Monday, February 25, 2008

Negative Equity Refinance Solution Proposed By OTS

It has been said by many recently that the mortgage crisis we're in is not a subprime crisis, rather -- it is a home value crisis. The core problem that many homeowners have "negative equity", having a higher mortgage balance than home value, prevents them from refinancing out of Adjustable Rate Mortgages or other high rate products, and sometimes ends in forced or voluntary foreclosure.

FT reports today that the OTS (Department of Treasury: Office of Thrift Supervision) is proposing a solution involving what they are calling "Negative Equity Certificates". In this solution, eligible borrowers would be able to refinance out of their current loans and into FHA guaranteed loans based on the current value of the home. The original lenders would be paid back part of their loans, and issue this Negative Equity Certificate for the short balance. This would be a lien against the property, like a second mortgage, but without interest. If or when the home is sold for more than revised value, the overage would be immediately applied to the original lender's Negative Equity Certificate lien.

The plan is refreshing insofar as it limits taxpayer exposure to credit crisis risk, and presents a win-win situation for borrower and lender with lenders' interests protected in the case the home prices recover.

Wednesday, February 13, 2008 and BankRate Mortgage Offering

Earlier this month, just prior to their February 5th conference call, Bankrate announced the acquisition of FeeDisclosure enables consumers to get price quotes on all fees related to the purchase, sale or refinance of a home, including mortgage broker fees, real estate agent fees, title insurance, home inspection, hazard insurance and appraisals.

Unlike Bankrate, who charges banks and lenders a per-click fee to display their interest rates on its rate tables, FeeDisclosure has been a subscription based service, charging its partipating vendors annually for the right to be included in their fee tables.

As a standalone, FeeDisclosure is limited in its appeal with little traffic and no information about the main-event of the mortgage shopping experience: mortgage rates. Bankrate certainly can deliver what FeeDisclosure lacks.

Can FeeDisclosure bring to Bankrate consumers the straightforward comparison shopping experience that they want?

I think there is work to be done: the FeeDisclosure model is open to problems related to vendors posting inaccurate or not-guaranteed pricing, and upon a visit to their site, their interface seems to confusing with multiple fee line items from mortgage brokers, real estate brokers, and wholesale lenders on the same transaction. A perusal of their site shows that in many ways it is still not ready for prime time with broken links, empty functions. Returning to the site and logging in brings an error screen, completing a request for quotes brings no response from lenders.

I suspect this acquisition is just one piece of the plan for improving Bankrate's offering and securing its place as the arguably the most successful consumer mortgage portal. The real challenge it seems continues to be balancing the need for transparent accurate pricing information with a meaningful and simple comparison interface.

Wednesday, February 06, 2008

LendingTree Affiliate Program To be Shut Down

LendingTree Affiliate Program participants got the below email today announcing (for most) an end of the CJ Affiate program. Although the email states that the program's cancellation may be temporary it speaks volumes about the current status of the mortgage lead marketplace: Strong consumer demand matched with tepid lender appetite.

Dear Publishers,
Due to the recent Federal Reserve rate reduction
announcements, the mortgage market has dramatically changed and a surge in the
volume of mortgage requests have caused LendingTree to reach its capacity.
As a result of this change, the LendingTree affiliate program will continue to
exist as an “invitation only” program. This means we will be contacting specific
affiliates to remain in the program. Unless you are personally contacted,
your LendingTree account will expire on February 13, 2008.
We hope to welcome you back into the program in the coming months once market conditions improve. Thank you for working diligently to promote the LendingTree brand and I hope you will consider LendingTree again.

Meanwhile, as of today LeadMarketWatch shows LendingTree having one of the worst conversion rates. For certain, at a 5.69% average 30 day application rate, LendingTree network lenders can't be making much money. Blame affiliates? Outpacing LendingTree are short-form affiliate fueled vendors such as LeadPoint, LowerMyBills and Quinstreet. Blame market conditions? LeadMarketWatch data shows only the individual conversion rates on leads sold to lenders, and in a refinance fueled market conversion rates should be shooting upwards, not drifting down. Something is wrong at LendingTree. One can hope that with Lebda back keeping shop, there is a plan behind all of this.