The unwanted suitor

Picture this: You apply for a home loan from a local mortgage company on a Monday afternoon. By Tuesday morning, you’re getting unsolicited phone pitches from out-of-state lenders who seem to know a lot about your finances.

Loan applicants around the country are receiving uninvited pitches, sometimes just 12 hours after getting a mortgage quote. But now a major mortgage industry group is speaking out against the practice.

“There are very serious privacy, identity-theft and bait-and-switch issues involved here,” said Roy DeLoach, executive vice president of the 27,000-member National Assn. of Mortgage Brokers. “It’s outrageous that simply applying for a home loan should open up a person’s sensitive personal information.”

The practice targeted by the mortgage brokers is known in the industry as “trigger list” marketing – a warp-speed version of the “prescreened” credit card offers you routinely get in your mailbox. It works like this: When your local mortgage company checks your credit to provide you with a rate quote, one or more of the national credit bureaus takes that inquiry and essentially turns it into a marketing product.

So-called lead generator companies and some lenders themselves are eager to know the identities of people who are shopping for a mortgage, and they pay the credit bureaus for those hot prospects. Generally, the prospects have to fit credit and geographic profiles that the lenders have set in advance. For example, one customer might only want the identities and contact information of people in the Los Angeles area with FICO credit scores above 700.

The credit bureaus defend their right to sell applicants’ personal financial information, arguing that it is simply a zippier form of marketing “prescreened” target prospect lists for credit offers – something they’ve been doing for years.

Tim Summers, a vice president at Experian, one of the three dominant national credit bureaus, said in an e-mail response that his company’s “Prospect Triggers” program “provides consumers with choice and potentially significant cost savings by delivering relevant information at the decision-making point instead of weeks after a mortgage lending choice has been made.”

Summers said the program meets “all requirements” under federal credit and privacy statutes.

But the mortgage brokers’ group disagrees. When credit bureaus sell overnight trigger lists to third-party lead generators, the brokers argue, they fail to comply with a key provision of the Fair Credit Reporting Act: that anyone receiving personal information must be in the position to make a “firm offer of credit” or have previously received permission from the consumer to obtain credit file data. Third-party lead generators obtain no permission and are in no position to make any credit offers, firm or otherwise.

The brokers also contend that even lenders who obtain trigger lists may not be in a position to make the firm offers that the law requires. A firm offer for a mortgage is vastly different from a firm offer for, say, a credit card. The mortgage process is more complex, and rates and fees are more difficult to quote on the basis of a credit score alone.

To make a firm loan quote, DeLoach said, you need to know a lot more than what the telephone marketers have in hand.

The biggest problem, however, may be the confusion that overnight trigger marketing brings to the mortgage business. Your local lender or broker quotes you one rate and estimated fees. But now, one or more outside lenders – whose reputations for honesty or service you know nothing about and who are in possession of your financial data without your permission – intervene and offer a lower rate.

Are the rate quotes for real? Or will they morph into costly bait-and-switch deals weeks or months from now?

You can’t really know. But what you can do is remove yourself from all potential trigger list come-ons by opting out. Much like the federal Do Not Call program, you can opt out of prescreened offers by going online to www.optoutprescreen.com or by calling (888) 567-8688.

Comments for Kenneth R. Harney can be sent to kenharney@earthlink.net.

 *

(BEGIN TEXT OF INFOBOX)

Average mortgage rates and indexes

Weekly survey of 60 Southland lenders as of Sept. 6, 2006

*–* Latest week One week previous Six months previous Rates for loans up to $416,999 30-year fixed 6.09%/1.55 pt 6.11%/1.39 pt 5.85%/1.67 pt 30-year ARM 3.07%/0.63 pt 3.04%/0.69 pt 3.14%/0.52 pt start rate 15-year fixed 5.79%/1.42 pt 5.79%/1.41 pt 5.53%/1.61 pt Rates for loans of $417,000 and above 30-year fixed 6.39%/1.35 pt 6.38%/1.38 pt 6.14%/1.58 pt 30-year ARM 3.20%/1.09 pt 3.15%/1.09 pt 3.24%/0.67 pt start rate 15-year fixed 6.10%/1.29 pt 6.08%/1.36 pt 5.86%/1.61 pt FHA or VA 6.61%/1.45 pt 6.63%/1.46 pt 6.38%/0.61 pt mortgage Average / points CALVET 30-year 6.50%/0.00 pt 6.50%/0.00 pt 5.70%/0.00 pt 6-month LIBOR 5.450% 5.460% 4.990% 1-year 5.030% 5.070% 4.740% Treasury bill 6-month 5.140% 5.170% 4.750% Treasury bill 6-month CD 5.410% 5.430% 4.950% Prime rate 8.250% 8.250% 7.500% 11th District July ‘06 June ‘06 Jan. ‘06 cost-of-funds 4.177% 4.090% 3.347%

*–*

Compiled by National Financial News Services