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Editor’s note: In this three-part series, Inman News looks at how the changing market is impacting lead generation, how agents are competing for top spots on Google, and how the lending industry faces increased criticism of its use of trigger lists. (Read Part 1, “Survival of the niches: getting leads in a slow market,” and Part 2, “Google as a lead strategy.)

If marketing and search-engine optimization can help bring borrowers to a loan originator’s doorstep, leads let them go knock on doors, so to speak.

Since it’s much easier to close a deal with a person who’s actually in the market for a home loan, perhaps no lead holds more promise than those hot off a trigger list.

Trigger lists are generated by credit reporting agencies when mortgage lenders pull a potential borrower’s credit as part of the loan application process.

The three major credit reporting agencies are all willing to turn around and sell the names of these “prescreened” borrowers to other lenders within 24 hours.

In theory, it’s a win-win for everyone. Lenders can concentrate their sales pitches on people who are truly in the market for a loan, and borrowers who may not have shopped around for the best deal may get better offers from other lenders.

But trigger leads may be losing at least some of their appeal, as consumers grow weary of the practices of lenders who use them, and regulators and lawmakers worry about potential abuses.

Complaints by borrowers who say they are besieged with calls from lenders weeks or months after applying for a loan have regulators and lawmakers considering remedies, including bans on their use.

Instead of knocking on doors, originators who buy trigger leads often pick up the phone to contact prospective borrowers. As is the case when calling any third-party lead, they must first check that the person they want to contact is not on the national Do Not Call Registry.

Although the credit reporting agencies say they check the trigger lists they sell to mortgage originators against the do-not-call list, they advise those who buy the leads to do the same.

Last fall, the Federal Trade Commission filed suit against USA Home Loans Inc. and a telemarketing firm the company employed to qualify borrowers, alleging that they’d called consumers who were on the Do Not Call Registry. The companies settled the charges for a combined penalty of more than $500,000.

But the FTC says that other than enforcing violations of the Do Not Call Registry, and providing consumers the ability to opt out of all prescreened offers, it has limited powers under the Fair Credit Reporting Act to address complaints from consumers who say they’re inundated by phone calls.

In a recent consumer alert, the FTC said consumers can benefit from prescreened offers, because they “highlight other available products and make it easier to compare costs while you carefully check out the terms and conditions of any offers you might consider.”

The House Financial Services Committee, however, is expected to look at the use of trigger lists as part of a broader review of the practices of credit reporting agencies later this year. But some states aren’t waiting for Congress to take action.

On May 21, Minnesota Gov. Tim Pawlenty signed into law a bill that prohibits consumer reporting agencies or anyone else selling information obtained from an application for a mortgage loan, including the fact that a potential borrower has applied for a mortgage loan. Minnesota’s ban on selling trigger leads takes effect Aug. 1.

Pending legislation in Massachusetts, Senate Bill 232 would allow consumers to place a security freeze on credit reports, prohibiting credit bureaus from releasing any information from the report to a third party without express authorization from the consumer.

None of the credit reporting agencies — TransUnion, Equifax or Experian — responded to requests from Inman News to discuss the backlash against trigger leads, or whether they are any less useful to lenders because of it.

But according to the Consumer Data Industry Association, a trade group that represents the companies, some of the problems trigger leads are blamed for may in fact stem from the use of other types of leads.

Trigger leads typically contain contact information such as the applicant’s name, address and phone number. By law, they contain only general information about a person’s credit history.

A third-party lead-generation company may obtain additional information by going to a courthouse and pulling public records, including titles, which may contain specifics such as the interest rate on a loan, said Stuart Pratt, the director of the Consumer Data Industry Association.

That information is combined with the original trigger lead to provide details about a consumer that can be used to sell them loan products.

“We find there’s a blend of knowledge that comes to be associated with trigger leads,” Pratt said. When consumers get calls from aggressive sales people who seem to have intimate knowledge of their loans, trigger leads are sometimes blamed by extension, he said, because “of the fact that you’ve entered into a mortgage, and people are still trying to do business with you even though the loan has already been approved.”

The Trigger Lead Network, one of the top ranked providers of trigger leads in Google search-engine rankings, says it’s able to apply filters to its leads, allowing lenders to target prospective borrowers according to 35 criteria, including credit scores, bankruptcy status, loan-to-value ratios, and gender.

“We have all 50 states,” the company says on its Web site, and sells trigger leads from TransUnion, Equifax and Experian.

“There simply is no better lead service than this,” The Trigger Lead Network promises. “The source and integrity of this data is unmatched.”

An employee at the Fort Myers, Fla.-based lead provider refused to discuss the company’s business practices, referring questions to the credit reporting agencies. 

But the company’s Web site includes the following disclaimer about its data: The Federal Trade Commission “requires that we deliver only name, address and telephone numbers with all credit data orders. Those (criteria) you may select within fields such as credit score and/or mortgage balance, the individual records will not contain any associated information. This requirement protects you and others from the potential misuse of your prospects’ personal credit information.”

Call him old fashioned, said Harry Dinham, president of the National Association of Mortgage Brokers, but lenders have no business making offers of credit over the phone.

“I don’t really believe trigger leads are useful to brokers,” Dinham said. “I’m real old school — I started in the business in 1967, and when I hear of people telemarketing mortgages, I get concerned. How many good things have you ever bought in your life that came to you by somebody calling you on the telephone and soliciting you to do something?”

The use of trigger leads to market mortgage loans exploits a hole in the Fair Credit Reporting Act, Dinham said, which was intended to allow banks to solicit consumers for credit cards.

“When you are dealing with a $500,000 or $1 million loan, you should take the time to shop it,” rather than accept a loan offer over the phone, Dinham said.

NAMB maintains that selling trigger lists to third-party lead generators violates a provision of the Fair Credit Reporting Act that says only businesses in a position to make a firm offer of credit have the right to access such information.

If trigger lists fall into the wrong hands, Dinham said, they can be used by identity thieves to make “pretexting” calls in order to obtain confidential information. A scam artist could call someone who has recently applied for a loan, he said, and posing as the lender, ask for personal information like a Social Security number.

Lenders may also misuse trigger lists to engage in bait-and-switch tactics, Dinham said, promising one set of loan terms over the phone and delivering another in writing.

“If they want to do something (to market mortgage loans) in writing, we think that would be fine,” Dinham said of originators who want to use trigger lists.

But instead of simply allowing consumers to opt out of such offers — a process that the FTC says can take up to 60 days to take effect — Dinham said regulators should set up an “opt-in” system, in which only people who say they want to get such calls are eligible to receive them.

Pratt said used wisely, trigger lists remain a valuable sales tool for mortgage lenders.

“The lead is a tool,” Pratt said. “It is only going to be as good as the talents and the integrity of the lender which uses it. A good lender will have an approach to the consumer that’s appealing and appropriate.”

The credit reporting agencies take steps to ensure trigger lists are used properly, he said, including “salting their lists with audits” to ensure they end up only in the hands of companies that are able to make firm offers of credit. In cases where the credit reporting agencies are not selling directly to lenders, Pratt said, the “end user must have a relationship back to the national credit reporting agency where the lead is generated.”

In a time of industry consolidation, trigger lists may be the best hope for some small lenders.

“We know that with the shrinking of the mortgage lending marketplace — fewer home equity loans, the compression of home sales, rising foreclosure rates — that the size of the lending community is shrinking as well,” Pratt said. “I suspect a year from now, there will be fewer mortgage brokers and loan officers than there are in the market today.”

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