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Consumers getting power to shop

More to transparency than 'turning on the lights'

SAN FRANCISCO — There’s a lot of talk about providing more transparency to consumers in real estate transactions, but delivering on those promises can be a complex undertaking, according to online providers who are attempting to crack the "black box" in lending and settlement services.

"Transparency is not as simple as turning on the lights," said Dave Gibbons,’s director of community relations, and the man responsible for "keeping the peace" on Zillow Mortgage Marketplace.

The biggest mistake that’s made when providing consumers with access to information previously hidden from view is the potential that it will create confusion, rather than clarity, Gibbons said in a presentation at the Real Estate Connect conference in San Francisco.

The Zillow Mortgage Marketplace — which allows consumers to submit anonymous requests for loan quotes to thousands of mortgage originators — offers algorithms employing "smart math that makes sense of the true cost of a mortgage," Gibbons said.

An important consideration in choosing the type of loan, for example, is how long the buyer intends to stay in the home, Gibbons said. While adjustable-rate mortgage (ARM) loans have been pilloried in the press for exposing some borrowers to "payment shock" when their rates reset, they may still be the best deal for homeowners who don’t plan to stay put for long. Zillow Mortgage Marketplace offers tools that allow consumers to weigh such considerations, Gibbons said.

Once they’ve decided on the type of loan they want, the Zillow Mortgage Marketplace not only allows consumers to compare the rates and fees offered by loan originators, it lets consumers see reliability ratings provided by other users.

To deter bogus ratings intended to pump up — or tarnish — a loan originator’s scores, Zillow employs a "closed-loop" feedback system that allows only those consumers who have ordered quotes from Zillow to submit ratings.

Leaderboards allow consumers to see the top-ranked lenders on Zillow Mortgage Marketplace, providing a further incentive for loan originators to be on their best behavior in their dealings with consumers.

Gibbons said another aspect of the Mortgage Marketplace’s "user-powered quality control" is the ability of lenders to see the quotes offered by competitors and to flag suspected "lowball" offers that omit fees.

"When we launched, this was the first place in the mortgage industry where lenders could see what each other was doing," Gibbons said. While consumers may not realize they are being lowballed until they get to the closing table, "show (loan quotes) to lenders, and you see these things (flagged offers) all day long," he said.

If loan originators can’t justify a quote that’s been flagged to Zillow, they end up in a "penalty box" for a week and can’t get requests for quotes from consumers. If they can’t stay out of the penalty box, "they are off the market for good," Gibbons said. …CONTINUED