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

Mark Warner, the chief executive officer of RealEspace, explained a different approach to providing transparency in mortgage lending through the company’s RateWindow tool.

RateWindow is a widget that real estate brokers and agents can embed on their Web sites to provide information on loan programs and pricing offered by wholesale lenders. RealEspace claims the widget helps consumers comparison shop by revealing the loan originator’s fees, including yield-spread premiums, which are rebates lenders pay on loans that carry higher interest rates (see story).

Another aspect of the homebuying process that sometimes gets less attention — the provision of settlement services like title insurance — is the focus of another company that cites transparency as its goal.

La Jolla, Calif.-based ClosingCorp Inc. recently rolled out a widget that allows consumers and real estate professionals to calculate closing costs by querying a database of more than 140,000 companies to obtain fees and quotes for settlement services ranging from title insurance to home and pest inspections.

Users enter information about a transaction including property location, purchase price and loan amount, and the SmartClosing Calculator widget computes the fees, charges and taxes that lenders are required to include on the good faith estimate (GFE) provided to mortgage applicants.

The company estimates consumers can save $300 to $1,500 per transaction by shopping for the best deal on settlement services (see story).

The same capabilities are offered at ClosingCorp’s Web site,, which received a 2009 Inman Innovator Award for "Most Innovative New Technology" during the Real Estate Connect conference on Friday (see article).

"Most closing services haven’t migrated to the Web — we’re working to change that," said ClosingCorp CEO Anthony Farwell.

It’s a business "that has not had the benefit of much transparency," Farwell said, despite the fact that it’s not exactly a cottage industry. Farwell said ClosingCorp’s own research suggests closing and settlement services generate 100 million transactions a year and $50 billion in revenue.


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