual bids. You know that as well as I. How is this system not ripe for the same bait and switch tactics we both loathe?
The answer is education. Zillow has a very big platform and they are using it. I do not think this is the big step others do but I hope they continue down the path.
April 4, 2008 — 4:41 pm
David G from Zillow.com says:
Thanks Sean. And I appreciate the debate.
I understood your proposal; I just know it’s not what consumers are looking for. That solution actually exists today on at least one site that no-one uses. We spent days in focus groups with borrowers. They told us they wanted real quotes that they can really qualify for and that they wanted them anonymously.
The bottom line on borrower reviews is that it’s physically impossible for such a system to accrue enough data to be useful. Even if a consumer was “just shopping” when they spoke to you a week ago that does not mean that they’re not serious today.
The Zillow marketplace is hardly a friendly place for bottom-feeders; exactly the opposite. First, we’ve implemented the industry’s first transparent reputation system. We do background checks on all lenders and will exclude lenders who abuse the marketplace. We’ve given consumers the ability to compare quotes on an apples-to-apples basis in another industry first. A bottom feeder will stand out like a sore thumb on Zillow.
@Jeff and @Mike – THANKS!
April 4, 2008 — 4:54 pm
JeffX says:
A diatribe only in the measure of length, to make a similar conclusion David did about ‘rating’ consumers too…that it has of little value…
Right now nobody trusts anybody, both sides feel like they’ve been molested by the other.
‘The answer is education. Zillow has a very big platform and they are using it. I do not think this is the big step others do but I hope they continue down the path.’
Agreed…it is big in the way it is an important step, a very important one.
April 4, 2008 — 5:29 pm
Denver Mortgage says:
Why not just allow consumers who have closed loans to rate their originator, not just shoppers? Why should non-clients be allowed to rate a loan officer? If you have a 5 minute conversation with someone, should you be able to rate that person?
April 4, 2008 — 9:36 pm
David G from Zillow.com says:
@Denver –
Good point. The review asks 2 questions. One is; “did you close with this lender?” So, borrowers will be able to differentiate between reputation earned in closed loans and those that didn’t get beyond the first sales pitch. And again, borrowers can only contact lenders they’ve contacted.
April 4, 2008 — 9:45 pm
Sean Purcell says:
David,
…it’s not what consumers are looking for
…they wanted real quotes that they can really qualify for and that they wanted them anonymously
I believe you have put together exactly what consumers told you they wanted. Let me be clear that I am not objecting to what you are creating or the quality of what you have created. This is a platform from which to sell advertisers a slice of my (the consumer’s) mind by providing consumers access to originators that have demonstrated some type of professionalissm while distributing the leads for free on an open basis. This is free market economy at its best.
My objection is to how it is being hailed. Free leads to lenders is great. A level of professionialism is needed but far too little in my estimate (nearly to the point of providing a false sense of security, but I don’t want to quibble about something that is a damn sight better than what else is out there). The ability to sell advertising that is directed is not only good economics but should be welcomed by the recipients as well.
It is all of those things. What it isn’t is much of an improvement in transparency. Again, better than most other options; I am not trying to tear it down. Rather, I see the purpose of a site like BloodhoundBlog is to share compliments and criticisms. The idea is to improve the system and the mortgage system needs A LOT of improving.
Lenders providing quotes that they can not back up (no matter how earnestly they try) is very, very similar to what we have always had. And I believe a lot more try to honor their quotes than don’t, but there are those out there that are happy to switch the rate and fees later. How do we know those guys from the legitimate guys that changed rate or fees because the borrower was mistaken. How does the borrower know? And since we are talking about transparency let’s cut to the meat of it. How about putting a disclaimer on every page explaining what rebate, ysp and srp are? Let’s actually do something about transparency by removing temptation as well as opportunity for the rampant theft that goes on with the vast majority of loans, even by the “honest” lenders. There would be a number of ways to implement such a situation and I will be glad to share them with you (as would, I suspect, JeffX – the original and still, as far as I know, top voice when it comes to lending honesty).
The bottom feeders to which I refer may be a bit misleading. I did not mean to imply shady characters who only thrive at the bottom of the process. I meant lenders that will lower their rates and fees to the rock bottom. I am not against open markets (quite the contrary). But I suspect that the rock bottom pricing of a “discount” lender is appropriate for very few consumers. More to the point, very few legitimate, professional originators will stay in a game that requires them to continually cut fees below what they believe they are worth. Would this concept work for lawyers or doctors? Doubtful. This then defeats the purpose of your platform by leaving only the least experienced or least knowledgeable originators behind to “compete.”
Finally, you have done an exemplary job of giving the consumers what they want. The problem with that – and again I am criticizing an evolutionary platform that is already doing more than anyone else out there, so please accept this in the spirit in which it is intended – is that most consumers only think they know what they want. That does not imply that in turn I know what they want. But I have found that when you sit down with a client and discuss long term/short term financial goals, risk aversion scales and how debt planning fits into their overall financial health, the difference between what they thought they wanted and what they actually want, now that they are educated, changes a great deal. If everyone needed a 30 year, fixed rate loan then there would be no need for any of us. Just web sites where borrowers could compare rates and fees (sound familiar?). But that is not always the case and worse yet, we still don’t know what percentage of originators out there actually have a clue on how to help a client. The only thing we can be fairly certain of is that the percentage is higher now than it was a year ago. 🙂
So this comment has probably now gone on longer than the original post. I do enjoy a good debate, especially when the topic is something that we both agree is trying to improve the national discussion and disagree only as to degree.
April 4, 2008 — 9:53 pm
Sean Purcell says:
Jeff,
Agreed. I am backing off the “rating borrowers” theme for the time being because I think it leads us down the wrong path. My point was and continues to be the need for transparency to be a two way street. While I think it would probably not be that difficult to devise a useful system to rate the borrower, it is not my central concern.
April 4, 2008 — 9:56 pm
Louis Cammarosano says:
Sean I left a comment over at FOREM that I would like your thoughts on
Joel wrote
“taking my info and then selling it on (as a lead) to the highest bidder. That business model should be taken out behind the woodshed, shot and disposed of appropriately, in my opinion.”
How is that different than taking your information and then pimping it out to advertisers?
Both models result in a direct sale of the consumers information.
In the rush to praise the “transparency” that Zillow is bestowing upon us, I think we are missing as Joe over at
Sellsius noted- Zillow has become a Lead Seller, plain and simple.
http://blog.sellsiusrealestate.com/zillowcom/zillow-mortgage-marketplace-is-lead-generator-for-mortgage-lenders/2008/04/03/
Whether Zillow claims its ‘free’ or ‘transparent’ they are still selling leads, just with a different model.
So while you are busy taking lead generation models outback for assassination, keep some bullets ready for Zillow’s new lead generation model.
April 6, 2008 — 8:02 am
David G from Zillow.com says:
Louis,
How obtuse. That’s probably lack of sleep typing, but seriously, do you not understand that people hate having their personal contact details sold? That is absolutely not how online advertising works. Is this just FUD or do you truly not get the difference?
April 6, 2008 — 9:18 am
Louis Cammarosano says:
Hi David
David, sounds like a little FUD peddling your self!
David there are “people” who don’t like cookies tracking where they go so that lead vendors like Zillow can serve up personalized ads to them.
These “people” view it as a form of intrusive cyberstalking.
I understand that there are consumer segments (not “people” in general)
Some people don’t mind leaving their full contact information.
Some people don’t mind if their information is kept annoynouns
Some people don’t mind vendors like Zillow tracking their web activity.
Not all “People” agree with what Zillow is doing or what HomeGain is doing.
But thanks for the instruction on how online advertising works and what “people” want!
April 6, 2008 — 9:28 am
David G from Zillow.com says:
To elevate this discussion beyond semantics I think we’ll increasingly need to differentiate between “voluntary” and “involuntary” leads. Ultimately all marketing yields a lead (an opportunity to pitch a consumer) but there’s a world of difference between reacting to genuine interest in you and your services and proactively trying to interest them. Permission marketing driven leads and lead-gen driven leads are unlikely to have much in common. Any suggestions for a good way to differentiate between the two? I don’t think voluntary/involuntary completely does it.
Louis –
I don’t understand if your position is that you think most people don’t hate having their contact details sold or simply that enough people don’t mind that it’s a good way to make a buck but either way I’d have to disagree with you. Time will tell.
April 6, 2008 — 10:16 am
Louis Cammarosano says:
David
I agree we need to get beyond semantics. Who ever fills out a lead form should understand what they are getting in return and from whom they shall be getting it.
Under HomeGain’s agent evaluator program the consumer fills out a form and their details of what they are interested are passed along annoynmously to realtors who then bid on the business. The consumer pays nothing but participates in order to receive the proposals.
We fund this service by charging the real estate agents a referral fee if they close a deal based on one of our leads. Zillow is essentially the same except it funds it through targeted ads sent to the consumer.
Our model does what yours does WITHOUT the ads. Our Agent Evaluator customers remain annoymous and they receive the agent proposals and respond to them When and if they chose. We don’t resell their contact information, nor do we even attach cookies.
Under Zillow market place your consumers remain annoymous to the brokers BUT they get additional ads.
I am not sure what we are doing is different from what you are doing only we’ve been doing it since 1999 and our real estate agents pay for the operation of the service and in your model the brokers don’t pay for it your advertisers do.
Under both models, however the consumer’s information remains annoymous until they chose to work with an agent or broker. However under the Zillow model they get some targeted ads too.
April 6, 2008 — 10:28 am
Dave Shafer says:
The problem is that the consumer can’t get what they want; “real quotes that they can really qualify for and done anonomously.” You tell me how that works in the mortgage market? You tell me how I can give someone a real quote without pulling credit, getting documentation, an appraisal for LTV, etc.?
Now if left to their own devices I believe consumers will make major mistakes in structuring their mortgage debt. But that is my story to sell and the basis for my value added. There will always be folks out there who think they can “make banks compete!” Good for them, even though they are demonstratably wrong. Viva the consumer!
But, Zillo is perpetuating a lie by telling folks they can get “real quotes anonymously.”
Bottom line. Good luck with your business model. I will watch it closely.
April 7, 2008 — 2:13 pm
Sean Purcell says:
Dave,
I agree with you wholeheartedly and am already witnessing the problems. You have an interesting web site. Thanks for stopping by.
April 7, 2008 — 2:26 pm
Wade Young says:
Will originators be able to delete their profiles is Zillow isn’t a good fit for them, or will the reviews (positive or negative) remain indefinitely?
April 7, 2008 — 9:16 pm