As the questionable practices employed by some mortgage lenders during the housing boom come under public scrutiny, lenders who can position themselves as consumer-friendly expect to benefit from borrowers’ heightened skepticism.

Finding the best deal for their customers may generate smaller profits on a per-loan basis, the thinking goes, but they’ll win more repeat and referral business.

As the questionable practices employed by some mortgage lenders during the housing boom come under public scrutiny, lenders who can position themselves as consumer-friendly expect to benefit from borrowers’ heightened skepticism.

Finding the best deal for their customers may generate smaller profits on a per-loan basis, the thinking goes, but they’ll win more repeat and referral business.

One such company is San Francisco-based LoanInsights Inc., which claims to have developed an online search platform that gives consumers access to more than a dozen lenders’ wholesale rates and guidelines.

The site allows consumers to query lenders much the way mortgage brokers do — plugging in different loan types and down-payment options to see offers they are likely to qualify for.

“The technology basically automates the function of a mortgage broker,” said Jonathan Strike, LoanInsights co-founder, president and chief executive officer. “The benefit for consumers is being able to shop their profiles against major lenders’ programs in a matter of minutes.”

Unlike lead-generation sites, prospective borrowers don’t have to provide identifying information, and their credit isn’t pulled until they’re ready to contact a lender and actually apply for a mortgage. That means they won’t face the barrage of sales pitches that can follow visits to lead-generation sites that simply sell contact information to lenders.

“There’s a lot of confusion in the market — people are concerned about what their mortgage options could be shopping online,” Strike said. “We are the first company … to be the consumer’s champion.”

Strike said it’s more efficient to let consumers do the preliminary work, so LoanInsights can offer fees 25 to 50 percent below the industry average. Borrowers are charged what amounts to a flat fee of 0.5 to 0.75 points depending on the size of the loan, he said.

“It’s essentially a flat fee,” he said. “We have to meet certain minimums, but as the loan amount scales up, we’ll reduce the points we charge.”

If borrowers want to reduce their closing costs and pay a higher interest rate, they can restructure the loan that way. The LoanInsights search platform also allows borrowers to find the best deal on first and second loans from different lenders — a valuable tool for borrowers seeking to avoid higher interest rates on jumbo loans, Strike said.

LoanInsights is licensed to broker mortgages in Washington, California, Ohio and Kentucky, and plans to expand into Massachusetts, Virginia, Maryland and Washington, D.C., Strike said. After launching in beta test mode in 2006, the company conducted a “soft launch” in March and is currently promoting an official launch.

Strike said the site relies on referrals and partnerships with other sites, including Movoto, a search tool for California home buyers.

Most LoanInsights users are “pretty tech-savvy,” Strike said, making repeat visits to the site to test multiple scenarios for buying homes at different price ranges and with varying down payments.

Borrowers have complained about “bait and switch” tactics at some other online mortgage sites, saying they’re not always able to lock in the low rates offered. Strike said the loan pricing consumers get from LoanInsights will be dependable, because users input the same information mortgage brokers use to shop lenders, including credit history, monthly income, liquid assets, monthly debt payments — nearly three dozen factors in all.

“Our system is designed to not show rates or products for which they won’t qualify,” Strike said.

“With everything going on in the industry and all the bad press, people are skeptical of online services,” Strike acknowledged. But “once a consumer goes through our process and sees our results, and our originators explain what the results mean, they get a lot more comfortable.”

BuySide Mortgage

In Chicago, BuySide Mortgage employs “loan coordinators” to place borrowers in a loan — salaried workers who are paid bonuses based on customer satisfaction, instead of how much profit the loan they arrange for their clients will generate for lenders.

In fact, loan coordinators can be paid bonuses whether their clients ultimately close on a loan or not, said Joseph Fox, chief executive officer of BuySide Mortgage’s parent company, Iggys House.

“You’re not going to get a guy who was working for $200,000 last year for $40,000 or $50,000,” Fox said of the company’s loan coordinators. “But I don’t want that person. I want the service-oriented person that understands the loan programs, that did the handholding, but hasn’t been slogging through the commission minefield. I don’t want the ex-commissioned person.”

Iggys House is also the parent company of BuySide Realty, a real estate broker that refunds 75 percent of buyer broker commissions received from sellers back to the buyer.

As an affiliated business, BuySide Mortgage benefits from referrals from BuySide Realty. That lowers its customer acquisition and overhead costs, Fox said — savings that are passed on to consumers.

“A lot of (loan originators) will buy leads from LendingTree or HomeGain,” Fox said. “We don’t do any outbound solicitation. It’s all about being there to service the customer when the customer wants.”

The “seamless” relationship between BuySide Realty and BuySide Mortgage has been “fantastic,” Fox said, with the mortgage side of the company recently helping salvage two deals where buyers lost their financing when the original lender closed its doors.

Fox acknowledged that affiliated business arrangements have been controversial in the title insurance industry — critics say they are used to steer consumers to more expensive policies. “People don’t shop title,” Fox said in defense of the affiliated business arrangement he’s created. Consumers do shop mortgages “big time,” Fox says, noting that “you can shop on 100 mortgage Web sites every single day.”

Borrowers are informed that the two companies are sharing profits, as required by the Real Estate Settlement Procedures Act, or RESPA.

Fox welcomes BuySide Mortgage’s clients to exercise that right. “We have no problem saying get our free pre-approval, check other rates, and as long as it’s apples and apples, we feel we’ll be right there,” he said

BuySide Mortgage began brokering loans in California earlier this year, and this week announced an expansion into Florida.

BuySide Realty represents buyers in six states — California, Florida, Illinois, Georgia, Virginia and Washington — and plans to be active in Texas by the end of the year, Fox said. BuySide Realty employs about 20 licensed, noncommissioned agents, including those who service Georgia and Virginia from a call center in Chicago.

In addition, Iggys House Inc. operates, where sellers and agents can post photos and videos of their homes, and Iggys House Realty, Inc., which offers sellers free MLS listings and free placement on in 20 states.

The companies under the Iggys House umbrella are all set up to win repeat and referral business.

“People will continue to use us, and refer us to their friends,” Fox said. It’s not necessarily a formula for rapid growth, but “If you grow fast, you can die fast. If you grow slowly, you have a greater chance of survival over the long run.”

For now, BuySide Mortgage is a broker, but Fox said he plans for the company to become a lender next year, so it can create new loan programs. Although declined to provide further details about the planned loan programs, Fox said they will be designed to benefit the consumer.

Upfront mortgage lenders

Any mortgage lender or broker can claim to be looking out for their clients’ best interests. Jack Guttentag, a syndicated columnist who writes about mortgage lending, has created a set of criteria he thinks are essential for such claims to hold weight.

Guttentag defines “upfront mortgage lenders” as companies that provide prices online, disclose all lender fees including points, origination fees and fixed dollar fees, and guarantees them to closing. He says upfront lenders disclose all third-party fees, provide clear explanation of lock requirements (including payments), and disclose how loan officers are compensated.

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