Seattle-based Zillow.com, best known for its instant home value "Zestimates," launched a new service on Apr. 3 aimed at changing the way Americans shop for mortgages.
Borrowers can use Zillow's new "Mortgage Marketplace" to get custom loan quotes from lenders without having to give their names, addresses, phone numbers, or Social Security numbers, or field unwanted telephone calls from brokers competing for their business. Borrowers reveal their identities only after contacting the lender of their choice.
For mortgage companies, the anonymous leads come free of charge; they can make a bid based on information provided by the borrower, such as salary, assets, credit score, and the type of loan. Lenders can browse borrower requests and see competing quotes from other brokers before making a bid.
"This is a huge step forward in terms of putting borrowers in control and giving them access to information," said Spencer Rascoff, Zillow's chief financial officer and vice-president for marketing.
Fees Rolling In
The company is entering a field of established mortgage sites such as LendingTree.com and Experian Group's (EXPN) Lowermybills.com, which charge mortgage companies for borrower information. Zillow, which has an advertising model, says it won't charge for leads.
A few hundred lenders across the country have already signed up to participate in the new service and have paid a one-time $25 fee, which covers the cost of a background check, including employment and broker license verification.
Borrowers will have more than fees and loan rates to consider; the site gives a 1-to-5 rating to each lender based on borrower feedback. Zillow's standardized quote form allows customers to compare rates, fees, and lenders' ratings. Zillow calculates a monthly payment for each quote by estimating taxes and insurance for the house.
Brian Brady, managing director at San Diego's World Wide Credit, a national lender and broker, said he signed up for the Zillow mortgage marketplace a few weeks ago and has mixed feelings about it.
He said it has the potential to be a great tool for both consumers and lenders. But he's concerned that borrowers will be seeking quotes without first getting advice from mortgage professionals about the loan that best fits their needs.
He's also concerned about the kinds of leads the site might generate.
"Zillow is going in the right direction, in that the consumer gets to rate us as [loan] originators," Brady said. "I certainly wish it were a mutual rating system because customers need to be rated, too."
Bill Rice, founder and CEO of Kaleidico, a Flat Rock (Mich.) and Cleveland lead-management and distribution software company, said the Zillow service will be appealing for borrowers who want to shop for low rates without getting bombarded by lender phone calls.
But for the lender, the quality of the lead from Zillow will not be as good as it would be from other sites such as IAC/InterActive's (IACI) LendingTree.com in Charlotte, N.C. These are more likely to attract serious customers, he said.
Lenders typically pay sites between $15 and $65 per lead, Rice said. Zillow's leads are free, but might not be as solid and could take time to nurture, he said.
"There is a significant difference between someone who has committed to you personal information vs. someone anonymous," Rice said. "It doesn't mean that this is a bad path for Zillow. I think it's a positive move for Zillow but there are going to have to be some nuances worked through before we see broader adopters."
Zillow's Rascoff conceded that some of the borrowers seeking quotes on the mortgage marketplace might be "early in the decision process." But he said a borrower who decides to call a lender is more valuable than one who simply answers the phone.
Zillow's traffic has been growing despite the weakening real estate market. The site received 5.2 million visitors in March, up 30% from a year earlier. The Mortgage Marketplace could have a head start in attracting lenders because about a third of all U.S. mortgage professionals visit the site in a given month, he said.
Todd Carpenter, owner of Lenderama, a mortgage industry blog, said he hopes Zillow's mortgage service will be successful.
"It's structured in a way that's to the advantage of the customer," he said. "There's no way for the lender to harass you. All they can do is return a good-faith mortgage quote with details."