How your mortgage application turns you into a target

The Star-Ledger, June 17th, 2007

SAM ALI STAR-LEDGER STAFF

1617 words

English (c) 2007 The Star-Ledger. All rights reserved.

Less than 12 hours after filling out an online application with her local credit union to refinance her home, a strange thing happened to 48-year-old Bonita Holmes.

Her telephone started ringing off the hook with calls from fast-talking loan officers from mortgage companies trying to peddle their products.

Even more troubling - they all seemed to know a lot about Holmes, where she lived, her phone number, her age, her mortgage history and her FICO score, that elusive numeric calculation lenders use to evaluate how big a risk you are when it comes to paying back your loans.

How did this happen?

Holmes had just become a "trigger lead."

It turns out when Holmes decided to refinance her loan, she authorized her lender to pull her credit report to determine her qualification status - a standard procedure. But once her credit report was pulled, her name was "flagged" by the national credit reporting bureaus, such as Equifax and Experian.

That's right.

The same credit reporting bureaus that gather information about you and your credit history have discovered a new way to profit off all that juicy information: Whenever you make a loan application, a rate inquiry or a request for a mortgage pre-approval letter: they package your name along with a whole bunch of other people shopping for loans and sell these lists to so-called "lead brokers," as hot leads.

A "hot lead" is essentially a consumer - like Holmes - who is in the market for a loan.

Lead brokers then sell the lists to competing lenders who are often willing to pay top dollar - sometimes in excess of $50 a name - for the opportunity to know exactly who is in the market for new financing.

And all of this happens less than 24 hours after your credit report has been pulled - without your knowledge or consent.

Holmes, who is a loan counselor herself at New Jersey Citizen Action in Newark, said the loan officers who left messages on her answering machine said things like, "Hello, I am calling about your mortgage application," or "Your mortgage application has just crossed my desk," giving her the false impression that these repeated phone calls were somehow related to the application she had just filled out the previous day at her credit union.

"It's really deceptive," Holmes said. "If I didn't know better, I would have assumed it was my credit union calling. They pretty much knew everything about me."

An outrage you say?

Well, it's perfectly legal. And completely unregulated - at least for now.

A few states, including Connecticut, Maine and Massachusetts, have been exploring restrictions on the sale of trigger leads. And congressional action may be on the way. The House Financial Services Committee, chaired by Rep. Barney Frank, a Massachusetts Democrat, is currently reviewing the need for consumer privacy protection in advance of hearings it expects to hold on credit-reporting agencies.

For its part, the Consumer Data Industry Association, the credit reporting agencies' trade group, defends the sale of trigger leads by arguing it promotes competition, which keeps rates down. Credit agencies also say they scrub their trigger leads against anti-telemarketing Do Not Call lists.

LendingTree, which began doing business in 1998, is viewed by many as the pioneer of the mortgage-lead-generation industry.

Everyone has seen the Charlotte, N.C.-based firm's commercial and heard the line - "When banks compete, you win."

But what a lot of consumers may not understand is that companies like LendingTree.com and LowerMyBills.com (which was bought by Experian, the credit reporting bureau, in 2005) are in the business of selling "leads" to mortgage brokers and lenders for a fee.

In other words, anytime a consumer fills out an application online and hits the send button, all their personal financial information is promptly sold to four or five different lenders, for $40 or $50 a pop.

Trigger leads, however, cross the line, say opponents, which include the National Association of Mortgage Brokers and the National Association of Realtors.

Not only are the national credit bureaus hawking your personal financial details, opponents argue. But they are doing it behind your back, without your knowledge or consent and probably without the knowledge or consent of the mortgage lender you may have already agreed to work with.

One reason why real estate agents, lenders and even a handful of lead-generation companies like Atlanta-based Cityloan.com oppose trigger leads is their customers often accuse them of selling their names and numbers, when they, in fact, have nothing to do with it.

"If you come to my Web site and fill out my application form and the following day you get deluged by 50 or 100 calls, now you are going to say to your friends, 'These people are dirt. They sold my name 100 times,'" said A.J. Martin, president of Cityloan.com. "It creates a bad experience for the consumer."

Martin said trigger leads are becoming increasingly popular, due in large part to the slowdown in the housing market.

"Loan officers are getting more desperate for business, so they are starting to consider these more than they did a few years ago," he said.

A quick Google search of the words "mortgage leads" turns up a staggering 1,180,000 hits on assorted Web sites, which promise "fresh leads," "quality leads," and "exclusive leads."

One such company, Green Tree Media Group, an Oceanside, Calif.-based lead broker, advertises on its Web site that it will sell trigger leads in bulk. A minimum order of 500 leads runs about $5.50 a piece. If you buy 5,000 or more leads, the price drops to $3 a piece.

"Trigger data or trigger leads are offering the highest ROI (return on investment) of any type of data currently available," Green Tree Media writes on its Web site. "Until now, this type of data was only available to companies that were able to make a long-term commitment to the credit bureaus. Now, anyone can take advantage of this new program."

Another company, Lead bull.com, offers to sell "aged leads" at a discount, meaning the names and numbers of consumers who were in the market for a loan 30, 60, even 180 days ago, on the faint chance these customers might be ready to nibble again.

As a lead generator himself, Martin said he is routinely bombarded with phone calls from lead brokers looking to buy his old customer lists, which he refuses to do.

He said old customer lists and phone numbers are sold at a discount - between 25 cents and 50 cents a name - because they are not "hot."

"It's really a shame, because it is hurting the overall ability of the Internet to help people," Martin said.

As a mortgage broker, Arthur Aranda, president of Garden State Mortgage, said he does not buy leads, but instead relies on old-fashioned referrals.

For one thing, buying leads costs money, and a lot of it.

Aranda employs eight loan officers. If each one gets just five leads a day, at $40 a pop, that could cost him $1,600 a day.

"I would be crushed by the cost of it," he said.

Aranda said he is also not comfortable with the lax lender-screening process employed by many of these lead brokers and lead generation firms.

Although LendingTree has developed a rating system for its lenders based on reports from borrowers, most companies that sell leads don't do enough to protect the public from falling into the hands of rogues, Aranda said.

For example, lenders are not cross-referenced against the Mortgage Asset Research Institute, or MARI, database, which tracks fraud, crimes and misconduct by employees, clients and businesses in the industry, Aranda said.

"It's a good practice to do a MARI report on the lender and find out if the principals in the company have ever been accused of anything," Aranda said. "I think they should require that as part of their due diligence to protect the public."


Sam Ali may be reached at sali@starledger.com or (973) 392-4188.

  1. Refinancing a home, or applying for other kinds of loans, can turn you into a target for mortgage companies' loan officers.

LIST: OPTING OUT At least two weeks before you apply for a loan, you can prevent personal information from being sold if you choose to opt out. Call toll-free (888) 5-OPTOUT (888-567-8688) or visit www.optoutprescreen.com for details. The telephone number and Web site are operated by the credit reporting bureaus. When you call or visit the Web site, you'll be asked to provide certain personal information, including your home telephone number, name, Social Security number and date of birth. The information you provide is confidential and will be used only to process your request to opt out.

You can also notify the three major credit bureaus that you don't want personal information about you shared for promotional purposes by sending letters to: Equifax Options P.O. Box 740123 Atlanta, GA 30374-0123 Experian Consumer Opt-Out 701 Experian Parkway Allen, TX 75013 TransUnion Name Removal Option P.O. Box 505 Woodlyn, PA 19094 You can get a temporary and disposable phone number that forwards to your existing home, cell or office phone when you start shopping for a loan. After you are done, you just throw the phone number away. Companies that offer disposable phone numbers that expire after 30 days or sooner include www.numbr.com and www.tossabledigits.com.

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