My first impression of Mortgage Marvel (MM) was that it was a multi-lender shopping site, which would make it the fourth new one I have reviewed in 2008; the others are Loan.com, Mortgage Grader and Zillow Mortgage. My second impression was that MM was more of a referral site than a multi-lender shopping site.

A multi-lender shopping site is one on which the user can get all the information required to select the best deal from multiple loan providers, and apply for the loan, on that site alone. The site is self-contained in that it at least purports to provide sufficient information to allow the borrower to make a rational choice without going anywhere else.

A referral site, in contrast, is a portal to the sites of the individual loan providers that it lists. Referral sites are designed to provide just enough information to induce the user to visit individual lender Web sites, where the selection decisions will be made. Referral sites can list hundreds or even thousands of loan providers.

MM has one feature that I look for in a multi-lender shopping site: It protects the user against "lowballing," which is the widespread practice of quoting an unrealistically low price to land the client, then finding a reason to raise the price later. Borrowers using MM can always check their posted price on the lock day.

But MM lacks many other essential features of a good multi-lender shopping site. One is clarity regarding the assumed characteristics of the transactions that are priced. The prices shown by MM apply only to borrowers with good credit who can fully document their income and assets, but this is not stated anywhere.

A good shopping site should also help the user determine which lender offers the best deal. The deal includes lender fees, but those shown on MM are intermixed with third-party fees, and separate totals are not provided. In addition, some of the lender price quotes are for 30-day lock periods, while others use 60-day periods.

Comparing prices on adjustable-rate mortgages (ARMs) is particularly difficult. MM does not report the index used by the ARM in adjusting the rate, the margin that is added to the index to determine the new rate, or caps on rate changes. MM refers the user to the lender’s site for "Additional Information About ARMs," but that is a fruitless quest. Nine of the 10 I checked had nothing, and the 10th had nothing useful.

The mortgage payment shown on MM includes mortgage insurance where it is required, but the amount is not broken out. The only way I could determine whether or not mortgage insurance was required was to calculate the payment of principal and interest and subtract it from the total. Many users don’t know how to do this.

Another feature that I look for on a multi-lender shopping site is protection against overcharges on lender and third-party fees. Many Internet-based lenders, including all Upfront Mortgage Lenders, guarantee their own fees. On MM, in contrast, lender fees are shown as estimates. There is no way for a user to know whether or not the lender will stand by the fees shown or raise them at closing when it too late for the borrower to back out.

Third-party fees on MM are also vulnerable to abuse. Among 10 lenders estimating the title insurance charge on my $400,000 ARM in Valley Forge, Pa., seven quoted $2,750, one quoted $2,329, one quoted $2,123, and one quoted $700! The last is clearly a mistake, but whether it was a deliberate mistake I don’t know. The other two lenders with lower prices may have negotiated deals for their customers, which should earn them gold stars. On the other hand, these firms may be "lowballing" the price to make their offers on MM look better, and revert to a higher price at closing. The borrower doesn’t know which explanation applies, and clearly MM doesn’t either.

As a referral site, MM looks better. It has only about 15 lenders, but that’s enough. All the lenders use the same format to display mortgage information on their sites, which makes it easy for users to go from one to another. Compared to other referral sites, that’s a plus. The lenders are mainly credit unions, plus a few small banks. For someone who has decided to borrow from a credit union, which in the current state of the market is not a bad idea, MM could be a good place to start.

The writer is professor of finance emeritus at the Wharton School of the University of Pennsylvania. Comments and questions can be left at www.mtgprofessor.com.

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