You shop around for a home loan or a home equity line-of-credit.
You apply.
Your mortgage loan originator asks and receives your permission to run credit reports.
Almost immediately after that credit report is run, you and any of your co-applicants and co-signers are on the receiving end of a plethora of phone calls, text messages and emails from numerous other mortgage lenders wanting your business.
You most likely end up frustrated and furious at the invasion of your privacy. If you wanted the world to know what you were doing, you would have announced it.
That intrusive aggravation is most likely coming to an end under the bipartisan Congressional legislation, H.R. 2808, the Homebuyers Privacy Protection Act or so-called trigger lead legislation. The bill was passed by the House of Representatives and unanimously passed by the Senate and is now headed to President Donald Trump for his signature to make it law.
This means Equifax, Experian and TransUnion will be prohibited from selling the fact that you applied for a home loan. But the law comes with certain exceptions.
“This new law will help protect consumers from a barrage of unwanted calls, texts, and emails they too often receive immediately after applying for a mortgage,” said Bob Broeksmit, chief executive of the Mortgage Bankers Association. “It marks a major victory for borrowers, and will create a more efficient, responsible and respectful home buying process.”
Before I explain the legislative loopholes, let me first provide a more comprehensive explanation of a triggered lead.
Trigger leads are a way for mortgage lenders to identify potential customers based on their credit inquiries. When the mortgage loan originator pulls your credit, it “triggers” the credit bureaus to sell your information to competing lenders who subscribe to the so-called trigger lead service. This almost always leads to a barrage of unsolicited mortgage offers from uninvited lenders. This practice is currently legal under the Fair Credit Reporting Act or FCRA.
What exactly is provided to those uninvited lenders?
“Your name, credit score, loan amount, phone number and email address. It’s an unethical practice of selling leads to complete strangers,” said Jim Nabors, president of the National Association of Mortgage Brokers or NAMB. “Under a $150,000 loan amount, they’re not interested (in purchasing the lead). I’ve heard they (the credit bureaus) charge $50 to $100 a piece.”
Here are the loopholes allowing uninvited solicitations in respect to the Homebuyers Privacy Protection Act:
—The consumer explicitly consents to such solicitations
—The third party has originated the current residential mortgage loan for the consumer (lender who funded the existing mortgage)
—The third party is the servicer of the current residential mortgage loan of the consumer (you are making your mortgage payments to that lender)
—The third party is an insured depository institution or insured credit union and holds a current account for the consumer
I’m guessing the last three loopholes are ways for the Mortgage Bankers Association and other lobbying organizations to appease their members who have or have had a relationship with the borrower applicant.
Whether consumers want their previous lender, current mortgage servicer or their banker/credit union soliciting them is a good question. This is certainly better than the alternative of selling the trigger leads to anyone and everyone.
Remember, it’s always good practice to shop with three mortgage loan originators as you’ll have a better sense of whether or not you are receiving a fair deal from the first originator you contacted. And you can always negotiate for a better deal when you have a broader sense of what’s available in the marketplace.
Once this legislation becomes law it will take 90 days to write the rules (assumption is either the Federal Trade Commission or the Consumer Financial Protection Bureau will write the rules) and another 90 days for Experian, Equifax and TransUnion to implement the rules, according to Nabors.
So, it’s going to be six months or more until this takes effect.
Freddie Mac rate update
The 30-year fixed rate averaged 6.63%, 9 basis points lower than last week. The 15-year fixed rate averaged 5.75%, 10 basis pointslower than last week.
The Mortgage Bankers Association reported a 3.1% mortgage application increase compared with one week ago.
Bottom line: Assuming a borrower gets the average 30-year fixed rate on a conforming $806,500 loan, last year’s payment was $85 less than this week’s payment of $5,167.
What I see: Locally, well-qualified borrowers can get the following fixed-rate mortgages with one point: A 30-year FHA at 5.49%, a 15-year conventional at 5.25%, a 30-year conventional at 5.99%, a 15-year conventional high balance at 5.625% ($806,501 to $1,209,750 in LA and OC and $806,501 to $1,077,550 in San Diego), a 30-year high balance conventional at 6.375% and a jumbo 30-year-fixed at 6.25%.
Eye-catcher loan program of the week: A 30-year mortgage, fixed for the first five years at 5.5% with 30% down payment and 1 point cost.
Jeff Lazerson, president of Mortgage Grader, can be reached at 949-322-8640 or jlazerson@mortgagegrader.com.
