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"Banks Compete" Model of rate Shopping

I am sure lots of you know about this model of business. You go online fill out a form with your personal and loan information and Voila, in minutes you have 4 professionals who will quote you their best rates and you can compare. The problem is, you dont know these people from Adam and they very likely may not be professionals.

Here is an actual testimony of how it goes wrong. I just did an in house closing as a mobile notary. The borrower told me they used something like the model mentioned above and had around 10 brokers pulling their credit.

A lot of these shops that buy leads have "loan officers" without a lot of experience that they pay low percentage commissions or a very small salary to work these leads. These novice LOs will run the prospect through four or five automated underwriting programs with different lenders trying to find a fit and each time they run it, it pulls credit again.

I know we have all heard of the "shopping allowance" on inquiries to your credit score but this is not the first time that it has not worked correctly. The borrowers score dropped over 100 points so they were no longer a conforming borrower!

The client is livid, but had to do the transaction anyway, as they have relocated and had two mortgages and had to do the deal to get some cash out. They now have the ordeal of fighting with the bureaus to try and get their credit back in shape.

Heres what they said. "Wed never use a service like this again. None of the LOs would return our calls promplty. It took days to get a call back. Our credit got wrecked and it took almost 2 months from start to finish to get this deal done. Well only use someone locally from now on so if things get messy, weve got a name and a local address and a neck to wring if there are problems."

This should have been an open and close full doc conforming refi of an investment property. Instead it turned into a nightmare for these poor unsuspecting, trusting people.

It goes to show you that its not all about the rate.

If you want a loan officer who is a professional, who will do good work, is honest, can communicate effectively & in a timely manner and who knows his or her business, expect to pay a fair price for their service or be prepared for the consequences of the other model.

Most often, borrowers who enter their information online, are bombarded with calls from loan officers within the first 24-48 hours.

The best way to avoid the problems this poor borrower had is to seek referrals from family, friends or coworkers. If you need to use the Internet to locate a mortgage professional, search for a company in your local area and never let anyone run your credit until you are absolutely sure this is the company you are going to work with. A competent mortgage professional will be able to estimate your credit based on your explanation of your credit history. You can always run your credit report through one of the many online credit agencies. You can then provide this for a preliminary loan qualification analysis.


Generally speaking, websites that offer to have "4 or more banks competing for your business" are "lead" sellers. These websites main concern is to sell your information to other mortgage banks and brokers. To avoid having your information sold over and over and to avoid being called by mortgage loan solicitors for the next year to come, always make sure you are dealing with websites operated by mortgage professionals who are the ones actually working on your mortgage.

The long and short of this? When you contact a reputable, specialized brokerage such as ourselves, banks are still competing for your business, but instead of 4, we compare literally hundreds of lenders and programs to find you the best deal possible, with as little as one inquiry to your credit file. So instead of being flooded with dozens of "sales" calls from loan officers who have purchased your information from the lead marketer whose form you filled out, you can work with one team of seasoned professionals who can lay out your best options, and then make a decision.


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