Sitting On the Cusp of Lending 2.0
From this Month’s Wired Magazine - Q&A: Zillow’s Rich Barton on Real Estate, AI, and Basement Floods - more on Zillow’s upcoming foray into mortgages.
If you take Zillow’s principles — power to the people, transparency in marketplaces, rich information — and apply them to mortgages, there’s an obvious opportunity. So we’re working on that. We think there are many consumers out there who… There is a lot of mortgage-buyer’s remorse. Let’s put it that way.
Mortgage-buyer’s remorse indeed. This fall’s credit crunch and the fallout from the subprime mortgage mess signals (to me, at least) that the mortgage industry is ripe for a move by a technology player like Zillow to step in and help lead the way for frightened and confused consumers.
Real estate 2.0 is already chock full of examples of taking the Web 2.0 approach to real estate; Redfin, Trulia, et al. but the mortgage lending industry has remained a remarkably entrenched, anti-consumer and conservative marketplace. Therein lies the opportunity… and it can’t come fast enough.
Lending 2.0 will see companies like Zillow and the also forth-coming RateSpeed (as well as many others I’m sure) try and bring transparency to this sector - to what degree of success, is anybody’s guess right now.
For more on this fascinating emerging space, make sure you’re reading Blown Mortgage and The Mortgage Reports Blog.
If you enjoyed this post, make sure you subscribe to my RSS feed!
andrew | Nov 26, 2007 | Reply
I just think zillow is trying to do too much. The core product needs attention. They tend to jump around and I feel they are without focus. If they are jumping into mortgages I hope the will create a new brand because zillow is known for estimates. Millow anyone?
JeffX | Nov 26, 2007 | Reply
The ability for consumers to access wholesale lender mortgage rates, without any prior ability by a mortgage originator to manipulate such data…that’s Transparency…Lending 2.0
Matt Carter | Nov 26, 2007 | Reply
What if Microsoft teamed up with Freddie Mac, and got lenders like J.P. Morgan Chase and GMAC to chip in $100 million — they might build a pretty impressive mortgage site, no? Maybe if they were doing it today, and not back at the turn of the century.
Tom Kelly wrote an interesting column for Inman News last month about that partnership, HomeAdvisor Technologies, and how the lessons learned then might apply to Zillow’s possible foray into mortgage lending.
http://www.inman.com/InmanNews.aspx?ID=64847
In a nutshell, Kelly said, consumers like to use mortgage Web sites to find out what kind of deal they can get, and then go try to get the same deal from their local bank (anybody ever used Orbitz this way — to see which airline is offering the best price on a flight you’re planning, and then buying the ticket direct from the airline and cutting Orbitz out of the deal?).
Another problem — it’s one thing to provide a quote to somebody online, and another to deliver it on those terms. HomeAdvisor “best served those who fit the norm and fell within ‘plain vanilla’ loan qualifications,” Kelly says.
Mortgagebot LLC’s new Web site, Mortgage Marvel, acknowledges this issue, offering only loans to prime borrowers, CFO Dan Welbaum told me last month at the Mortgage Bankers Association convention.
http://www.inmantv.com/?p=93
At the other end of the spectrum, during the boom many mortgage sites made a killing delivering borrowers with crummy credit scores into the hands of lenders, who were clamoring for subprime borrowers because they could make more money on high rate loans. It’s an interesting world we live in, where lenders will pay more for leads on borrowers with the lowest FICO scores.
Consumers know this and many are wary of shopping online for a loan. According to Kelly, only 10 to 12 percent of mortgage loans are originated online.
“The reluctance of consumers to accept online mortgages has been well-documented — they want their hand held through the process; they question the security; they fear a deluge of other product offerings,” he says. “But most of all, home-loan borrowers have shown that they like to click around in cyberspace for the best home-loan deal they can find and then walk down to the corner bank to see if their old buddy — perhaps the same individual who set up their checking, savings and home equity account — will match it. ”
Transparency may help address consumers’ fears about the honesty of online lenders, but how are you going to prevent potential customers from using you as a comparison shopping tool, like Orbitz?
Chris Dowell | Nov 26, 2007 | Reply
The industry needs loan originators who are not affraid to say no. In the past, if a loan officer said no or this maybe a problem, the borrower would go right down the street. I’m not sure Zillow has the answer.
Metrowest MA Homes Blog | Nov 27, 2007 | Reply
Zillow? They really should stick to doing something well than trying to be a jack of trades and master of none. Here is a novel concept - how about improving their zestimates so they are least within 5% of true market value!
Cape Number Plates | Nov 27, 2007 | Reply
I agree with the comments above. Zillow is spreading itself too thin. It needs to focus on something and do it well. Doing several things adequately just isn’t enough anymore.
David G from Zillow.com | Nov 27, 2007 | Reply
Hi, it’s David from Zillow,
Andrew, Metro and Cape -
Zillow is a media company (think of the real estate section of your favorite newspaper.) Zillow’s audience is absolutely interested in mortgages; it’s a natural next step for us after valuations and listings.
We agree that improving Zestimate accuracy is important and are constantly working on both data coverage and Zestimate algorithms. You should note however that the goal of an automated valuation is not to replace an appraisal. An AVM will never tell you precisely what all homes should sell for. Zestimate values have attracted a massive audience but visitors come back for more than just Zestimates; they’re searching for listings, answering Home Q&A, learning about neighborhoods and engaging in discussions.
Having worked at Amazon at the time the company expanded beyond books, I can assure you that mortgages make perfect sense for Zillow and our audience.
Matt Carter | Nov 27, 2007 | Reply
What if Microsoft teamed up with Freddie Mac, and got lenders like J.P. Morgan Chase and GMAC to chip in $100 million — they might build a pretty impressive mortgage site, no? If they were doing it today, maybe, and not back at the turn of the century.
Tom Kelly wrote an interesting column for Inman News last month about that partnership, HomeAdvisor Technologies, and the lessons that might apply to Zillow’s possible foray into mortgage lending.
http://www.inman.com/InmanNews.aspx?ID=64847
In a nutshell, Kelly said, consumers like to use mortgage Web sites to find out what kind of deal they can get, and then go see if their local bank will match it (anybody ever used Orbitz this way — to see which airline is offering the best price on a flight you’re planning, and then buying the ticket direct from the airline to cut Orbitz out of the deal?).
Another problem — it’s one thing to provide a quote to somebody online, and another to deliver it on those terms. HomeAdvisor “best served those who fit the norm and fell within ‘plain vanilla’ loan qualifications,” Kelly says.
Mortgagebot LLC’s new Web site, Mortgage Marvel, acknowledges this issue, offering only loans to prime borrowers, CFO Dan Welbaum told me last month at the Mortgage Bankers Association convention.
http://www.inmantv.com/?p=93
At the other end of the spectrum, during the boom many mortgage sites made a killing delivering borrowers with crummy credit scores to lenders, because the lenders made more money on loans with high interest rates. It’s an interesting world we live in, where lenders will pay more for a lead on the borrower with the lowest FICO score.
Consumers have caught on, and according to Kelly, only 10 to 12 percent of mortgage loans are orginated online.
“The reluctance of consumers to accept online mortgages has been well-documented — they want their hand held through the process; they question the security; they fear a deluge of other product offerings,” he says. “But most of all, home-loan borrowers have shown that they like to click around in cyberspace for the best home-loan deal they can find and then walk down to the corner bank to see if their old buddy — perhaps the same individual who set up their checking, savings and home equity account — will match it. ”
Transparency may help address consumers’ fears about the honesty of online lenders, but how are you going to prevent potential customers from using you like Orbitz?
Sol | Nov 27, 2007 | Reply
Many online brokers and lenders already use the web to lock rates, communicate data and check on loan status. Those afraid of the web will become more confident just as ATMs and debit cards have.
I’ve compared orbitz, hotwire, priceline and travelocity and have found that going direct
often cost more. What I find most effective is start online and take to a local travel agency. It often works.
Zillow started out as wanting to change the industry. It has evolved to become a company that services the industry. They’re simply following what Housevalues has done but if history repeats then we already know the outcome.
Zillow is trying to becoming a Homegain transparency but attacking from the Homescape angle.
Only time will tell…
Kansas City | Nov 29, 2007 | Reply
I find Zillow’s site to be inaccurate and difficult to use and when I have listed information on there that they try and take control of the info. There are better sites out there.
retrove.com | Nov 29, 2007 | Reply
I agree. There is lots of room for improve in lending as they are still 1.0 lead capture models. Here is an example of lending 2.0 for consumers already. It’s an IGoogle widget that displays rates, allows users to calculate payment payment and compare monthly, yearly and life savings without providing personal information.
http://www.google.com/ig/adde?moduleurl=http://hosting.gmodules.com/ig/gadgets/file/118368724154882363472/refinancecalculator.xml
I think that is just a sample of things to come. Z has a good chance because they can tie in alot of info and I know that FNIS - Cyberhomes is looking at the same thing.
jdahleen | Dec 2, 2007 | Reply
Rich and his team are very smart and mortgages are a natural fit. I see this as a great opportunity for change in the mortgage space.
I think that this is also a perfect time to open a brand new mortgage company. I see opportunity and Zillow as a great partner.