Zillow Mortgage: follow up observations

A New Post By Dan Melson
Mortgage Loan Broker - California
Read other posts by Dan Melson

I've been quoting loans on zillow mortgage in what would have otherwise been my wasted time, and watching what others quote.

Observations:

1) No matter the characteristics of the loan that gets asked for, most quotes seem to be A paper conforming full documentation rates - and lowballed on the points as well.

2) I have yet to see FHA costs addressed at all, by any other quote provider

3) I have yet to see quote caveats provided by any other quote provider

4) Zillow does not appear to be effectively monitoring their quotes forum or their feedback.  In at least one case, I'd bet money that a top of the line review was a sock puppet.

5) I have done roughly 15-20 quotes.  Real loans, that I could actually lock and guarantee price (assuming the client was telling the truth) and deliver in 30 days or less.  Zero calls, zero emails.  I'm seeing identical quote requests circulate at intervals of a few days, with no apparent action  on the part of the requester.

6) I'm going to be nice here: Perhaps given a bit more time, the enforcement mechanisms will shake themselves out.  It has been less than a month.

7) Nonetheless, at this point in time, Zillow has done precisely nothing to separate themselves from all the other on-line quote sites, and it does not appear that they are likely to do anything to make them any more worthwhile than any other such site, from the point of view of either consumer or mortgage provider. 

Quite frankly, I appear to have wasted the $25 sign up fee.  Not that it's the first $25 I've ever wasted.  But if you're quoting something real, Zillow mortgage does not appear to be living up to their hype.

Comments

[Shailesh Ghimire]

Dan,

Brilliant follow up. All of the points you mentioned were things I was afraid would happen. I kept my mouth shut and didn't sign up. Thanks for sharing. It solidifies my business decision.

[Phil Caulfield]

Dan,

I have made about the same number of quotes with the same result - not one phone call!
Many of the quotes I have made have only has one or two other quotes. I'm not going to waste my time with this until I hear from someone reliable that they are getting results.

[David G from Zillow.com]

Hi Dan,

Thanks for the feedback.

No doubt there are lenders on Zillow quoting at very low margins right now. As long as they honor those quotes, I obviously see no problem with it and that's actually a smart tactic for receiving early contacts from borrowers and for rapidly earning a positive reputation on Zillow. Once a lender's earned positive feedback they could then leverage that reputation to walk margins back up to where they'd like them to be. The market dynamic really does empower the borrower and so it's probably realistic to assume that lenders who succeed on Zillow will be those lenders that already have a high volume and tight margin strategy (or at least that applies to the lenders that bid on the most attractive loan requests.)

I have spoken with many lenders who are in contact with borrowers they've quoted. Many of these loan applications are at the bank and we expect to start to hear closing stories over the next few weeks. But most of those lenders had submitted far more than 15 quotes. The lenders I've spoken to are hearing from about 10% of the borrowers they quote and the majority of those loans are moving through to applications.

At least one sock puppet has been dismissed from Zillow and I have a few more in investigation. We're getting AWESOME feedback from lenders but we should have launched with the ability to flag quotes and so that's coming in the next week or so.

Don't expect us to publicly shame lenders found to be dishonest but do know that we're reading the feedback we're getting and investigating allegations of dishonesty and dealing with those lenders that are found to be dishonest. That said, most reports of bait-and-switch quotes thus far have proven to be false-positive.

"... no apparent action on the part of the requester."

That's a problem that we (Zillow) created by mistake when we decided to email entire quotes to borrowers. So, when borrowers see your full quote details via e-mail and don't view it on the site it appears as though those quotes weren't reviewed. We'll be fixing this in the next few weeks - quote details will be removed from e-mails and your quote activity will be more accurate.

"Nonetheless, at this point in time, Zillow has done precisely nothing to separate themselves from all the other on-line quote sites"

Come on, Dan. Do you really not see the difference it makes that;

a) lenders see each others quotes,
b) lenders are reviewed by borrowers,
c) borrowers are anonymous,
d) leads are free and unlimited,
e) there's no limit to the number of lenders that can quote a loan,
e) quotes are standardized such that borrowers compare them side-by
f) lenders are policing the honesty of each others' quotes.

[Dan Melson]

Dave,

1) Lender's see each other's quotes

So they know how big a lie they have to tell?

2)Lenders are reviewed by borrowers

That's in abeyance

3) borrowers anonymous

That's one of the problems

4) leads free and unlimited

you mean each additional lead is free. Except they're not leads. A lead comes with contact information. They're possible leads.

5) No limit to number of lenders that can quote a loan (see my response to number 1)

6) Quotes standardized

This is a bug, not a feature. You're underestimating California property taxes by a factor of 2. Furthermore, it gives lenders leeway to say "They didn't ask about it, so we can pretend it doesn't exist" Change all the fees to one line: total of all non-recurring closing costs.

7) Lender's policing the accuracy of each other's quotes.

This must be some new and improved Zillow mortgage so new that it doesn't show up when I Reload the page. Exactly what is the mechanism for this.

I just pulled up two loans, one purchase, one refi. The most recent of each in my default search area.

90% purchase money loan excellent credit. There's two quotes there, one for 5.875 with 3370 in fees, one for 5.75 with 3217 in lender's fees both are claiming no points of any kind.

I do business with about 80 lenders. The absolute lowest *WHOLESALE* I can find is .01 discount for 5.875, just under .7 for 5.75 - and that maxes out at 80% LTV, not 90, and we're designated a declining market by every lender I know of. lender and statutory fees total about $1800, never mind title and escrow and appraisal. Adding PMI or LPMI or FHA moves that loan into the high sixes at the quoted fees. You think there might be a little bit of lowball going on there?

The other one is a $400k rate/term refi loan on a $550k property - but the monthly debt and income listed tells me there is no way they are qualifying full doc. TEN quotes, all of which are quoting rates for full doc, none of which are noting the apparent need to do another documentation type, OR the fact that Debt to income ratio does not appear to work. The quotes vary from 5.5 to 6.125, none of them admitting they're going to charge points. *IF* it was "full doc" I could maybe get it done at 6.125 full doc without points for the costs listed, but even that would be shaving my margin, and IT'S NOT FULL DOC by what the prospect said.

Nobody quotes money losing loans to build reputation. I really want to compare the HUD 1 on these loans to what's being quoted. I got a nickel says I can find major discrepancies, whether or not the consumers notice how they were lied to. You in?

There is no apparent ability for me to report any of this. How, please?

It's the same old game: People competing to tell the biggest whopper.

[David G from Zillow.com]

Dan,

I didn't ask if you thought these were good ideas. Time will tell us that. I was simply responding to your claim that Zillow isn't differentiated vs traditional lead sites which is obviously far from accurate.

Look at your comment for example; you're frustrated 'coz you found two impossible quotes. Now do you really believe that that same thing does not happen when you're competing against quotes you do not see? Or that it's less likely to happen off line? Zillow is merely the first ever service to shine a very detailed light on this issue. And you think that's a bad thing?

We made a real error in not anticipating the amount of feedback we'd have from lenders about other lenders quotes. As you know, it doesn't happen on the RE side of the house but I welcome this feedback and we're course correcting; soon you'll see a solution for flagging individual loan quotes for our attention on every quote. In the meantime, you can use one of the other feedback mechanisms on the site ... or just e-mail me until the flags are on the quotes [davidg AT zillow DOTCOM]. Something quite a few lenders are doing is contacting the lenders who have clearly made an error on their quotes. You're professionals and a professional should appreciate that feedback and if they don't, I'm sure their broker will.

I'll leave you with feedback from a broker in NYC ...

"I have had a positive experience on zillow so far. At the point I had in about 100 quotes I had 12 responses which lead to 7 apps and I have 4 loans in underwriting approved with conditions. Of the remaining 5, I have followup calls scheduled down the road for App's once a few issues are resolved. I dont want to encourage more competition for myself but since zillow has been good to me I figured I would report my experience."

From here: http://www.brokeroutpost.com/loans/brokers/forum/topic.asp?TOPIC_ID=218195

[Dan Melson]

Dave:

Take a step back. Stop looking at individual trees. There's a forest there.

What I was saying, originally, was that the lowballing was endemic and practically universal. I have better things to do with my time than flag other people's misquotes and explain precisely what each of them is *not* taking into account. The people who quote correctly are the rare exception, not the rule, and my sample in the later comment was simply an illustration of this point. It's *Zillow's* responsibility to see that the quotes are correct - and Zillow is currently failing miserably.

You can have all kinds of fixes and upgrades on the way. When they get here, things may change and so may my opinion. But as of just a couple minutes ago, those changes were not in evidence.

What is happening on Zillow Mortgage as of this moment is *precisely* what is happening on the other online quote forums I've written of in the past. Loan barkers shamelessly low-ball, trying to get people to call, secure in the knowledge they're not going to lose anything real even if someone calls them on the deception, and they're likely to gain a few blind suckers for their loans.

And you may not have asked me if they were good ideas, but you *should* have. I don't me me, personally, but mortgage professionals in general. Every single problem I've noted was completely predictable to anyone in the business, and thus far, we have seen precisely *zero* in the way of actions to deter it out of Zillow.

"First service to shine a very detailed light on the issue." Sorry, but when you get to the level of a weak flashlight held too far away, I'll let you know. I'll give you 90 out of 100 on good intentions - and one out of 100 for execution, simply for acknowledging that the problem exists. We know what's paved with good intentions, particularly fueled by lack of execution.

And I'll bet, sight unseen of that broker's quotes who has all those applications in process, that he's shamelessly lowballing as well. When everybody's lowballing, that's the way you get calls. Just human nature, people responding to the "bigger better deal", when they have no way of knowing it's not real. And over fifty percent of all people who get lowballed literally *NEVER* figure it out.

[60 Day Realty]

I've done both face to face and online lending. Online mortgages lead a buyer off the rough path into the tall weeds where deception and disconnect is perpetuated even further than face to face mortgage lending.

Until mortgage lenders and bankers are held accountable for their ridiculous quotes I advise all my clients to stay away from online lending.

Not sure how Zillow or any other online middle man is going to solve this issue. Thoughts?

until then, it's a lot easier to see the snake on the path than in the tall weeds when you hear its rattle.

[Rhonda Porter]

David G reports a LO provided 100 quotes and received 12 responses. I wonder how much time it took for that LO to accurately provide 100 quotes for 5 aps from the 12 responses. It's good information to have however, I would find providing that many quotes with that small of a return to be a huge exercise in frustration. But that's just me! My business is referral based--I don't even take upcalls at my office so why would I hang out at the ZM?

I'm wondering if ZM's program would be better if it was done more like "liar's poker" (bad analogy perhaps) and lenders could not see each other's responses. That would prevent lenders from undercutting the closing costs of the next lender by $100 (or what ever) to be the next lowest bid.

[Searchlight Crusade]

Rhonda, it's not even undercutting other quotes by $100. That I could understand, and it would be legitimate.

My point is that it's a very rare quote that's even taking into account basic facts of LTV and DTI to quote something real. Zillow said they were going to prevent that, and have thus far failed to do so. They say they have some upgrades coming - but those upgrades are not yet here, and as described, I do not believe they will accomplish what Zillow claims they will.

I do see at least two ways that *might* accomplish what Zillow claims they want. There are probably others. But all of them require a lot more in the way of programmer effort and human time than I have yet seen them willing to commit. Zillow wants the computer to do all of the work, and that just is not going to happen.

[Searchlight Crusade]

Rhonda: As I've said previously, given my observations of the system, I'll bet the quotes that the "successful" loan officer made to get those contacts were lowballed, whether the client recognizes it yet (or ever) or not.

[Rhonda Porter]

I received an email (as I'm sure many LOs did) from Zillow stating that many consumers have unanswered bid-request.

I thought I'd check out ZM in my spare time and between work, family and blogging...I just don't have the time and when I have visited it, it's just not the way I like to go about finding new clients.

[Wade Young]

Your report is exactly what I expected. Thanks for taking the time to blog about it.

[Rhonda Porter]

Dan, I was just back to ZMM to check it out...first time back in a month (since they started). I'm noticing a few LO's quoting in the Seattle area are rated now...and what I don't like is that there is no way to tell if who is doing the rating is legit. These seems like it would be very easy to manipulate.