To the National Association of Realtors and the National Association of Mortgage Brokers, they are one of the scourges of the current marketplace: New home loan shoppers continue to be deluged by dozens of telephone calls within 12 to 24 hours of making an application for a mortgage.
The callers frequently claim that they can provide the home buyer with a better interest rate or lower fees than what was quoted by the loan officer who took the application the prior day. Sometimes they misrepresent themselves as being associated with the same lending organization the home buyer applied to, and are merely following up with a superior deal than the one offered the prior day.
But now the government agency with regulatory power over marketing of credit, the Federal Trade Commission, says it lacks the statutory authority to ban so-called "trigger lists" as long as they contain a "firm offer of credit."
Trigger lists work like this: When a home buyer applies for a mortgage, the broker or loan officer pulls the applicant's credit data, typically through a triple-merge report from the three big credit bureaus, Equifax, Experian and Trans Union. The bureaus then remarket that inquiry as a hot lead to third-party vendors and others who sell them to lenders willing to pay up to thousands of dollars a month for them.
The lists are customized to purchasers' detailed specifications. For example, you could order the names, addresses, and phone numbers of all new mortgage applicants in Chicago, Dallas, Los Angeles and Denver who have FICO scores between 620 and 660, current mortgage balances of between $200,000 and $300,000, and credit card balances of $5,000 or more a month.
Marketers receive the hot lead lists electronically within 12 to 24 hours of the application, so the targets are very fresh. Though telemarketers are not supposed to call consumers' phone numbers on the National Do Not Call list, Ginny Ferguson of the National Association of Mortgage Brokers says that rule often is not followed.
Ken Trepeta, a regulatory counsel for the National Association of Realtors, says trigger lists are a problem for his members because they "confuse the home buyer," and have the potential to "knock pending sales off the tracks" when the telemarketers' loan offers of lower rates later prove to be bait and switch.
Both NAR and NAMB have complained to federal authorities and to Congress about the practices, arguing that telemarketers of mortgages are not capable of making "firm offers of credit." Harry Dinham, president of the NAMB, says a true firm offer on a mortgage can only be extended after a lender does an appraisal of the property and obtains key personal information about the applicant's employment, income and assets.
"These are not firm offers at all," he says. Plus they open a "gaping hole" in the system of privacy of personal data. In effect, companies who have no legal right to be in possession of a consumer's credit report information are being granted access to it with little or no regulatory oversight. Dinham wants prescreened mortgage offers limited to written pitches, so home buyers have an opportunity to read the fine print and understand what is being marketed,
The FTC's consumer alert did suggest a remedy for home buyers who do not wish to be bombarded by phone calls the day after applying for a loan: Before making an application, consumers can opt out of the prescreened list marketplace altogether by calling 1-888-5-OPTOUT, or by going online to www.optoutprescreen.com. In both cases, consumers will need to provide their Social Security numbers to confirm their identities.
On a related front, the chairman of the House Financial Services Committee, Rep. Barney Frank (D-Mass.) told the annual legislative conference of the NAMB last Tuesday that he plans to hold congressional hearings on trigger lists and other mass market uses of consumers' private credit data.
