Archive for April, 2008
Microsoft to Get Medieval on Yahoo
April 6th, 2008 Categories: Random
From Wired, Microsoft Threatens to Go Hostile On Yahoo:
“Microsoft says Yahoo has three weeks to negotiate a decent deal, after which time Microsoft is going to get medieval on its ass.”
The news isn’t all that interesting, the way it’s reported was too funny to pass up…
X
Sphere: Related Content| Comments
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’…
Sphere: Related Content| Comments
Zillow Launches Mortgage Community. The Consumer is Ready, But is The Mortgage Professional?
April 3rd, 2008 Categories: zillow
Zillow formally launched their mortgage community today. David Gibbons was kind enough to give me the grand tour yesterday…my general opinion is that this is a big step in the right direction for a broken mortgage industry.
Stating the obvious…what Zillow has created is a community for mortgage professionals (Mo-Pro), a community that requires said participating professionals be of a certain grain of salt, checking their state licensing information as well as a social security number for a cursory level personal background check. These two stop-gaps insure a baseline quality standard and validate the community as (more) trusted and viable for a consumer as opposed to them walking into the many lender traps that currently exist on the web.
Zillow does not aggregate consumer data to then sell them as leads to the mortgage hounds. Thank God (Yahweh, Jehovah, Muhammad, Buddha, Jesus, et al). Joel has the best remedy for this ad nauseam dinosaur age practice made sickeningly popular by LowerMyBills, LendingTree et al…if he can drag them behind the shed, I’ll pull the trigger. Because of their well funded and non-conflicting business model as an advertising and media company, Zillow can afford to do this and should be properly recognized for staying outside of this black box.
Rating the mortgage professional based on service and rate/price quote accuracy is another positive aspect, a stop-gap to cap bait and switch and other traditional Mo-Pro smarmy marketing strategies.
Anonymity. Love it and consumers will too. However, consumer anonymity can and will cause participating Mo-Pro’s to chase their tail as rate voyeurs flood the system. It will be interesting to see what the client conversion ratio is. How many ‘leads’ will it take a Mo-Pro to respond too before they convert to a dedicated and paying client? Is it 10-1, 20-1, 100-1? While the ‘leads’ may be free, they will be cost heavy using the metric of time.
Consumers are notorious voyeurs. I’m one of them. I submitted my anonymous info to Zillow today and received 3 quotes in less than an hour. The info I provided was extremely attractive and easy to qualify:
692 FICO, $390k loan amount, 76% LTV, Full-Doc, low debt to income ratio, plenty of liquid assets…in other words a straight up automatically underwritten conforming loan scenario.
The responses I got (all 30 Yr Fixed Interest Only products) varied from 5.5% with ~$4900 in lender fees to 5.75% with ~$6200 in lender fees. The lowest quote came from a major bank, the highest quote came from a broker.
The three Mo-Pro’s that responded took one look at my info and undoubtedly shot over quotes without thinking twice within < 3 minutes. Not alot of time invested for nothing in return. No harm no foul.
So my questions are as follows:
How many scenarios as easy (and far more difficult) as mine will a mortgage professional have to spend time on to pull an actual client?
If this quote to client ratio is too high, will top notch professionals continue to troll Zillow’s community in hopes of fishing out a real deal?
If this ratio is too high, and the scenario is more difficult to place, how much real time will a professional spend taking the time to qualify and price the situation correctly?
If the anonymous scenarios are more complicated than my submission, which they assuredly will be, how will consumers respond to the resulting latency in information exchange?
Im going to pause here (for today) and end with stating that Zillow’s mortgage community is a (very) positive step in the right direction, but it needs something else…latent information can be perceived as misinformation.
Mortgage professionals are not equipped to handle what Zillow is throwing at them, not yet.
Also See:
| Comments
Fannie Mae Releases New Mortgage Qualification Guidelines
April 2nd, 2008 Categories: Mortgage News, fannie mae
Flush with new cash to buy up Mortgage Backed Securities, Fannie Mae has released new guidelines when it comes to credit score, LTV and prior foreclosure standards for borrowers. While my presumptive thought was that they would tighten the screws across the board, Fannie is actually expanding approval criteria in certain instances.
As stated, this is a bit of a surprise as I expected a reflexive credit choke out for a consumer trying to get a conforming loan going forward. Instead the guidelines appear to represent a measured increase in pricing adjustment guidelines. In other words, FNMA didn’t yank the carpet out from underneath everyone, they just built in cost in the form of higher pricing to consumers (thus higher yield to investors).
In a nut shell, conforming mortgage programs that deviate from the very straight and narrow (credit scores below 660, LTV’s above 80%, less than ‘full-doc’ income and asset) just got more expensive.
A few other highlights:
Consumers with prior foreclosures will be subjected to higher qualification standards, a five year moratorium will be required to qualify for a conforming loan with a prior property repossession on record instead of four. A 680 credit score and 10% down payment will also be required.
A 60 day mortgage late on a credit bureau anytime over the past 12 months will not qualify for a conforming loan.
Minimum credit scores for 2 unit properties are 640, 680 for 3-4 unit properties.
Max LTV’s were cut on the high end (95%+) anywhere from 3%-5%. There are still 105% LTV programs available.
Expanded Approval products are now to include the following programs:
Manufactured housing (not mobile homes)
Flexible Mortgages with CLTVs up to 100 percent
Mortgage loans with CLTVs up to 105 percent with an eligible Community Seconds mortgage
30-year fixed-rate IO mortgages (10-year IO period only)
5/1 interest-only ARMs with 2/2/5 caps and 10-year IO period (ARM plans 3515 and 3516)
Three- and four-unit properties
Cash-out refinance transactions on two-unit principal residences
Cash-out refinance transactions on second homes
Cash-out refinance transactions on investment properties
Investment properties with LTVs over 80 percent
Consumers, contact your trusted mortgage professional to see what this means for your specific situation.
Professionals, contact your favorite conforming account executive to see what this means for your business.
X-Out
Sphere: Related Content| Comments
