Nice detailed post.  Sounds like a good system for many people.

Hi Spencer,

I've got another 30 days on my self-imposed beta test of the system, the auto populate features on quotes has been a helpful addition to make it a faster process.  There are still some issues that I think need to be addressed:

1. The APR on ARM's is still not calculating correctly.  This is huge and has legal implications for those of us providing quotes.
2. FHA is more and more common and should be a default category that takes the 1.5% funding fee into consideration and adds to the loan amount (or addresses how it can be paid).  Also, the PMI factor is a default .50 (except on a 15 year fixed with LTV lower than 90%)
3. Cash out refi needs to be clearly identified by the borrower, and a disclosure that in many cases Cash out refinances are more expensive.  I have seen a number of rate-term refi quotes that do not reflect the cash out nature of the request, this should be specified by the lender providing a quote as well.
4. Out of state lenders who aren't licensed in that state, don't know LTV restrictions, loan limits for the MSA area are making things confusing for the borrowers because they are being quoted rates products not available for particular areas.  This doesn't serve borrowers or lenders making legitimate quotes.  Even though I can lend in California, as a professional I would never solicit business from Cali because knowing the region is huge to providing accurate quotes and sound advice.  Bogus quotes from out of area lenders do not help borrowers make a decision, it adds to confusion.

Just some thoughts.

I've seen quotes where the rate being offered was less than the par rate, and offered with little or no fees or points. Sometimes I see fees for things such as appraisal hidden in the comments section, but $0 on the form to make their total fees look less than the competitors.

I don't see how Zillow can police all the quotes ... perhaps we can "flag" these quotes that we know to be erroneous. Zillow should pay heed to those "red flags." And they should perhaps develop a policy that if you receive say 3 red flags for your quotes, you're "on probation," and if you receive 5, you're kicked off the system and barred from quoting.

Just my 2 cents....

Hi Spencer: So far I have submitted probably 10-15 quotes with a personal note and had no response. I mentioned to you initially that I thought it might be a forum for "rate shoppers" and I feel that way so far. I plan on continuing although there are plenty of other avenues to generate leads. I also agree with Rich; several quotes are unrealistic which gives all of us a bad name. I've also noticed quite a large percentage of the borrowers are self-employed. Any loan officer worth their salt knows that self-employed borrowers are tough to get approved these days. Just my 2 cents. I like the concept and, obviously, everyone is looking for an easier way to do business. I just think that so far it sounds a little too good to be true. Again, I plan on sticking with it although if the borrower doesn't even respond it's probably a waste of my time. Have a nice night!

Paul 

Ditto to what Paul said.  Many self employed borrowers have a gross income much, much greater than their usable income due to how they get paid, how many deductions they take etc.  Once again, while it makes the borrower provide more information, there is a great deal of information that would be helpful to provide accurate quotes.  If I'm a consumer and I don't know things because I wasn't asked on the quote request, I'm going to give the LO a negative rating becuase it is going to sound like bait and switch.

Once again, I think the concept is good, but it needs to be improved on the both the borrower side and the lender side.

Question for Spencer:  have you researched the RESPA reform issues, pending YSP disclosure issues for brokers, etc? I'm curious to know what your position on how this service might generate compliance issues...

Hi, it's David G from Zillow,

@Rich -

To address your first 4 points;

1) I'm surprised to hear that about APR's; can you please e-mail me an example of a quote where the APR calculation is incorrect [davidg AT zillow DOTCOM]

2) Great feedback on FHA loans. We agree and it's a opportunity we're working on.

3) Cash-out refi is clearly indicated on loan requests. Lenders are required to pay attention to loan request detail and to provide accurate quotes. Lenders who ignore that information should earn a poor reputation.

4) That's a good discussion of the complexities of distance lending. I am hearing that local lenders are far more successful on Zillow than those quoting nationally BUT just because it's complex is not a good argument for not allowing long-distance quotes and for some borrowers in extreme circumstances it could make the difference in finding financing. 

Loan requests already do clearly indicate whether borrowers are self employed. Lenders are required to pay attention to those details when they submit quotes.

Regarding RESPA; yes, we've certainly done our homework. YSP disclosure applies to GFE's, not to loan quotes so it's not actually an issue for the mortgage marketplace though we did investigated it thoroughly. Borrowers told us that what they needed was a way to compare the all-in monthly and one-time costs associated with a loan on an apples-to-apples basis. That's the challenge that the Mortgage Marketplace addresses. Frankly, it can be hard to argue that YSP disclosure helps borrowers achieve that goal and it's very easy to imagine it being a distraction from them achieving it.

@Lewis - Please do flag the quotes you believe to be erroneous. We're using flags to detect patterns in lender behavior and dishonest lenders shown the door. Look in the left sidebar of any quote to send us a flag.

@Paul - The marketplace is certainly competitive and it will take a new lender some time to grow a reputation and get a feel for optimal pricing. All of the successful lenders I've spoken with have submitted at least 100 quotes. Please hang in there. And if you do see impossible quotes, please flag them for our attention (at least on Zillow you can see what other quotes you're up against.)

Rich and Paul have addressed some of my concerns as well.  I have only responded to 23 quotes.  I have seen many quote request for 100% financing from borrowers with credit that can not qualify based on self-employed/poor credit/can't document income, etc. If there was a way to screen these, it might help with the amount of non-qualified leads or bad quotes. Just my thoughts. 

Thanks, David. I appreciate your feedback. Again, I figured I would try a little longer. I like the idea; that's why I was willing to take it on. Good luck!

Paul

Hi David/Spencer,

I really appreciate Zillow's openness to dealing with suggestions...way to go.  I will screen shot things when I see them and forward them to you.  Thanks.  And please know, I think the is a really good start, I just think that it can be improved even further.

Hi David,

I've been an approved Lender on the Zillow Mortgage Marketplace since day one.  My results are pretty good considering it's a free service.  I've closed about 5 loans so far and have 3 that are in process.  Most of them are purchases, VERY "A" paper...  Have you noticed that everyone who posts a quotes has a 800 Fico?lol

Great info...Thank you,

Tiffany Taylor

Spencer, I can't believe no one has commented on your stats yet!  That's the important part of your post.

Why do you think that ONLY 40% of borrowers posting requests are contacting a Zillow lender?  That seems pretty low.  I mean, why go to the trouble to post a request and then not follow through.

Does your second stat mean that ONLY 30% of the 40% "have closed or plan to close" a loan with a Zillow lender?  If my math is correct that means that only 12% of the total requests for loans are resulting in a closed or "plan to close" loan.

The "plan to close" stat is worthless - what % is actually closing?  Surely Zillow asked that question in the survey. Why ask "plan to close?"

My questions may seem anti-Zillow but that is not the case.  I would just like to see the REAL stats of closed loans before I place any validity on Zillow's reported success.

As for the business model itself - I'll make an attempt at posting quotes because your service is free and we're all struggling for business.  What's sad is that you know the truth just like the professionals that have posted comments before me know the truth - there is no way for us to provide a VALID and HONEST quote based upon the information provided by the consumers on the Zillow web site.  You know that.  Having said that, we all have to recognize the Zillow Quotes are simply "advertising."  No more, no less.  The ONLY purpose of advertising is to get the phone to ring so you can make your pitch in person.

Oh, I just thought of another important survey question to ask the next time around - "Mr. Borrower, here is a copy of the original quote submitted by your Zillow lender (presumably you have those stored in the server somewhere).  Did your interest rate at closing MATCH exactly that which was quoted."  Ask the same for the fees quoted.  Now that would be an important survey question - for Zillow.  Then you could report confidently how the service was benefiting the consumer because such and such % got what they were originally quoted. 

Michael,  Actually, a 40% response is quite high given that the leads did not cost lenders anything other than a $25 application fee and some time to complete quotes (which we've made easier and faster since launching the quote pre-fill feature).  And these are not weak leads; borrowers who are contacting lenders are serious, since they have already reviewed lenders' quotes, ratings and profiles.  Regarding the 60% who have not yet contacted a lender from Zillow Mortgage Marketplace, the main reasons include: rates weren't low enough (particularly for refinance loans) or borrowers are not yet ready to purchase a loan.  It's important to note that many of these respondents could still lead to business for lenders once rates come down a bit more.  And for those who just aren't ready today, lenders who have provided them with quotes have a leg up once these borrowers become ready to secure loans. 

We asked respondents about their intention to "plan to close" since the vast majority of loans close 30-90 days post-quote.  We conducted this survey several weeks after the launch of Zillow Mortgage Marketplace.  Therefore, most of the Zillow borrowers who took the survey have not yet had a chance to close their loans, since the service is still so new.  You are correct-30% of the more than 40% have closed or plan to close a loan with a lender they found though Zillow Mortgage Marketplace.  Again, for a free service, this is a pretty good success rate: lenders sometimes pay hundreds of dollars per closed lead and loads of time on the phone chasing down weak leads, which they don't need to do with Zillow Mortgage Marketplace.  As I noted earlier, many who have received quotes could turn into actual customers in the future, so this "close" rate is a bit conservative.

Our goal with Zillow Mortgage Marketplace is to connect borrowers who are looking for loans with lenders who have a valuable, relevant service to provide.  And we are thrilled to say that our data and research show that after only a very short time, the service is working for many borrowers and lenders.  Zillow Mortgage Marketplace is new, and we are learning from both borrowers and lenders alike and are applying this knowledge to improve the service so both can obtain greater benefit.  We will continue to monitor the performance and collect feedback, and we will share results so we can get further valuable input from readers and Zillow visitors.