The ABC's of CBA's
When you have a real estate agent represent you on the purchase of your home, you may find that they make recommendations for the mortgage provider, the escrow company, the title company and other related services.
Many times, the agent will make the recommendation because they have had positive experiences with these service providers, they trust them to take care of you, the client. They have a track record of confidence in the service provider's ability to keep their word and deliver on the level of service that all parties deserve.
There may be other reasons for recommendations from the real estate agent. It could be that the companies they are asking you to patronize are associated with the real estate company in the form of a CBA - a Controlled Business Arrangement. In most cases, the larger real estate companies that have national name recognition have a mortgage company, an escrow company, and a title company in which they have an ownership interest.
In and of itself, there is nothing wrong with a real estate agent wanting to maximize profit to the parent company by creating more business with their client base. A problem could arise if you are not made aware that there is a CBA in place, and if the service providers are not offering low, competitive costs for their service.
The agent has a duty to their client to put the client's interests ahead of their own (or ahead of their real estate company). The agent or their company should not be profiting without the consent of the client, which means that disclosure is required. It could be construed as a breach of their fiduciary responsibility to their clients to steer them to higher-cost services that benefits the broker or agent financially.
The agents are highly "encouraged" to refer the CBAs because there is more money flowing into the company's coffers - and this extra profit is often distributed to include the sales managers and the agent. It could be in the form of a check after closing, contributions to retirement plans, contributions to marketing expenses, or into bonus pools that are distributed periodically to the deserving participants.
What should you do? If you are presented with these kind of recommendations, ask some questions. Ask if there is a CBA between the companies. Ask what the agent's motivation is for making the recommendation. Ask for several trusted service providers from the agent so that you can shop among several sources.
Remember that it is your right to shop for the service providers based on their quality/cost or to seek the lowest cost services. The important thing is that you make an informed decision and that disclosures are properly made to you.
I rely on real estate agents to recommend my services based on my 30 year track record of providing a high-quality experience for them and their clients. I am willing to take the time to educate you, shop for the best terms I can find, be organized and efficient in the placing of your loan and always be available to answer questions and brainstorm solutions. There are no financial arrangements between me and my referring agents.
Our common goal is to do a great job of servicing you, our client.
Wednesday, March 28, 2007
Wednesday, March 14, 2007
Trigger Lists-Your Credit Activity is Being Sold
Do You Know That Your Credit Activity is Being
Sold for Sales Leads?
They are called Trigger Lead Sales Lists, and they are marketed by Experian, TransUnion and Equifax. It's the same concept as the credit card offers that come in the mail so frequently, but there are some important distinctions when they are used for marketing home loans.
This is how it works:
A financial institution or lead generation company compiles a list of criteria for the credit bureaus. Let's say it's a bank or mortgage company that wants a chance to get their information in front of people who are currently interested in getting a new home loan. They could include categories such as minimum credit score, zip code of the borrower, and if the credit report was accessed in connection with a home loan.
Within 24 hours, the borrower may find that 5-10 companies, different from the one with whom they applied for their loan, have generated "offers" of competing mortgage proposals. In some cases, the borrowers may not even be aware that these are coming from sources that their lender has not contacted.
Once the borrower realizes that these are coming in from other lenders, they are rightfully concerned that their credit information has been compromised, may be susceptible to identity theft, and may think that their mortgage representative is responsible. The borrower's chosen lender does not know this is going to happen, and the borrower has no voice in the matter.
It is the credit bureaus that are using this to make more money from their information files, and to please their customers. Their customers are the subscribing companies that share the credit histories that form a consumer's credit report, not the consumers themselves. So if a subscribing company wants the credit bureau to provide targeted sales leads, the credit bureau is happy to do it.
Under the Fair Credit Reporting Act (FCRA), pre-screening is allowable as long as the creditor makes a "firm offer of credit", and meets other requirements. When a creditor is making an offer of a new credit card it is very easy for them to meet the "firm offer of credit" requirement, because the offer is primarily based on the credit score.
To use the Trigger Lead Sales Lists in the case of a mortgage, and to generate a proposal to a consumer differs widely from a "firm offer of credit" because the mortgage process is so much more complex. The credit score has become important, but not defining in and of itself. The borrower's income, the appraisal of the property, outstanding debt service, liquid assets, etc. all need to be analyzed in conjunction with the credit score to feel confident that a "firm offer of credit" can be proposed.
This opens the door to unscrupulous lending companies to insert themselves into the transaction. They rely upon another lending company to identify a borrower with a need and a desire, to take time to generate the loan application, to provide counseling and advice and to put the wheels in motion to satisfy that client. The company that purchases the lead by way of the credit reporting bureau knows that the borrower is taking action on an interest to obtain a new home loan, and they can make any offer to attract that borrower to them. The offer is not "firm" and it may be too good to be true, and it may be the beginning of a "bait and switch" operation.
How to Opt Out
Consumers can opt out by logging on to http://www.optoutprescreen.com/ or by calling 888-567-8688. It may take about 5 days to go into effect, and it won't eliminate any screening that is already in the works.
If you don't like your mailbox filled with credit offers, or if you are concerned about your confidential credit file being passed around without your knowledge to generate sales leads, I would encourage you to research what the Opt Out process can do for you.
Sold for Sales Leads?
They are called Trigger Lead Sales Lists, and they are marketed by Experian, TransUnion and Equifax. It's the same concept as the credit card offers that come in the mail so frequently, but there are some important distinctions when they are used for marketing home loans.
This is how it works:
A financial institution or lead generation company compiles a list of criteria for the credit bureaus. Let's say it's a bank or mortgage company that wants a chance to get their information in front of people who are currently interested in getting a new home loan. They could include categories such as minimum credit score, zip code of the borrower, and if the credit report was accessed in connection with a home loan.
Within 24 hours, the borrower may find that 5-10 companies, different from the one with whom they applied for their loan, have generated "offers" of competing mortgage proposals. In some cases, the borrowers may not even be aware that these are coming from sources that their lender has not contacted.
Once the borrower realizes that these are coming in from other lenders, they are rightfully concerned that their credit information has been compromised, may be susceptible to identity theft, and may think that their mortgage representative is responsible. The borrower's chosen lender does not know this is going to happen, and the borrower has no voice in the matter.
It is the credit bureaus that are using this to make more money from their information files, and to please their customers. Their customers are the subscribing companies that share the credit histories that form a consumer's credit report, not the consumers themselves. So if a subscribing company wants the credit bureau to provide targeted sales leads, the credit bureau is happy to do it.
Under the Fair Credit Reporting Act (FCRA), pre-screening is allowable as long as the creditor makes a "firm offer of credit", and meets other requirements. When a creditor is making an offer of a new credit card it is very easy for them to meet the "firm offer of credit" requirement, because the offer is primarily based on the credit score.
To use the Trigger Lead Sales Lists in the case of a mortgage, and to generate a proposal to a consumer differs widely from a "firm offer of credit" because the mortgage process is so much more complex. The credit score has become important, but not defining in and of itself. The borrower's income, the appraisal of the property, outstanding debt service, liquid assets, etc. all need to be analyzed in conjunction with the credit score to feel confident that a "firm offer of credit" can be proposed.
This opens the door to unscrupulous lending companies to insert themselves into the transaction. They rely upon another lending company to identify a borrower with a need and a desire, to take time to generate the loan application, to provide counseling and advice and to put the wheels in motion to satisfy that client. The company that purchases the lead by way of the credit reporting bureau knows that the borrower is taking action on an interest to obtain a new home loan, and they can make any offer to attract that borrower to them. The offer is not "firm" and it may be too good to be true, and it may be the beginning of a "bait and switch" operation.
How to Opt Out
Consumers can opt out by logging on to http://www.optoutprescreen.com/ or by calling 888-567-8688. It may take about 5 days to go into effect, and it won't eliminate any screening that is already in the works.
If you don't like your mailbox filled with credit offers, or if you are concerned about your confidential credit file being passed around without your knowledge to generate sales leads, I would encourage you to research what the Opt Out process can do for you.
Subscribe to:
Posts (Atom)