With new loan applications sagging this spring, home mortgage lenders are turning to aggressive marketing techniques pioneered by the credit card industry. Get ready to be pitched one or more of these deals in the coming months:
--Pre-approved, fully guaranteed credit lines of $15,000, $30,000 or higher tied to your home equity. You never actually apply for the money. You've been pre-screened electronically, and the lender knows your home value, your credit history, even the number of kids in the house.
The offer of guaranteed money simply arrives in your mail, like one of those pre-approved VISA or Mastercards you've probably received. All that's needed is your signature.
--Credit card tie-ins offering substantial discounts on your mortgage fees, interest rate, closing costs or homeowner purchases. These are patterned after high-profile "co-branded" automobile, airline and other forms of VISAs and Mastercards. They all offer rebates on future vehicle, travel or other purchases as incentives for extensive use of their plastic on your everyday transactions.
--Reverse mortgage cards for seniors in their 70s and 80s. These are pre-approved equity lines, accessed through plastic, up to a maximum dollar amount. Unlike other credit cards, however, the reverse mortgage card won't have to be paid off in monthly installments. Instead the full loan balance, plus interest, is paid off following the sale of your home. You could charge a European vacation to your gold reverse mortgage card, and never have to pay back a cent until after you're dead.
Sound far-fetched? Not at all, say top marketers for the mortgage industry. Plastic-style rebates, tie-ins and computerized target marketing are the hottest new concepts in the home mortgage field. Here's what's happening:
Pre-approved mortgages are being introduced in key markets around the country by clients of Investment Marketing Group (IMG), based in Chicago and Arlington, Tex. Firm president James W. Finkenkeller says the typical offer works like this:
The lender defines the sort of new borrower it wants to attract--say, upscale baby-boomer families with plenty of equity in their homes, solid credit histories, but who have no home equity loans or lines of credit outstanding. IMG then uses credit bureau data and computerized homeowner profiles to identify consumers in the bank's market area who fit all the desired criteria.
IMG then sends solicitations to the household heads offering them "guaranteed" credit--instant cash--up to the bank's target limit, say $30,000. For consumers who respond, the bank then offers either the line of credit or a first mortgage that consolidates the family's outstanding debts--for autos, boats, college tuitions, etc.--into a single loan secured by the house.
"With the data resources now available" on millions of households' personal finances across the country, Finkenkeller said, "this (technique of targeted, pre-approved loan offers) will become increasingly common" in the mortgage market. Because of confidentiality clauses in his contracts with banks and mortgage banking firms, Finkenkeller said he cannot identify any of his clients.
But if you've got a lot of home equity, and you are an active user of consumer credit (via charge accounts or personal loans), don't be surprised if you find an unsolicited offer of instant, guaranteed mortgage money in your mailbox. Should you accept? Check out the fine print first: Is the interest rate in single digits like other home equity lines of credit that are tied to the banks' prime rate? If not, who needs high-cost debt--guaranteed or not?
Another home loan come-on heading your way: Mortgage tie-ins with VISA or Mastercards. For example, Wells Fargo Bank now awards rebates toward mortgage services on all purchases using its "California Advantage" Mastercard. The rebates come off mortgage fees, settlement charges or the interest rate on a new home loan.
Wells Fargo's tie-in concept is similar to popular "co-branded" VISA and Mastercard programs like the General Motors card with Household Bank, the Ford-Citibank VISA, and others that allow card users to cut the cost of a vehicle by hundreds or up to thousands of dollars.
Is it for you? Tie-ins and rebates could indeed save you money on your next home loan--unless you've binged on your credit card purchases, racking up monthly balances with interest charges of 15% or 16%.
What about reverse mortgage cards? They don't yet exist, but one West Coast executive, K. Shelly Porges of San Francisco's Porges/Hudson Marketing Inc., says they're just over the horizon.
"Why not allow (seniors) to access (reverse mortgage) credit lines with charge cards?" she asked.