Study Criticizes Costs of Internet, TV Mortgage Leads

Those were findings in a recent report announced by the National Mortgage Complaint Center, which advised that loan prospects “wishing to finance or refinance their homes should consider steering clear of any mortgage service/mortgage referral service that promotes itself on TV or the Internet as a way to get mortgage firms to fight for their business, or as your helpful way to ‘get rid of debts or credit card bills.'”

The center said it reviewed over 1,100 loans and found that 80% of transactions generated by lead services had higher interest rates or higher closing costs than loans in which the borrower obtained the mortgage directly through their community lender. It was common to find closing costs $600 and higher, or, interest rates 25 to 50 basis points higher than on loans that left the “middle man” out, the center’s president Thomas Martin told MortgageDaily.com.

“In the vast majority of the cases the lenders that would fight each other to give the homeowner ‘the best possible deal,’ were in many cases the very same lenders that have a reputation for gouging or over charging consumers nationwide,” the center reported.

Martin told MortgageDaily.com many borrowers who obtain financing through the Internet have their rates changed to a higher one than they were initially told. He noted in the announcement that borrowers “have no chance of getting a fair of fully disclosed deal” as federal laws do not require that lending institutions disclose yield spread premiums.

The executive’s “biggest worry is mortgage firms promoting exotic interest only mortgage products that have ‘start’ rates as low as 1.5 percent to 2 percent, or mortgage firms that charge excessive interest rates using the rational that its better than paying for a huge credit card bill,” according to the announcement.

Martin reportedly forecasts a huge wave of new foreclosures early next year as a result of borrowers receiving interest rates or fees that were predatory and being unable to afford the mortgage payments.

Lower income, elderly and or minority groups are the most vulnerable to Internet or TV ads that claim they will help or send “$10,000 right away or pay off your debts,” which translates to “call us so we can help ourselves to your home equity, or call us so we can rob you blind,” Martin indicated in the announcement.