|What You Should Know About Buying Leads
A look at risks of mortgage lead purchasing
January 24, 2005
|Buying mortgage leads can be a great source of new business for brokers and originators. But beware that unscrupulous lead originators are also out there trolling for new marks.“It’s a racket,” is how Massachusetts originator Leonard Dudley describes a North Carolina lead provider he claims sells leads that have already been tapped.
The company touts the exclusivity of its leads, and peppers brokers and originators with tempting e-mail solicitations.
But an exasperated Dudley said when he contacted the names of customers provided by the lead company, many had refinanced or taken a new mortgage weeks or even months earlier.
“I started noticing a pattern,” Dudley told MortgageDaily.com. “I would ask customers if they want a loan, and they would tell me no, that they applied for a mortgage and closed two months ago.
“I figured one or two were a fluke, but out of 20 leads, 18 told me the same thing,” said Dudley, who thought he was purchasing fresh leads that were one to two days old.
“It turned out to be a fraud,” he said. “And when I tried calling the company, they didn’t return my calls or finally just told me they didn’t need my business.
“Leads can be great…but you have to be careful with who you are dealing with,” Dudley warned.
Though there are some bad apples in the business plenty of lead buyers end up closing loans.
iHomeowners Inc., a Calabasas, Calif.-based Internet marketing firm, is a provider of mortgage leads through its LoanWeb.com unit.
It recently commissioned a study done by Real IQ Consulting that showed more than half the customers who submitted a loan quote through its LoanWeb.com Web site secured a mortgage.
“It’s crucial that brokers and lenders build a relationship with their online customers during this instant shopping phase,” iHomeowners Inc. president John Hasenauer said in a statement.
For all types of home loans, 53.7% of consumers secured a mortgage within 61 days, according to the study.
“Brokers and lenders need to be able to assess their own lead closing ratios in the context of the high funding ratio for LoanWeb leads,” Hasenauer said.
Some smaller lead companies hook up with larger lenders to expand their reach and marketing capabilities. An affiliation with a well-know mortgage lender helps with any potential issues over credibility.
For instance, Fidelity National Financial of Jacksonville, Fl., has struck up an alliance with ABN AMRO Mortgage Group, a giant subprime mortgage lender.
Fidelity’s LSI Credit Services division and ABN AMRO have developed an online lead generation and list service for community banks to target consumers looking for a mortgage.
Lead Locator Plus will allow ABN AMRO’s partner community bankers to obtain custom-qualified mortgage leads for targeted marketing, the companies said in a statement.
“Lead Locator Plus…offers time and money saving tools that provide the valuable sales leads and marketing materials financial institutions need, but don’t often have the resources to develop in-house,” Michael Griffith, ABN AMRO Mortgage Group senior vice president, said in the statement.
Through the service, prospecting lists are built with data culled from public sources, credit bureau reports and Fidelity’s customer database. The data is then available to clients through the Web site Interfirstlink.com.
“Hundreds of lead selection criteria will be available to local lenders to refine targeting, including information about income, loan types, property types, loan-to-value ratios, loan amount and geographic data,” the companies said in the statement.
There are dozens if not hundreds of Internet sites offering mortgage leads for sale.
Though prices vary, many sites sell leads for $14 to $50, with prices escalating for newer leads. For example, a mortgage broker would pay more for a newer lead, one that might only a day or two old.
Typically, closing loans on 8% to 14% of the leads a broker purchases is considered good, according to A Mortgage Leads Guide.
The site, which sells advertising to lead companies looking to reach mortgage originators, offers guidelines to what it considers “quality internet mortgage leads.” A key component of lead buyers is to make sure the lead is “fresh.”
“Best case scenario,” the Web site advises, “the lead is delivered instantly…and is an exclusive mortgage lead delivered only to you. At a minimum you want to make sure the lead is delivered in less than 48 hours.
“Otherwise, the lead is less valuable and should not be sold at the same premium as a real-time mortgage lead,” the site recommends.
The site also advises lead purchases to make sure the lead is accurate and determine that companies aren’t overselling the leads they generate.
But the risk of purchasing leads goes beyond the quality of the lead, as Ameriquest Mortgage Co. has learned. The company is locked in a legal battle with a prospective mortgage borrower named Christine Baker of Arizona.
Baker has filed a federal lawsuit in U.S. District court in Phoenix alleging Ameriquest targeted her after improperly buying her name and e-mail addresses from a lead provider called Lead Jungle.
In court documents and public statements, Baker has alleged that Lead Jungle sold her information after she responded to what she thought was a more legitimate spam offer from a subprime lender.
Ameriquest has denied the allegations that it acted improperly and Lead Jungle could not be reached to comment.
But Baker said she has been victimized by a spamming operation that uses e-mail solicitations to glean consumer information that it later sells as legitimate mortgage leads.
“Paying for illegally obtained leads is as criminal as purchasing stolen goods,” Baker said in a statement. “The spammers are stealing our time and resources.”
So, you’re interested in refinancing your mortgage. Maybe you want some extra capital to do that home project you’ve always dreamed of, interest rates are nearing record lows, or you want to start consolidating debt. Regardless of the motivation behind the refinance,...