Know who is getting your application
Applying online for a credit card, car loan or home mortgage probably doesn’t work exactly like you think it does. In fact what you probably do not know is the company accepting your “application”, especially for home mortgages, is not a lender or broker at all. They are simply a lead generation company.
Mortgage lead generation companies soared during the boom. A large number of solicitation calls answered by brokers and small lenders consisted of someone from one of the myriad of lead generators and resellers which sprang up almost overnight. Without indicting any companies some of the largest have been the guiltiest of tactics which have harmed applicants and companies alike.
During the early part of the first decade lead generation companies worked like Wild West snake oil peddlers and far outside of any regulations. Even today they are still allowed to participate in practices which are in a gray area at best.
Luring in the unsuspecting applicant by advertising interest rates far below what major lenders and banks are truly offering they tempt the shopper into giving their full information in the form of a loan application. What the applicant may not realize is the website they are using goes to a lead generation company and not a lender at all. There is no mortgage professional on hand to actually make the decision.
Immediately upon completing the application the name and location of the applicant is published along with a brief description of the loan needs. Database access is given to the highest bidders who pay anywhere from about $25 each to $75 each for the ability to click on the name of the borrower and purchase that lead. Do not count on that being the only lender who gets the info because even at those prices the lead is generally distributed to a minimum of three loan officers.
What is wrong with this practice?
Theoretically the applicant is expecting a loan at the rates that were advertised by the lead generation company. Expected also would be a mortgage professional who has at least a moderate understanding of the loan process. Generally neither of these expectations are met.
Often times the buyers of bulk leads, therefore the company most likely to phone you, hire banks of telephone solicitors who work from a script and their only goal is to get you to commit to having your credit examined and paying an application fee. Keep in mind the actual loan itself is the real goal but not from that first person who may contact you as a borrower. If you pass their screening then you may, or may not, be passed off to a true loan professional.
While not every mortgage company performs in this manner it certainly is something you should expect. There have even been companies who have hired off shore (International) call centers to call these leads. This means you may be giving your very private information to an English speaking operator in a foreign country where data integrity may not be as important as it is here in the States.
Some lead generation companies hawk everything from life insurance to cell phones. Since the agreement you enter with those companies gives them the right to share your information with their “partners” you may be offering your credit information to credit card companies, insurance agents and cell phone companies while you believe you are simply doing the right thing and shopping for a mortgage.