Picture this: You apply for a new home loan from a local mortgage company on a Monday afternoon. By Tuesday morning, you're suddenly getting unsolicited phone pitches from out-of-state lenders who seem to know a lot about your personal finances:
Your credit scores.
Your outstanding credit-card balances and other revolving credit accounts.
The approximate market value of your home and how much you owe on it.
Your home address and, obviously, your phone number.
Thousands of loan applicants around the country are receiving uninvited pitches like these, sometimes just 12 hours after getting a mortgage quote. But now a major mortgage industry group is planning a campaign to put a damper on the practice.
"There are very serious privacy, identity-theft and bait-and-switch issues involved here," says Roy DeLoach, executive vice president of the 27,000-member National Association of Mortgage Brokers.
"It's outrageous that simply applying for a home loan should open up a person's sensitive personal information" to prying eyes anywhere, literally overnight, DeLoach said.
The practice targeted by the mortgage brokers is known in the industry as "trigger list" marketing - a warp-speed version of the "prescreened" credit-card offers you routinely get in your mailbox.
The "trigger list" works like this: When your local mortgage company checks your credit to provide you a rate quote, one or more of the national credit bureaus take that inquiry and essentially turn it into a marketing product.
So-called "lead generator" companies and some lenders are eager to know the identities of people who are in the process of shopping for a mortgage - and they pay the credit bureaus for those hot prospects. Generally, the prospects have to fit credit and geographic profiles that the lenders have set in advance. For example, one customer might only want the identities and contact information of people in the Los Angeles area with FICO credit scores above 700 who have applied or inquired about a jumbo home mortgage within the past 24 hours.
Another might only want the credit and contact information of Washington or Chicago residents who applied for a zero-down-payment loan no more than 12 hours ago. The fresher the information, the better, say marketers.
The credit bureaus defend their right to sell applicants' personal financial information, arguing that it is a zippier form of marketing "prescreened" target prospects lists for credit offers - something they've been doing for years.
Tim Summers, a vice president at Experian, one of the three dominant national credit bureaus, said in an e-mail response that his company's "Prospect Triggers" program "provides consumers with choice and potentially significant cost savings by delivering relevant information at the decision-making point instead of weeks after a mortgage lending choice has been made."
Summers said the program meets "all requirements" under federal credit and privacy statutes.
But the National Association of Mortgage Brokers doesn't agree. When credit bureaus sell overnight trigger lists to third-party lead generators, the brokers argue, they fail to comply with a key provision of the Fair Credit Reporting Act: that anyone receiving consumers' personal information must be in the position to make a "firm offer of credit" or have previously received permission from the consumer to obtain credit file data. Third-party lead generators obtain no permission and are in no position to make any credit offers, firm or otherwise.
The brokers also contend that even lenders who obtain trigger lists might not be in a position to make the firm offers that the law requires. A firm offer for a mortgage is vastly different from a firm offer for, say, a credit card. The mortgage process is more complex, and rates and fees are more difficult to quote on the basis of a credit score alone.
To make a firm loan quote, says DeLoach, "you need to know a consumer's income, you need to have an appraisal" - you need to know a lot more than the telephone marketers have in hand.
The biggest problem, however, might be the confusion that overnight trigger marketing brings to the mortgage business. Your local lender or broker quotes you one rate and estimated fees. But now one or more outside lenders - whose reputation for honesty or service you know nothing about, and who are in possession of your personal financial data without your permission - intervene and offer a lower rate.
Are the rate quotes for real? Or will they morph into costly bait-and-switch deals weeks or months from now?
You really can't know. But what you can do is remove yourself from all potential trigger list come-ons by opting out.
Much like the federal Do Not Call program, you can opt out of prescreened offers by going online to www.optoutprescreen. com or by calling this toll-free number: 888-567-8688.