One of the problems with new Internet-based ventures is that they often lack critical mass. Jeff Lazerson, a Laguna Niguel mortgage broker, found that out firsthand.
Lazerson had a great idea: a website that would allow home buyers to hunt anonymously for the lowest prices for most of the services that lenders require before a mortgage can close -- things like settlement agents, title insurance, surveyors and termite inspectors. But alas, his grand plan for www.fairclosingcosts.com eventually fizzled.
There are a number of reasons the site never really took off -- the lack of money to pay a sales force to sell the idea, the crashing real estate market and perhaps even the desire on the part of larger players to avoid transparent pricing. But whatever the reasons, the fact is that the site doesn't have enough participants to make it useful.
"The site is still up, but pretty empty," Lazerson said. "I had the right idea, but the timing was a disaster."
Now come two new Web-based enterprises, one remarkably similar to Lazerson's and the other offered by a group of nonprofits. This time, both appear to be rich enough to make it beyond the start-up stage.
Closing.com, a site that can create instant closing-cost estimates as would-be borrowers search for the best or least expensive real estate service providers, has a vendor database of nearly 150,000 firms in 14 categories. And fairmortgage.org has dozens of lending organizations that promise to offer safe mortgages at fair prices.
"We're not really an early-stage company," said closing.com's creator, Anthony Farwell. "Building the site took three years. We launched our first version in 2008, and now we're having a 'soft launch' that is vastly more sophisticated."
Cerebral it is: The system auto-adapts to your specific location. So instead of forcing you to wade through a laundry list of companies to find those near you, it shows only those that offer their services in your neck of the woods.
Moreover, it automatically selects the services that are required by lenders or are customarily paid by borrowers in your area. And then it lists all the optional services you might want to consider -- pest control, home warranties, home inspection and the like.
Better yet, closing.com is free, both to consumers and vendors. Farwell's La Jolla-based ClosingCorp makes its dough by charging providers for "enhancing" their appearance on the site.
There is no estimate as to how much borrowers might save by doing their own legwork to find the cheapest or best providers. But overall, borrowers pay roughly $40 billion a year for these lender-required services. Each of us leaves anywhere from 3% to 7% of the price of our new homes at the closing table in settlement fees and charges.
Of course, there are plenty of borrowers who don't care what they pay for these services or who picks the providers, so long as the deal gets done without any glitches. But for those who want to be sure their transactions are handled properly at the lowest possible cost, the savings can be significant.
The savings also can be considerable at fairmortgage.org. And so can the peace of mind, because the site lists only those lenders that promise to adhere to a set of core standards established by the Fair Mortgage Collaborative, a collection of advocacy organizations, consumer-protection groups, loan-counseling and lending networks, and secondary-market intermediaries.
With major funding from the Ford Foundation, the collaborative is an effort to put would-be borrowers in front of lenders and brokers who promise to work on behalf of the customer.
There is no official number of participating lenders (one official describes the collaborative as "a network of networks"). For example, the National Federation of Community Development Credit Unions is one member, but it has 270 affiliates. Together, the crop of certified lending organizations originated $520 million in mortgage over the last 12 months, so the database is extensive.
And it's growing, according to collaborative Executive Director Howard Banker. "We are talking to five big lenders" about joining the group, he said, adding, "It's always good to begin with those who brought you to the dance."
Collaborative Chair Janis Bowdler describes the effort as "a delivery system" in which consumers will be able to separate honest lenders from the dishonest ones who pushed borrowers into loans they couldn't afford or for which they weren't qualified and are blamed, at least in part, for causing the mortgage-market meltdown.
The good lenders have always been out there, said Bowdler, who works for the National Council of La Raza, a Latino-centric group that has 52 affiliates. But they were pushed aside by big-budget lenders who didn't always have consumers' best interests at heart. The collaborative will be a "better way" for consumers to shop and identify products that are in their best interest, she said.
"It's the loans, not the borrowers," the Ford Foundation's George McCarthy said of the foreclosure debacle that has brought the housing and mortgage markets to their knees. "A lot of people were driven into inferior products, even when they qualified for prime loans."
Distributed by United Feature Syndicate.Copyright © 2014, Los Angeles Times