Zillow Mortgage Launches - How do you rate?

by Morgan on April 2, 2008

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Zillow launched its mortgage product tonight and from my review of the platform seem to have taken a major step in the right direction when it comes to leveraging the internet to provide consumers with quality mortgage options without the treachery that is online lead generation. I had a sneak peak at the platform and I’m duly impressed at the way Zillow has put consumers in control of the transaction right from the start.

You’ll see the new Mortgage Marketplace as a new tab in Zillow’s home page navigation and there are two paths once you get to the marketplace, either as a lender or as a borrower. If you remember about a month ago Zillow started taking lender applications to prime the system to be ready for this day. I made a big deal out of the vetting that went in to the application process and I’ll go in to detail now about why that was such a big deal. The lender side isn’t that sexy, so let’s talk about what the Zillow Mortgage Marketplace means for the consumer.

Accurate information without the hounding

The paradigm-shifting change at Zillow is the separation of the consumer’s contact information from the loan information.  This gives the consumer total anonymity when soliciting mortgage quotes which is something that must sound like music to consumers’ ears.  With this one move Zillow has eliminated a MAJOR pain point for borrowers shopping online for a mortgage.  

The number one complaint we received from internet-based leads was that they had been hounded to death on the phone for business.  I knew of a lady who lost her job because her office line rang incessantly after she filled out a lead on lowermybills.com.  People turn off their phones, unplug their home phones and generally do whatever they can to avoid be hounded to death once their information gets out on the internet.  

Zillow allows them to 100% control the interaction by getting custom mortgage quotes by providing their scenario in a standard pre-qual format (their interface is pretty similar to a typical online prequalification form you’d see elsewhere - Zillowfied of course) minus their personal information.  Zillow has made it a bit more user-friendly by helping people estimate their credit scores through a series of questions and have also made the mortgage product choices easier by eliminating some of the more exotic programs from the quote options.

Once a consumer submits this anonymous quote lenders in the system can “bid” on the quote. They can quote rates, fees and terms that are submitted with a brief introductory paragraph from them as well as their picture and a link to their profile page.  The principal and interest payments are automatically calculated by Zillow based on the loan program, term and fees and the taxes and insurance are estimated based on property records (Zestimate?) so that there can’t be any manipulation of those numbers.  

Consumers are presented these quotes as they arrive and when they find one they like they can choose to contact the lender directly and share any additional information they choose to at that next step.  They are never bothered by unsolicited phone calls or emails.

The Originator Rating

In addition to the quotes that they receive that come packaged with an intro paragraph, easy-to-understand terms and pre-calculated payments the originators submitting the quote carry ratings with them of 0 to 5.  These ratings are calculated based on consumer feedback after dealing with the originator.  The ratings have nothing to do with fees or loan terms and everything to do with the process of working with that lender.  So if there were changes in the loan, or things seemed shady or uncertain consumers can rate that originator poorly, and vice-versa.

Loan originators who feel wrongly scored can rebut the poor score and all of it is kept with their profile to provide consumers the clear picture of who they are dealing with.  They can now determine whether they want to work with the person with the lowest rates and fees and a low rating, or pick someone with a higher rating that has higher fees.

I think this is a great step towards providing transparency for consumers and an easy-to-understand scoring system that allows them to make choices in a difficult decision-making environment.  Of course, Zillow will have to police the marketplace and eliminate offenders on both sides of the wall, ensuring that slanderous consumers don’t blackball innocent lenders and vice-versa; but the step is a positive one and one that should help consumers in their quest for an honest, straight-forward (non-blown) mortgage.

Originators get transparency too

In addition to the consumer getting multiple, anonymous offers the originators who are submitting the offer can see all of the other offers that the consumer has received and who has submitted those offers.  This is a great tool for originators to use as market intelligence - they now know who and what they are selling against.  They can talk intelligently about the universe of offers that the consumer has without having to sell without any information about what or who they are competing with.  I think this will be a big help in letting originators determine what customers they quote, how they quote and their overall strategy towards leveraging this platform.

The Code of Conduct

In addition to the upfront vetting that Zillow performs on originator-applicants Zillow has rolled out a Mortgage Marketplace “Code of Conduct” for all parties involved.  The code calls on consumers to be law-abiding, honest in their disclosure of income, credit and other material qualification criteria, and fair and reasonable in their rating of originators.  Originators are called on to be law-abiding, upfront, to stick to their original quotes as long as material facts don’t change from beginning to end, and to respect consumer’s in the marketplace regardless of what the consumer ultimately decides to do.

Zillow will of course play ombudsman in its sandbox and will bounce originators and consumers who use the marketplace in ways that Zillow deems unacceptable to a healthy environment.  This is at their sole discretion. 

Here are the highlights from the Zillow Code of Conduct, you can read the whole thing here:

Principles for Lenders

  • Stand behind your quotes
    Don’t provide lowball loan quotes and teaser rates to intentionally draw in a borrower and then “readjust” your quote. We alert borrowers that the anonymous nature of Loan Quotes prevents an initial quote from being a binding Good Faith Estimate; however, we expect you to stand by your quote if the information provided by the borrower is accurate.
  • Disclose all terms of the deal
    Be upfront and transparent with various rates and fees so that borrowers will regard you as a trusted lender. Do not hide details of the loan in fine print; our loan quote form is designed to easily identify these costs. Be ready to answer questions and walk borrowers through each step of the process. Helpful lenders will get good ratings on Zillow, leading to more business down the road.
  • Obey the law
    Discrimination in mortgage lending is prohibited by the U.S. Department of Housing and Urban Development’s (HUD) Fair Housing Act and the Office of Fair Housing and Equal Opportunity actively enforces those provisions of the law. The Fair Housing Act makes it unlawful to engage in the following practices based on race, color, national origin, religion, sex, familial status or handicap (disability): 

    • Refuse to make a mortgage loan
    • Refuse to provide information regarding loans
    • Impose different terms or conditions on a loan, such as different interest rates, points, or fees
    • Discriminate in appraising property
    • Refuse to purchase a loan or set different terms or conditions for purchasing a loan
  • No spamming
    If you have made contact with a borrower and things didn’t work out, please be professional and end your contact with that person. Do not add their contact information to your promotional lists or provide their contact information to others unless you specifically ask for the borrower’s permission first.

Principles for Borrowers

  • Accuracy, accuracy, accuracy
    Be accurate when filling out mortgage loan requests, particularly when you estimate your credit score. Lenders will prepare quotes based on the information you provide. If you submit information that is not accurate, you will get loan quotes based on inaccurate information and the quote will likely need to be readjusted.
  • Rate/review mindfully
    You may rate any lender you’ve contacted through Zillow Mortgage Marketplace. However, your rating for a lender with whom you’ve closed a loan carries more weight because you experienced the full extent of the lender’s service. So, please rate thoughtfully so that others can benefit from your feedback. 

    • If you contacted a lender, but did not close — Your rating should be based on how responsive a lender was in providing a quote and follow-through during the process; it should not be based on the quote received.
    • If you contacted a lender and closed a loan with them - Your rating should be based on how responsive a lender was in providing a quote, finding the right loan for you, the rate and terms for the quote and follow-through during the closing process.
  • Report questionable or unscrupulous behavior
    While Lender Ratings is one of the most valuable tools you can use to rate the quality of a lender, we also want to know if you encounter any questionable practices by any lender. Contact Zillow Customer Support by e-mail at mortgagesupport AT zillow.com so that we can quickly respond if necessary. Also, if you feel you have been subject to discrimination, file a complaint with the U.S. Department of Housing and Urban Development (HUD).
  • Be informed and responsible
    There are scores of tools at your fingertips to help you evaluate the loan offers you receive from various lenders. We have assembled many of these in our Help Center. Take advantage of these and weigh your options and long-term implications before signing up for particular loan. 

Will originators use it?

The first question that came to my mind is would a high-quality originator use this?  I can’t imagine a Brian Brady spending his days blindly filling out GFE’s to ghosts who may or may not work with him.  It is feasible that a consumer gets upwards of 20-30 offers on a quote or more (it’s not restricted).  What is going to make Brian Brady use his time for a small chance win when he has a million other strategies that will result in higher close rates?  Knowing Brian he will find a way to succeed with this platform, leverage administrative resources of find a way to leverage this marketplace; but what about those who are good but don’t want to fire shots in the dark?

I think that’s the big question to be answered as this marketplace evolves.  Are the consumers getting lower-quality originators because the good ones don’t want to play consumer roulette with GFEs?  It will be interesting to see how it plays out as the marketplace evolves. 

A big step in the right direction

The online “lead” model has been broken since its inception and has caused irreparable harm to not only countless consumers but to the image of the industry as a whole.  People who bought and sold private data across convoluted networks of lead brokers abused people’s trust that the lead form they completed would be a great offer from 1 of 4 lenders.  This clearly has not worked.  Zillow puts the power in the consumer’s hands.  Now they can shop from hundreds of offers at their discretion from behind the Zillow wall of privacy which is certainly a step in the right direction; now the question is - will the best in our industry use it?

What do you think?

Last 3 posts by Morgan

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Viewing 14 Comments

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    I'm trying to figure this out, Morgan. I LOVE what Zillow is doing but I'm wondering if I have the time to be a Zoriginator.

    My concern is that they have completely ignored the advice component of mortgages. Now, especially, we need better advice for consumers.
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    Great point Brian. I'm concerned that people of your caliber won't find the random solicitation of loan quotes via GFE submissions an effective use of your time. I do love the consumer-advocacy and transparency pieces of the platform with their funding and large audience base I believe they can change the expectations people have when shopping for a mortgage.
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    I'm with you on that one. I think the reason that some of us are busy (I'm up 40% from last year) is because, as Brian says, we need better advice for consumers.

    I don't expect I'll have time to be a Zoriginator as Brian calls it. I don't think I want to be an order taker either.
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    IT is a nice tool..however..it doesn't really change the credit market as it exist today...For many borrowers who might think it is a easier way to get a loan may find that the rejection is still the same just now its by email instead of by mail or phone...

    Shame Zillow didn't have this working a few years ago....
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    I agree Ann, hopefully this builds a new paradigm for the way people expect to shop for mortgages. Then, regardless of the market they'll set the expectation across origination channels and we'll all be better off because of it. If any one private company has enough sway in this area it's Zillow. I hope they can pull it off even with the down market.
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    I agree Morgan...Zillow has come a long way...anything that can help this industry now would be a good thing..especially for the brokers and consumers...
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    "Don’t provide lowball loan quotes and teaser rates to intentionally draw in a borrower and then “readjust” your quote. "

    With the incredible volatility in this market and rates changing constantly, what constitutes a binding quote? Last time I checked, it meant locking the loan. How do you do that with an anonymous borrower? I think all you are going to see are ticked off consumers who feel they got the bait and switch when in reality all that happened is rates changed from one day to the next, or from morning to afternoon.
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    This could work for some but not all. I think "mortgage as commodity" is the wrong mindset. I get anyonomys calls from people who just want a rate quote. I ask a few questions and let them know the rate. I never hear back. I don' t ask for them names or their intentions. Honestly, I don't win rate quotes. I have a borrower who is at a 5.75% ARM that doesn't adjust for 4 more years. He's always asking for rates - sends me the Bankrate averge ever few weeks - as his benchmark. First of all he has no equity in his house - second of all what good does it to do refinance a mortgage for 0.125% less of a rate... not in his case at least. So, anyways, bottom line is I don't see this as something that will increase my business - becuase these are not my customers. Maybe for some it will work wonders.
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    NameYourLoan.com beat Zillow to this model by at least 6 mos. However, I'm certain that the Zillow name will gain greater consumer acceptance. It's a move in the right direction w/ a model that is ultimately designed to reduce cost & increase transparency for consumer by creating a forum where lenders openly compete in rates/fees (i.e. mortgage auction). The downside as noted by others is the greater "commoditization of our offerings" as well as consumer perception of bait & switch tactics among other downsides we have yet to imagine. Mass acceptance of this model will not serve to better educate the client but instead further the "lowest rate/fee" mentality. In the end, this may not be best for the client.
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    So I am prepared to get slammed by some for this, but this model while a GREAT step in the right direction, doesn't change the CONSUMER mindset (which is at least half of the problem.) Consumers still don't know what they are talking about, and yet armed with the bankrate.coms of the world, think that they do. How does a borrower know that a 2 point buydown is a terrible idea, or that taking a free loan (ysp paid) is a better one. If you have ever seen the newspaper rate advertisements, it is as confusing as ever.

    Mortgage shoppers often look at mortgages as commodities. I spent countless hours fielding calls and explaining my track record, education, references, etc. Guess What? Nobody cared. It was whomever could do it cheapest. Or it went to the guy who lied. Nothing that Zillow can do to make people SMARTER or more business savvy. They will continue to take the lowest cost, lowest rate. Sad but true.

    The best part about this is that the phone will stop ringing. The worst part? NOw they are choosing between LOTS of quotes.
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    I agree with what Graham said about the consumer mindset. I think this is a huge step in the wrong direction. While there are of course many sleazy lenders out there it is also true that people who can follow and catalog the results of every American Idol episode simply cannot be bothered to spend a little time getting to understand the details when they want to borrow $500k to buy a house. Yet every time there is a situation like this it is always the lenders who didn't put people in the right loans. Just once I'd like to see someone say that educated, adult, 21st century Americans can be treated like grown-ups and expected to invest some tiny portion of their American Idol time into learning a little about the biggest financial transaction most of them will make.

    And this industry has an inferiority complex that feeds this. We can talk on here all we want about consultation and educating clients and all the rest. But we don't really believe it. If we did then some portion of this lead generation industry we support would be based on promoting something - anything - other than the pure, raw, lowest commodity pricing possible.

    The one message that the millions of dollars of advertising that generate the leads sends is that mortgages are a complete commodity. That the reliability, service, support, honesty, etc. of the lender are irrelevant. Now, on top of that, a good lender who provides great service is supposed to quote a loan for a borrower whose name he doesn't even know, to whom he has not spoken, with whom he has had no chance to discuss options.

    What if I want to propose putting 10% down instead of 15% as stated in the lead form and use the rest to pay off debt nd get him into a better program with good ratios? What if I want to discuss some credit items I think can be quickly addressed? Will the Zillow lead form tell me a first time buyer can provide 12 month's rent checks or a professional VOR? Or do I just assume they can and then have to change the program for the borrower later when I find out they cannot?

    I could give 50 examples. This is just another situation where we are saying consultation in meaningless, all borrowers are totally defined by a few numbers, and lenders add nothing to the mix with their experience and expertise.

    Can you imagine a web site forwarding a lawyer legal questions for answers with no name of the client? Or a doctor getting medical records for a diagnosis with no name or direct consultation?

    You want an industry that provides service, education, and support to clients? Then stop treating it like a commodity and stop accepting and paying for advertising schemes that treat you like the only thing of value you have to offer is rock bottom pricing.

    You want clients to stop being barraged by dozens of calls? Then enforce the industry's stated number of lead recipients. The phone rings 20 times because a lead that was supposed to be sold 3 or 4 times got sold 20 times.

    And remember that if you want a client to be treated like a client and receive any kind of service at all then the phone HAS to ring at least once.

    This kind of thing will only encourage participants to offer very low rates that are dubious at best. They can have whatever rules they want - the truth is that lenders will have a million legitimate reasons why the rate changes later - didn't have all the info because there was no consult, market changed, etc. But we all know that if you throw a truly honest price into a pure price competition where you didn't even have the chance to talk to a client you will lose to someone who lies. We all see it every day. And honest lenders fight it through honest consultations with clients.
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    I'm willing to try it but have thus far been unable to. I signed up several weeks ago, paid my fee and received an email from Zillow that said I was approved to start subuitting quotes. I can log in but everytime I go to submit a quote it just takes me back to the sign up page and wants my credit card info again. I have sent several emails to Zillow but have gotten no response. I even got an email from someone at Zillow this weekend asking me why I haven't submitted any quotes yet. I replied to her and explained my issue but have not heard back from her either. I'm ready to call my credit card company and have them reverse the charges for the background check fee If I don't hear from someone at Zillow. Is anyone else having the same problem or does anyone know how to contact someone at Zillow?
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    Same experience. I even placed an ad for $500.00 that never showed up. I called and ask to see it and they couldn't show it to me. Even after three attempts.
    This will be a colossal dud. Prices change so frequently in the bond market, and what people THINK thier credit profile is, and what it really is, almost always differ. I predict tons of complaints about pricing, loan terms etc. The days of a mortgage as a commodit are over. It not "what is your best price" its now loan officers saying " lets see if you can get a mortgage."
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    I did some reasearch and I passed zillow. Because of such blogs ;)
 

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