The two central features of the professor’s network are integrated decision support and borrower protection against lender scams. These features are absent from lead generation sites (henceforth LGSs), which today are the largest web-based segment of the home mortgage distribution system.
LGSs collect information from potential borrowers visiting the sites, and sell it to mortgage lenders. There are dozens of LGSs, perhaps hundreds; nobody keeps a count. The two largest LGSs are LendingTree.com and LowerMyBills.com.
A prospective borrower visiting an LGS fills out a questionnaire covering the loan request, property, personal finances, and contact information. The completed questionnaire is the lead that is sold to the 3 or 4 lenders who will pay the most for them. For further discussion, see Do Lead Generation Sites Help Mortgage Borrowers?
LGSs do not collect price information from lenders. This means that an LGS cannot provide integrated decision support, only generic advice (if they offer any at all) unrelated to the actual prices faced by borrowers. Prices are quoted to borrowers by loan officers, which exposes borrowers to all the tricks of the trade associated with loan officer intermediation in the pricing process.
The table below summarizes the major differences between LGSs and the professor’s network.
|Feature||Lead Generation Sites||Mortgage Professor|
|Information provided by borrowers about themselves||Sold to 3 or 4 lenders||Retained for use in decision support|
|Information on lender prices & underwriting rules||Not collected||Collected for use in decision support and lender selection by borrowers|
|Decision support: Selecting best mortgage type||Not available except as general advice||Integrated using borrower and lender-provided data|
|Decision support: Selecting best rate/fee combination||Not available except as general advice||Integrated using borrower and lender-provided data|
|Decision support: Selecting lender with best price||Not available except as general advice||Integrated using borrower and lender-provided data|
|Source of price information to borrowers||Loan officer employees of each lender with discretion to adjust prices||The network passing thru prices received directly from lender pricing systems|
|Vulnerability to price “low-balling”||High, since each loan officer tries to win the deal based on price||None, since the borrower selects the lender based on posted prices|
|Vulnerability to scams arising from lock delays and market volatility||High, since the market price on the lock day is what the loan officer says it is||None, since the lock price is the lender’s posted price, which borrowers can check|
|Vulnerability to scams arising from new information that affects the price||High, since the price adjustment required by the new information is what the loan officer says it is||None, since the price adjustment required by the new information is based on the lender’s posted prices, which borrowers can check|