Mortgage Lead Generation Firms Continue to Violate Federal and State Laws
So here we go again. Now that mortgage rates are headed up, the deceptive lead generation ads are crawling back onto the web. Here’s a great example from a Google ad:
FHA Refinance 4.0% Fixed
$160,000 FHA mortgage for $633/mo. No SSN req. Calculate payments now!
MortgageRefinance.LendGo.com
When clicking through, the lendgo.com lead generation site asks some simple questions like the value of my home, zip code, whether or not I’ve ever filed bankruptcy, etc. Then I’m asked to provide personal information and assured that I’m dealing with a secure website. Name address, phone number, etc. After I click “submit,” I’m told that I will be given four quotes. I clicked ’submit’ after offering them the following:
First Name: Your Ad
Last Name: Violates TILA
But I don’t get a quote. Instead I’m asked even more questions before being told that four lenders will contact me within 24 hours: Quicken Loans, Onyx Mortgage, Americash Mortgage Bankers (I’m thinking it was a seven beer night when someone decided on that name), and….I’m totally surprised here: Paramount Equity Mortgage.
So, Quicken, Onyx, Americash, and PEM, Are you aware that the lead generation company you’re using is violating the Truth in Lending Act and probably a handful of state laws by advertising a note rate without conspicuously including APR in that ad?
I bet someone at these mortgage companies assumed that no one would be able to trace the deceptive ad back to them. Nah, their chief compliance officer couldn’t be that stupid. Oh wait, maybe they don’t have a chief compliance officer. Or perhaps these big mortgage companies are just making a strategic business decision: Violate TILA and some state laws and if we get caught, we’ll just pay the fine and move on because we’ll be able to earn six times the amount of the fine anyways.
Regulators: You’re being tossed under the bus in Washington D.C. this week as banker after banker stands before various congressional committees telling the world that the bank regulators were asleep at the wheel. I’m not going to throw you under the bus. Why? Because there never will be enough money to regulate every single mortgage lending transaction across your area of authority. You’ve got limited resources and regulators are always trying to balance everyone’s needs and are constantly being pulled in 10 different directions at once.
So I’d like to give the regulators a helping hand.
If mortgage companies are buying leads from a firm that’s using deceptive advertising, you can write out 5 consent orders and be very efficient with your time. Just start clicking on all the banner ads! It will be easy and mildly entertaining for your staff! At the same time, you’ll help consumers avoid getting sucked into doing business with a company that has chosen a business model of attracting consumers who are an easy mark.
They fell for the click through ad. They believed there was a 30 year fixed rate mortgage available under 4 percent! If they were stupid enough to fall for this, then that means perhaps the mortgage company can also win all kinds of other shell games with these folks, who probably believe there’s a diet pill that will help them lose those last 10 pounds and that the secret to prosperity and abundance is to think thoughtful thoughts. Maybe that’s the secret to the housing market recovery: We can just “think” away all those short sale, REOs, and re-defaulting loan mods!
Here’s another one:
3.44% APR – Refinance Now
$200,000 Mortgage for $898/Month! As Featured on CNNMoney & Forbes.
DeltaPrimeRefinance.com
Oh my goodness! This lead generation firm actually quoted APR! Which would be a cause for celebration, until you click through and see that they’re quoting a 5/1 ARM loan, and then they also inform us that this might be a 15 year amortization. Of course the APR looks awesome. Regulators, it would be interesting to find out exactly how many people, after filling out the online lead generation form, decided to select a traditional 30 year fixed rate loan instead of an ARM loan or a 15 year amortization. Classic bait and switch. Like shooting fish in a barrel.
These lead generation companies appear to hold a mortgage broker or lender licenses in various states, yet the consumer information is sold to other licensed brokers or lenders.
Question: Are mortgage brokers, lenders and banks responsible for making sure the leads they purchased are generated by advertisements that do not violate state and federal law? If the answer is no, then deceptive mortgage lending advertising will continue to grow as long as brokers, lenders and banks are able to skirt law by purchasing these leads.
To the loan originators who regularily purchase these leads: we need to send you to Tiger’s rehab center and wean you off the crack. Deceptive ads are poison to the system and they make it harder for you to procure clients using advertising methods that are transparent, ethical, and legal.
Maybe the broker/lender/banker willl say “We sign a contract and it’s the lead gen company’s responsibility to make sure the leads are generated according to state and federal law.” If I was a regulator (and sometimes I like to put on a dark blue suit and high heels and pretend I’m a regulator in the privacy of my own home) I might say, in response, “So what method do you use to be certain that the lead gen companies you deal with are advertising according to state and federal law?”
Quicken Loans, Onyx Mortgage, Americash Mortgage Bankers and Paramount Equity Mortgage, all a rational, thinking consumer has to do is google or bing your company name with the word “complaints” in the search box like I just did and they’d have all the info they need. But the rational, thinking consumer is not your target market.
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Comment by Christopher W. Johnston on 21 May 2010:
There are a couple of mortgage companies in my area where I know the principles where all they do is call on lead-generated referrals. I keep reminding them that this is a recipe for disaster as once the refi market dries up, then what?
As for their liability, I agree 100%. They should be held accountable to the practices by which the lead companies gather their info ESPECIALLY given the fact that they physically pay for that service. If it was given for free, I could argue that it is the fault of the lead generating companies but the fact that the mortgage companies pay for it, makes them just as culpable.
Comment by Bryce Zimmerman on 22 May 2010:
I agree in that the companies purchasing leads need to be certain that the company providing this service for a fee in meeting both state and federal laws. Again, these types of misinformation is what has led to the general public mistrust in our industry. Luckily those originators and companies that choose to conduct business in the proper manner, typically have been the ones that are still profitable today.
Comment by Shawn Lynch on 24 May 2010:
Interesting article. Lead generation is a double edged sword. It’s great to have the loans in process, but at what cost? I am in agreement with the article when it comes to holding everyone involved with a site accountable for the informaiton on that site. If it’s deceptive, if it’s against the law, if they haven’t bothered to run thru it themselves to see where their business is being generated from, then they are a stupid as the people who beleive that the 30yr fixed rate is 3.44% and deserve to be punished. They are paying for that service, after all.
Comment by Virginia Miller on 25 May 2010:
I also agree with this article that the mortgage company should also be held accountable. Goes back to my thought of “If it’s sounds to good to be true then it’s proably to good to be true”.
I worked for a mortgage company that took on lead generated leads and it was not definantly not my thing. I felt like a car salesman. I thought it was awful to sucker people to calling from the misconstrued internet ads. After taking a few of these leads I was knew this was not my book of business and I got out of that company. The LO’s I knew personally that based there business with the lead generations are ALL out of the business today. Hmmm I wonder why?
Comment by Angie Williams on 27 May 2010:
I am taking your advice and clicking through a banner ad to experience the..”I’ve been healed” slap on the forehead. Unfortunately when you are in dire straights you will believe in the ad and appreciate the quick fix until you lose your home. Bringing this to the attention of non misleading originators certainly spreds the education to consumers. Knowledge is power!
Comment by Kathleen Manford on 27 May 2010:
You know, it may just be me, but I like to work through referrals. You always have a client who wants to work with you, not one who is tired of nis name being given to every lender across the board. Where is the customer service? These loans are just being done by data entry people and who knows who closes them. I feel if there is someting wrong with the information provided, punish them but also the lender since they are not following up on the documentation provided. If you lose the personal touch, you lose the accountabilty for the information used to close a loan. I have never bought a lead and do not intend to. I get leads by doing a good job and asking for referrals.
Comment by amanda kirilenko on 31 May 2010:
It is so surprising to me that people click on these ads. I guess proof they do is the ads are still here. There is apparatnly no accountability for these ads. SOMEONE should put on a dark blue suit!
Pingback by Loan Home Inc. Lead Generation Scam | Rain City Guide on 21 June 2010:
[...] generation companies troll the Internet for consumer leads, use banner ad campaigns, and/or send out mortgage email spam and then sell [...]
Comment by Dora on 23 June 2010:
This is why all the regulations in the world out of Washington will NEVER stop the bad loans. A homeowner thinks he deserves that awesome rate, no matter his credit or equity. No matter how much we set up NMLS systems, test our brains out, pay thru the nose, there will always be some jerk who is happy to take advantage.
Making it harder for a well deserving borrower to get a loan is not the answer, shutting down these internet thieves is.
I lost a loan a few years ago to a builder/lender, the borrower was shocked to find out he had a 3 yr ARM. He was just gaga about the rate at the time. Then when rates went up, he had to refi. That bank by the way will skate right by the NMLS regs.
Comment by Owen Bell on 9 July 2010:
i am looking for an in-depth tutorial about lead generation, can anyone post links ?,;`
Comment by Don Davis on 9 July 2010:
The same laws apply to mortgage advertising as it does to the auto industry (or anyone who advertises). If a car dealer hires an ad agency (lead generation company) both the ad agency AND the dealer are responsible for the content of the ad. If they are caught with deceptive advertising then both are subject to the State Attorney General suing them. There should be no challenge to this topic. If you buy leads from a lead supplier, and the lead supplier is deceptively advertising to get the lead, and you buy that lead, you are just as guilty as the supplier. Ignorance is no excuse. If you don’t know how the supplier is gathering the leads and you think it is just magic, then you are either very naive or just plain stupid. I think most of the bad players in this business would disappear (only to find other industries to terrorize) if they were held liable for misleading, deceptive, bait and switch and sometime just plain outrageous claims. At this point we as an industry can only report violators and hope that the system has the time and inclination to follow up.
By the way the lead generation companies are not required to hold any license for this industry. They pass no test and hold no designation. All they do is promote to get a lead and sell, sell, sell.
Comment by gary wofford on 23 August 2010:
I have been amazed at the fraud, deceit and crap that his industry has had and the amount of false advertising is rampant and should be stopped. I was a stock broker for Smith Barney for 25 years before this and was an arbitrator the last 15 of those years and this kind of crap was not allowed in the Securities business but this business seemed to condone it?? It seems we have promoted the used car slime to do mortgages preying on the unuspecting consumer and there are a lot of them. The average consumer has been a target for these kind of crooks. It is too bad as the public has always thought a mortgage broker to be of high caliber and it is totally the opposite and not many even have a collage degree whereas in the securities business don’t even apply if you do not have a collge degree because you will not get thru the front door.