As lenders become more desperate for leads, prospective homebuyers are increasingly bombarded with calls, texts and emails after applying for a mortgage. A recently proposed bill aims to fix that.
Rep. John Rose, R-Tenn., introduced the
It's the second bill on the subject that has been put forward this year. Rep. Ritchie Torres, D-N.Y.,
What makes the new bill different? The severity.
Rose's allows the sale of consumer information about mortgage applicants, or trigger leads, in some cases. If buyers of leads have an existing relationship with the customer — if they finance a different loan, for example — or if customers opt in to receive unsolicited offers, trigger lead purchases are allowed.
Torres' bill, on the other hand, is closer to outright banning the practice — it doesn't include any allowance for lenders with existing relationships.
Currently, the
Trigger leads are sold by consumer rating agencies like TransUnion, Experian and Equifax, but plenty of companies like Zillow and LendingTree sell leads generated through online ads. Neither bill would not affect these.
The cost of trigger leads varies. None of the three major credit bureaus list prices online, but it can cost anywhere from $20 to $100 for a single lead, and many require a minimum deposit of $500
Trade groups, like the National Association of Mortgage Brokers and the Mortgage Bankers Association, voiced support for trigger reform bills, but their stances differ. The NAMB lobbied for Rep. Torres' bill, advocating for a more robust ban on trigger leads. The MBA lobbied for Rose's, and said they support the sale of trigger leads when there's already a relationship between the homebuyer and the lender.
Ernest Jones Jr., president of the NAMB, said they support the new bill as well, but the organization's advocacy group is in a "holding pattern," waiting to see what the representatives do with such similar bills.
"Anytime you can reach a compromise versus killing something, the likelihood of succeeding is — the probability is higher," Jones said.
Both groups have been vocal critics of harmful trigger lead practices.
"We can't support anything that would violate, in our opinion, the privacy of the consumer's information and put them in a disadvantaged position," Jones said. "Getting those calls does that."
Chrissi Rhea, co-founder of Southeastern lender Mortgage Investors Group and MBA member, called the practice horrific: "I think the invasion someone feels of their private transaction is really the most appalling of all."
Rhea knows the feeling herself. She once received 307 voicemail messages from mortgage lenders over eight days without ever applying for a mortgage.
She said her first thought was, "Oh goodness, they breached my bank!"
No breaching was necessary. A bank she worked with pulled a tri-merge credit report as part of its due diligence. This report is commonly used by mortgage lenders, so credit bureaus assumed she applied for a mortgage and sold her information to other lenders.
One of the callers told her about opting out. She registered for the Do Not Call list, but their system takes 30 days to process requests, so it did nothing to abate the flood of calls.
It's not only customers that are negatively affected by an increased number of unsolicited calls, though. Lenders suffer undue damage to customer relationships.
Rhea has experience with this, too. A client of hers received 97 calls and 60 voicemails within 24 hours of submitting his loan application. He was convinced MIG either sold his information or gave it away for a discount on their credit reports. He threatened to sue.
This story is not unique in the mortgage industry. And it's getting more common: Bill Killmer, senior vice president for legislative and political affairs at MBA, said because of slow market conditions, trigger leads have become a more intense issue.
"The volumes are down, so competition has become very, very fierce," Killmer said.
Supporters of trigger leads say they promote competition between lenders and help customers get the best price for their loan. The Rose bill still allows for this competition without sacrificing customer experience, Rhea argued.
"I think the servicer of their current home actually truly has a right to say, 'Can I give you an estimate of what our costs would be?'" she said. "Competition is not what we're afraid of."
TransUnion, whose trigger lead supply would be severely limited with the passing of this bill, said, "This legislation is an opportunity for a real conversation on how to improve the system while preserving a valuable service that helps save consumers money. We welcome that discussion and look forward to a thoughtful dialogue on the issue."
Experian and Equifax did not respond to requests for comment by deadline.
