Lending Tree Falls Hard…Goes Boom

February 8th, 2011

tree being cut

One motto of Lending Tree is, “when lenders compete, you win.” Yes, I agree. But that should be expanded to be considered even somewhat accurate. If Lending Tree were my company I’d say, “when experienced, legitimate, local lenders compete, you win.” But then , I’d have just put myself out of business. So I guess I would not say that if I owned Lending Tree or some other “lead generation” website.

What do I mean?

The main problem with these sorts of lead generation websites is that there is a fee paid to the website by the lender and that fee is passed off to the consumer somehow. The fee is paid by the consumer either in fees or by accepting a lower quality loan officer. It is simply a fact that weaker lenders whom are unable to go out and source their own business through excellent reputations and business practices have to turn to a lead generation website.

By submitting your information to a lead generation site, you are virtually guaranteeing that you will be working with an inexperienced, low quality, out of state lender. The mortgage market is so stunningly complicated, you have to choose a lender based on experience, as well as cost. I know its enticing to shop solely by price, but that is dangerous in even the easiest of mortgage markets.

Why is it a problem to use a lead generation website?

When you are putting your name on legal documents and are putting up a deposit to buy a home, you cannot risk working with someone who may not deliver, may change the terms at the last minute, who is not local, and who is not accountable to anyone. That last part is important. If you work with a local lender, who was referred by a Realtor or friend who has used them, the lender has skin in the game and cannot afford to ruin their reputation by not delivering or by over-promising.

There is a cost?

Lending Tree says, “Lenders pay us for the chance to compete for your business. You won’t pay a cent for our services.” I hope I have outlined above how this is absolutely false. Losing your deposit, having your terms changed last minute, or being put through delays that cost you money is not a cost free process. And even if you only suffer poor service, isn’t that a cost of some sort?

It’s nice to see competition drive the price down, but not if it means using a lender that is unaccountable for mistakes, last minute pricing changes, and lenders who don’t know their product nor your marketplace. Last minute hassles are generated from sources like Lending Tree, just ask a Realtor with more than a few years experience.

Lending Tree crazy talk

Another outlandish claim that Lending Tree makes is, “customers save $293/month on average (savings may vary).” What? That is literally IMPOSSIBLE! Assume even a loan amount of $300,000. A Lending Tree lender would need to offer a lower interest rate by 1.5% to save the consumer $293/month on this loan! That means if the market is around 4.75% for a 30 Year Fixed rate, the Lending Tree lender would have to offer that same mortgage at 3.25%. Come on! Why would anyone even consider this website after seeing such an outlandish claim?

The pitch to lenders to join Lending Tree

Below is how Lending Tree appeal to mortgage lenders to convince them to sign up and start getting online leads:

•Highest-quality mortgage leads and highest-conversion rates in the online mortgage lead generation industry.
•Awarded “Best in Lead Quality” at the 2008 Online Lead Quality Summit.
•Best-in-class marketing support across all channels
•Experienced, dedicated account management support to help you manage lead quality and lead volume

I am NOT a lead, I am a client

It goes on and on. My take on this is that if I were a consumer I’d think, “I am NOT a lead, I am a client!” Consumers need to realize what goes on behind the scene to get them to choose a lender, and how they are thought of. I’d rather be thought of as an important client, rather than a “lead”.

Limited options

Last, it is misunderstood that these sorts of online lead generation websites offer the consumer hundreds of choices. Lending Tree offers only up to 5 options.

Using Lending Tree for a mortgage is like going to McDonald’s and expecting a top grade filet mignon, it will never happen. If you are willing to be subjected to the vagaries and possible mishaps of using lower grade lenders, then by all means consider one of these lead generation websites. The bottom line is that before considering entering your data onto a website like Lending Tree, if you are concerned about quality and execution, consider calling a local lender who is referred by someone you trust.

Brian Martucci is a loan officer for Capital Bank Home Loans, a division of Capital Bank, N.A. He has been in the mortgage industry since 1986 and has served in a number of roles, including loan processor, loan officer, mortgage broker, branch manager, and vice president. Brian Martucci – NMLS# 185421. His opinions do not necessarily reflect the opinions and beliefs of Capital Bank Home Loans or Capital Bank. Capital Bank, N.A.- NMLS# 401599. Click here for the Capital Bank, N.A. “Privacy Policy”.

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