Mortgage lenders going after their share of what’s expected to be a smaller home loan originations pie this year and next can always do what their competitors are doing — buy online leads and banner ads and optimize their Web sites to show up higher in search-engine results.

Or they can connect with borrowers at an earlier stage in the home-buying process by establishing a presence on Web sites that provide consumers the information they are looking for: listings and valuations. Lenders can also supply such content themselves, although few do.

Mortgage industry consultant Stephen Bedikian, a partner with Los Angeles-based Real IQ Consulting, says that historically, the real estate and mortgage industries have used different approaches to bring customers to their Web sites.

To attract visitors, home lending sites like Bankrate.com, LendingTree and LoanWeb use rate tables, mortgage calculators and soft loan offers to consumers who provide details about themselves to attract visitors.

Real estate brokers and agents — and a growing number of independent sites that generate leads and sell ads — use listings and valuations to generate traffic.

As a result, with a few clicks of the mouse, consumers can find a house they’re interested in, get several (rough) estimates of its value, and obtain offers from lenders willing to finance the purchase. But not on one Web site.

The typical search for a home online might involve a visit to a Realtor’s Web site to search local MLS listings, followed by a stop at a site that uses public records of sales of similar houses to provide a valuation and, finally, a visit to a site that lets consumers solicit offers from multiple lenders.

Portals that offer not only valuations, but listings, are becoming more commonplace. But Web sites offering “one-stop shopping” — listings, valuations and financing — have been slow to emerge.

“As often as (real estate) brokers and mortgage lenders partner in the offline part of the world by forming affiliated business arrangements … you see very little of this online,” Bedikian said.

Real estate agents often have personal relationships with mortgage brokers, and real estate firms and lenders routinely create affiliated businesses arrangements in which they share in the profits of jointly owned companies. But most real estate brokers focus almost exclusively on listings on their Web sites.

“The notion from the consumer standpoint is that these two industries are intimately related,” Bedikian said. “Customarily, a real estate agent will say to a home buyer, “Are you prequalified or preapproved? If not, they point them to an in-house brokerage operation. And from a consumer standpoint, as long as (financial relationships between the companies are disclosed) and it’s competitive, that’s OK.”

But online, Bedikian said, “There has been real limited integration in terms of creating a site that brings it all together.” All the more surprising given the success of “one-stop” Web sites in the travel and auto sales industry like Expedia and Kelly Blue Book, he said.

So what’s holding lenders back? Is it a case where, like the old Reese’s Peanut Butter Cup ads (where the complimentary properties of chocolate and peanut butter are discovered only by accident), nobody has realized the potential to sell home buyers mortgages using online listings and property valuations? Not likely, considering the fact that big lenders and the lead-generation sites that serve them are among the biggest advertisers on portals that offer listings and valuations.

Although there are technical difficulties in providing consumers with firm loan commitments online, the biggest obstacle to the “one-stop-shopping” real estate Web site may be the fear of running afoul of regulators, said Gary Lacefield, president of Texas-based Risk Mitigation Group.

Lacefield said worries about violating the Real Estate Settlement Procedures Act, or RESPA, are a legitimate but by no means insurmountable obstacle to mortgage brokers partnering with real estate firms online.

“If you look at the future of the settlement services business, you’re going to see more of these one-stop shops,” Lacefield said. “There is no prohibition on these companies working with each other, but they must have sound affiliated business arrangements in place, and be able to justify any payments in the agreements.”

The biggest issue, Lacefield said, is being able to demonstrate that a lender is paying fair market value for any marketing done on its behalf by a real estate company (and vice versa).

“A lender may pay a real estate company $3,000 a month for marketing, but what are they getting?” Lacefield said. “Does it represent true market value?”

Lacefield is a former U.S. Department of Housing and Urban Development investigator who now trains HUD investigators on RESPA and fair-housing rules and regulations. He said that if regulators aren’t convinced that lenders are paying the fair market value for marketing done on their behalf, that could lead to charges that the real estate broker is making referrals in exchange for illegal kickbacks.

Marketing costs must jibe with those for other industries — not the results of the marketing effort — Lacefield said. “RESPA cares nothing about results — you can’t pay for results like the rest of the civilized world. There can’t be anything that would lead someone to believe it’s for the referral of business. You can’t underpay, and you can’t overpay.”

Risk Mitigation Group uses proprietary software to help companies calculate the market value of joint marketing programs, based on local market conditions, the size of the companies participating, and even such details as the volume of foot traffic at a business.

“There is some science involved in it,” Lacefield said. “The reason a lot of people don’t do it (joint marketing) is they fear the RESPA police.”

Many firms rely on lawyers for opinions and, because few law firms are up to speed on RESPA issues, those that can claim experience sometimes charge exorbitantly, Lacefield said.

“A gentleman called me last week from California and said he talked to one person who was going to charge him $55,000 to review his marketing plan,” Lacefield said. “We have a Realtor consultation program that’s pretty inexpensive. We can advise people how to go about setting these programs up that is very friendly for a broker with three or 300 agents.”

Jack Williams, president of the California Association of Mortgage Brokers, said it’s not technological or legal issues that stand in the way of more integrated real estate Web sites, but the relationships between individual real estate agents and mortgage brokers.

A real estate broker’s Web site may carry listing of dozens of agents, and each agent may have a different mortgage broker they prefer to work with, Williams said.

“Real estate agents are really proprietary — once they find loan officer that does a good job for them, they stick with them,” he said. “The agent at the next cubicle may be working with a different (lender) because they have a good relationship with them, or know them personally.”

Real estate brokers are inclined to leave it up to their agents to decide whether to post information or tools that would help a home buyer to apply for a loan through their site, Williams said.

But Lacefield said that because RESPA enforcement has been stepped up in recent years, real estate brokers should pay close attention to the arrangements their agents form with mortgage brokers.

“There are so many one-on-one agreements out there,” Lacefield said. “The agents don’t want to give those up, and sometimes they don’t want their brokers to know about them. The people interested in keeping on the straight and narrow are the brokers sponsoring these real estate agents.”

Williams is also skeptical that information provided by consumers over the Internet can return reliable loan offers. Home loans are more complex and come in a greater number of types than auto loans, he said, and consumers need to meet face-to-face with lenders to determine the loan that’s the best fit for them.

“I’m not saying it would be an impossible task — (Web-based offers) can maybe give a home buyer some sort of scenario to look at, but in the final analysis they are still going to have to sit down with mortgage broker, and run through the credit report,” Williams said.

Confounding factors such as a bankruptcy or money owed to the state for back child support, he said, “can give a false reading of what they would qualify for, and what their monthly payment would be.”

Williams also thinks lenders have more to gain from such partnerships than real estate agents.

“I just don’t think the relationships between the real estate agents and the brokers are that strong,” he said. “The brokers would love to get in. But the real estate offices are hard to get into. A lot of them don’t want to get into the loan process. They say, ‘I don’t know that, I don’t want to know that.’ They’ll put your name on the Web site, but they don’t want to muck it up because all they care about is getting the customer, getting the listing.”

Seattle-based Broker John L. Scott owns Response Mortgage Services Inc., but provides links to information about home financing on a separate Web site.

Trulia Chief Executive Officer Pete Flint said “applying the process of one-stop shopping as seen in other verticals to the real estate industry doesn’t work in the same way,” because, “the real estate process is not about one-stop shopping. It’s a very long and complex process.”

Flint said real estate portals like Trulia must be focused “100 percent on what they do best,” but said he hasn’t closed the door on such projects.

The company’s goal is “to help consumers make better real estate decisions,” Flint said. “Does that mean financial services? Possibly it does.”

A Redfin spokeswoman said the company “is looking to automate the entire real estate process, from today’s finding, buying and selling a home to future services such as mortgage, title and escrow. However, we do not have information or timing to disclose yet.”

Jeff Somers, the director of agent services for the popular valuations site Zillow, said that other than advertising, lenders’ best bet for making use of the site for marketing is the new wiki, where they can publish advice to consumers.

“In the spirit of Web 2.0, they must do it an authentic way — you are looking out for their interests, not making a blatant pitch,” Somers said.

Companies like LendingTree and Bankrate are using banner ads on the wiki to embed mortgage calculators offering mortgage quotes on the site.

“Some folks might look at that and not realize it’s a banner ad,” Somers said. “We love the approach they are taking, because it offers value to customers.”

Perhaps its no surprise that it’s lenders — and lead-generation sites that cater to lenders — who are taking the first steps toward using listings and valuations to market home loans.

Bedikian cited the real estate Web site built by one of his clients, Bank of America.

Bank of America’s Real Estate Portal provides valuations by First American Real Estate Solutions, listings in most states on the East and West coasts and Texas, Kansas, Missouri and Illinois, (plus homes Bank of America owns through foreclosure) and, of course, borrower tools including a customized rate calculator.

Another company moving in the “one-stop-shop” direction is LendingTree LLC subsidiary RealEstate.com, which is rolling out a redesigned site Jan. 25.

The revamped RealEstate.com will feature “find it,” “value it” and “finance it” tabs, with current interest rates for the markets consumers are interested in, said Kimberly Gorsuch-Bradbury, senior vice president and general manager, portal and networks, for RealEstate.com.

RealEstate.com, a licensed real estate broker, will provide referrals to LendingTree.com.

“We take RESPA extremely seriously,” Gorsuch-Bradbury said. “We do absolutely spend a lot of time thinking about RESPA and what it requires people to do.”

Because LendingTree generates traffic from marketing it does through many different sites, including MSN, Yahoo and Bankrate, “it’s very easy for us to calculate what the fair market value is” of marketing provided by RealEstate.com for LendingTree, she said.

Although Bankrate has made public statements about moving in a similar direction, a spokeswoman said the company had no further comments at this time.

Source:

http://inman.com/inmannews.aspx?ID=62013