Seeking a mortgage can spur onslaught

Applying for a mortgage preapproval is an exciting part of the homebuying process. That is, until you become inundated with calls from banks, mortgage companies and other agencies all vying for your business.

This is a result of what is known as trigger leads.

They are essentially a marketing tool that banks, mortgage lenders, insurance companies and other agencies use to identify potential customers. In theory, you could find a better deal because of it, but it can also lead to an influx of unsolicited and misleading offers.

“It’s one of those things that the consumer absolutely needs to be aware of,” said Richard DeGrace, senior vice president of 1st Colonial Community Bank in Mount Laurel. “I wouldn’t say trigger leads are an enemy, but they’re definitely a nuisance for the potential homebuyer that’s looking to get qualified.”

If you’re working to get preapproved for a mortgage – or don’t know why you’ve been getting so many calls after your preapproval – here’s what you need to know about trigger leads, as well as how to stop the calls.

When a mortgage lender or loan officer runs a credit check during the preapproval process, a hard inquiry appears on your credit report.

The national credit bureaus – the big three being Equifax, Experian and TransUnion – sell your information to other mortgage lenders, which will then use it to contact you with different potential offers.

“When we do a credit report, we do a hard pull – when we pull from all three credit bureaus – and then those companies sell those leads to other mortgage companies and, from what I gather, they’re sold to other agencies as well,” said Sarah Jean, a loan officer with Absolute Home Mortgage Corp. in Marlton.

The information that companies can obtain from trigger leads includes a consumer’s name, address, contact information and financial information like FICO credit scores and credit balances.

Not only do trigger leads cause consumers to receive an abundance of calls from companies, but DeGrace said they can cause a sense of distrust between the consumer and the lender that is handling their preapproval.

“When someone puts their information into our online application, I don’t initially run the credit anymore because I have to preempt them. It’s that bad. If I run their credit – which they’re giving me the ability to run their credit – some people think I’m selling their information,” he said. “I realized I had to start telling people what’s going on. It creates doubt, and I don’t want consumers to have doubts about me.”

Trigger leads can also result in consumers being lured into a mortgage company under false pretenses, Jean said. “I guess their thought is that clients are going to be able to shop rates, which is great, except what happens is there is so much bait and switch,” she said. “There’s companies saying that they’ll give someone a 4% interest rate, but what they don’t say is that there’s thousands of dollars behind that interest rate.”

DeGrace said that although it is legal for companies to buy targeted data from these three major credit bureaus, there is proposed legislation in Congress – known as the Protecting Consumers from Abusive Mortgage Leads Act – that would ban trigger leads altogether.

“If a person requests a report from a consumer reporting agency in connection with a credit transaction involving an extension of credit secured by real estate, such agency may not, solely on the basis of such request, furnish a report to a third party unless third party has submitted documentation to such agency certifying that such third party has the consumer’s consent or has a current relationship, relating to credit, servicing or other financial services, with such consumer,” the legislation reads.

If passed, the act – which was introduced on Feb. 7 by Reps. Ritchie Torres, D-N.Y., and John Rose, R-Tenn., – would allow prescreen reports to be used only if a company has a current relationship with the consumer in terms of credit, servicing and other financial services.

Luckily, there are ways to prevent or stop calls from trigger leads.

“You can alleviate that by going on the Do Not Call Registry, but it takes sometimes a month for the Do Not Call Registry to catch up, and these leads are being sold so quickly,” DeGrace said.

Both DeGrace and Jean said that if you’re thinking about getting preapproved in the near future, consider submitting your information to opt out of these calls now.

This can be done by visiting OptOutPrescreen.com, an official consumer credit reporting website that processes requests from consumers to opt in or opt out of offers of credit or insurance.

“OptOutPrescreen.com does expire after five years,” Jean said. “So every five years you’ll want to go back on and opt out of those calls.”

DeGrace said you can also register your phone number with the National Do Not Call Registry, which is managed by the Federal Trade Commission. Your registration on the site never expires – unless your number is disconnected and reassigned – and it will block unwanted calls from telemarketers, spam calls and, of course, trigger lead calls from banks, mortgage companies and other agencies.

“Legislation is getting involved because what they’re getting more and more of is homeowners complaining,” he said. “Most people don’t know about this process.”