Zillows Mortgage Community, On The Cusp of an Anonymous Transparent Credit and Personal Information eXchange Between Mortgage Professionals and Consumer?
April 5th, 2008 Categories: Business Models, Mortgage News, zillow
There’s been a storm of activity in and around Zillows mortgage community (ZMC) since they launched a mere 72 hours ago. Based on David Gibbons’ claim that Zillow has received over 4500 ‘leads’ in their first 48 hours, consumer interest is definitely there. Reading Zillows blog, they’ve done their research and are delivering what the consumer wants: an anonymous, transparent vehicle to receive mortgage quotes.
A fact worth reiterating about Zillow before addressing the wants and needs of the other half of this community, the mortgage professionals, is that Zillow is an advertising and media company. Advertising and media companies are keenly interested in the demographical nature of their traffic, the more refined this data is the more valuable it becomes to their paying customers: 3rd Party Advertisers.
By collecting and ‘cookie’ing’ the web-browser of (almost) anonymous members relatively succinct financial and credit information, Zillow is aggregating some very valuable data for sale, just not to mortgage originators. Advertisers will pay a premium to appear in front of people who represent they can afford and are likely buyers of their products. Very well thought out by the brass in Seattle.
Mortgage originators on the other hand seem to be less than enamoured with Zillows offering for reasons identified in my last post…they will likely have to farm through a mountain of rate voyeurs to find a client. Some well respected Mo-Pro’s feel that consumers should be held accountable to a degree of transparency as well. I’m a staunch advocate in transparency for the mortgage industry (read my very first post from 19 months ago, not the best written piece but I’ve left it unedited for effect) and agree the sword must cut both ways in order for a ‘transparent marketplace’ to work. Both sides must open the Kimono.
The dilemma with transparency has traditionally been: ‘How can one be transparent without being taken advantage of?’ For too long consumers have been forced to strip in front of a consortium mortgage originators, ZMC switches this around, making Mo-Pro’s disrobe first, and they don’t like it.
Things have obviously changed, so here we are today pointing fingers, losing business and otherwise trying to figure out the best way to make a business a successful one out of the business that’s left.
For their own clever benefit, ZMC is turning the transparency buzz into advertising dollars. If ZMC does nothing else, it increases traffic to their domain. They’re pleasing the consumer and pissing off the top notch Mo-Pro in the process. This may work for awhile but it would appear to be a matter of time before the good Mo-Pros turn their head to ZMC because the lead pool is deemed a dead pool, even though it has all the attributes of viable transparent marketplace for consumers and originators to conduct good business. As stated, Mo-Pros simply don’t have the capacity to work within ZMC very effectively, yet.
An ideal form of transparency, one that serves both consumer and professional, is akin to being naked with a bag on your head. You get to see all the goods but can’t put a face to the…well, you get it.
Take the time to read Mortgage 2.X and the concept called C2B (Consumer to Business) marketing. The company that was tooling with this concept is now out of business but was ahead of it’s time. In 2003, during a time when mortgage (and interest) rates (in general) were plumeting, transparency wasn’t even a thought because Mo-Pros could charge four points and lower a consumers interest rate by 2%.
So here’s where the novel idea comes in, for all I know Zillow may have already considered what I’m about to suggest, if they haven’t…I’m not in a position to do anything with the thought and someone might as well…
The consumer transparency theory…
In order to enter the ZMC a Mo-Po must submit some verifiable information to prove they are viable. Coupled with the promise of anonymity, the dynamic is very alluring to a consumer.
Zillow can require something similar of consumers. Offer two levels of consumer participation, the current low barrier level and an ‘authenticated’ designation.
Upon enrollment into ZMC from the consumer side, validate their credit score by having them acquire their ’score only’ from the repository of choice, all three offer this service for free to the consumer. This is often the biggest unknown from a consumer standpoint, I can’t tell you how many times someone’s self-estimated vs actual credit scores were off by over 100 points. I’ve had people tell me they’ve had credit scores ranging from “one hundred fifty, I think” to “one thousand something”. Zillow wouldn’t be privy to a members social security number under this scenario either, the information goes straight to the repository, score returns, consumer fwd’s repository doc (minus ss#) to Z…
Have consumers send over signed verifications of income, assets, type of employment et al (could all be done electronically). Although these aren’t meant to replace the docs what a mo-pro will require in any way (see Zestimate), the docs would foster a stronger commitment level and code of coduct enforcement policy by consumers.
The prevailing thought here is Zillow could substantially firm up the quality of consumer information to the community and still insure their anonymity. From a business model position this would be a brilliant move for Zillow as they could then represent the same to both mortgage originators and advertisers.
Quality mo-pro’s would flock to the marketplace to serve this quality of ‘lead’, consumers would be incentivized to provide the information based on the increased likelihood of attention an ‘authenticated lead’ and (most importantly to Z) advertisers could be compelled to spend more $$ for uber-high quality consumer financial and credit demographic placed ads. There is an opportunity here for Zillow to become the trusted marketplace to begin a mortgage transaction and make a lot of $$ in the process while holding to their current business model.
Theoretically, this would create a quality of mutualism and transparency not available in any other online mortgage community. From an advertisers standpoint, one would think they wouldn’t mind paying to promote their products and services in front of such refined, targeted eyeballs.
For fundamentally the same reasons mo-pros can’t effectively service ZMC today, they would have a tough time servicing this Zutopian marketplace as well. Most mo-pro shops are not equipped for volume based loan production, thus cannot afford to charge less per transaction. Typical mortgage industry business and commission split models make the economics of only charging $2000 in broker/banker fees impractical…this another thread for another post, although the topic has been covered previously on this site.
Zillow could be on the cusp of something special…an anonymous transparent credit and personal information eXchange between mortgage professionals and consumer, to create a highly trusted mortgage transaction community…and they could make a lot of money doing it without charging for ‘the good leads’…
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You know our problem? TB- true believer disease.
You brought up great points in the discussion, yesterday. As always, you’re delivering even GREATER ideas, today.
A consumer who goes the extra step (the verified step) will get more quotes. We shouldn’t discount the voyeurs but the verified borrowers would be primus inter pares.
Creative and workable solution, Jeff
An affliction in the truest sense of the definition…
Your demand for two-way transparency triggered a memory that ironically lead me back to my very first post on this site…So I must thank you again for the inspiration Brian
Jeff,
I understand that you like the transparency and all, and I agree! However, the zillow model may be anonymous, but is not transparent. It is not giving the consumer “transparent” rates. Isn’t transparency, in this description, a method of making the entire loan PROCESS transparent?
I may be missing something, because the way I see this, the lending companies, brokers, etc are still going to quote with YSP’s, etc, thereby continuing the rampant confusion that occurs when you receive 20 phone calls or even 20 anonymous rate quotes, each one different and difficult to vet for a consumer who has no working knowledge of the construction of a loan.
True transparency would give the consumer a benchmark, like a par rate, to work from. Then, the rate is obvious and transparent, which, when you give it some thought, is what really needs to be transparent in order to conform with your basis of transparency. (?)
I recall a conversation with an “Up-front Mortgage Broker” (these are the guys who advertise and brag about being Upfront about their charges, etc) member who told me that he (like other he knows) quotes BELOW par, so he can sound cheap. It’s bait and switch, and that is exactly what I see rolling downhill from zillow, as all “stuff” does tend to do. This will be worse for the consumer than what they even now deal with.
Transparency, in the end, means TOTAL transparency of RATES so the consumer can deal on a level playing field, thereby creating the total transparency you seek. zillow does NOT do that.
Good food for thought Jeff. I almost forgive you for last week’s stunt.
You’ve got me thinking about “approved borrowers.” Something I think could be very interesting there is if buyers’ agents were able to publicly endorse loan requests and make themselves a contactable reference for the mortgage broker to get more info on the deal? That could work for communicating intent in purchases. For REFI’s, I’m probably a bit naive, but surely a lot of it depends on whether the math is attractive; and that’s something a lender can already filter for.
Stunt? What do you speak of? (Not being coy, truly interested in what you mean…)
I really have to believe that you guys are in a position to implement something pretty close to what’s outlined above…
Don’t know if buyers agents want to endorse loan requests since they are often as naive as the borrowers themselves, IMO…
We should chat David
I totally agree that we should pursue features that help lenders further understand how serious the borrower is. But in a perfect scenario only serious borrowers would complete a quote request and so the ultimate solution will be to give less serious borrowers information without having to complete a loan request. That’s where we’ll be focused initially.
My point about buyers’ agents was simply that they’re in a good position to vouch for the buyers’ intent.
I agree with the spirit of your suggestion, Jeff but the tactic you recommend won’t work … from a consumer’s perspective asking for signed documents is equivalent to calling an online borrower a liar and so for the serious borrower it really adds little value and creates unnecessary friction.
“from a consumer’s perspective asking for signed documents is equivalent to calling an online borrower a liar and so for the serious borrower it really adds little value and creates unnecessary friction.”
Asking for signed documents is what any serious borrower must provide at some point, I don’t care if you’re Mother Theresa.
We’re all liars until we prove otherwise, this has been the issue in mortgage over the past 5-7 years… Don’t make enough income, just ’state’ what you make…I digress
In any case, physically signed docs aren’t required, rather a digital validation that makes consumers feel a greater sense of responsibility to provide ‘real’ numbers is certainly doable…and it adds substantial value David.
The #1 complaint I hear from the professional side re: ZMC is that the consumers are liars. The #1 complaint I hear from consumers is that lenders are liars.
Serious borrowers would have no problem representing a heightened level of authentication for reasons laid out above, serious professionals would have no problem playing in this sandbox under these conditions as well.
Who is heading up Zillows mortgage operations? If they are anyone who’s spent any time in the trenches in this industry they will tell you the same…
Stay open minded David, you guys have an opportunity here bigger than you may realize or have planned for.
I don’t disagree with you Jeff but “at some point” is the important clarification here. We’re open to suggestions but this one seems bloated for what we’re trying to do which is merely to introduce borrowers to lenders. I do agree however that teasing out borrower intent (and lender accuracy) is an important area of focus - please keep the suggestions coming.
It doesn’t have to be bloated, although I can see how it may appear to be…
Throw me on retainer and I’ll spec and implement it all for you
There’s this one application that would remedy one aspect of information latency for you guys. But thats a conversation to be had on the phone
[…] Interesting in light of Zillow’s launch of a mortgage platform. I think it is a brilliant idea and that is actually something I thought about doing when I was deciding to do Homethinking. […]