Congress asked to crack down on mortgage “trigger leads”

You’ve probably never heard of a “mortgage trigger lead.” But as a consumer, you might be shocked to learn that in an era of massive data breaches and hacks — witness the Equifax debacle — they even exist.

So what’s a trigger lead? When you apply for a home mortgage or a preapproval, the loan officer pulls your credit from the national credit bureaus. One or more of the bureaus then convert the fact that you are shopping for a mortgage into a commercial product — a trigger lead — for immediate sale to competing lenders. This allows those competitors to contact you and solicit your business before you get locked into the lender to whom you’ve applied.

Trigger leads are created and sold super fast — often within 24 hours of your loan application. Out of the blue, your phone might ring and suddenly you’re the target of a new pitch from a competitor offering a deal that may be real, deceptive or no better than the one you’ve already been quoted.

Enough of these lead-driven offers are deceptive that an industry group, the National Association of Mortgage Brokers, last week began pushing a campaign on Capitol Hill for an outright ban. John G. Stevens, president of the association, which represents mid-size and small mortgage companies, told me that trigger leads sold by the national credit bureaus inevitably “expose borrowers to identity theft,” disrupt ongoing mortgage transactions, and open the door to a wide range of “unscrupulous” come-ons.

Consumers “don’t know who they’re really talking to,” said Stevens. “They don’t know whether to believe” what the caller is offering them, and they frequently are misled. Meridian Home Mortgage Corp., a Maryland lender, recently posted a recording of a voicemail that it says was an actual trigger lead call to a borrower that illustrates the problem. The caller “misrepresents who he is, where he is calling from and even the purpose of the call,” Meridian said. He identifies himself as “an underwriter” rather than a telemarketer and “falsely claims to be calling from Fannie Mae,” the government-backed home loan investor. The caller then says he’s following up on a “loan application” made to “our agency yesterday,” implying falsely that he already has the borrower’s basic information and simply needs to follow up with some additional questions.

“The sole purpose of trigger calls like this is to trick consumers into applying with their company,” according to Meridian. “Many [people] have been duped into allowing these lenders to pull credit and review their financial information. It’s only after speaking with their original lender that they realize they have inadvertently opened a credit file with an unknown entity.” (You can listen to the trigger pitch here.)

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The credit bureaus aggressively market trigger leads online to lenders and third-party brokers. TransUnion, one of the three major bureaus, claims it offers the “hottest leads,” allowing purchasers to “reach out” to borrowers “right when they are shopping” and “ready to act.”

Stevens’ group hopes to amend the “Protect Act,” a credit bureau bill sponsored in the House by Rep. Patrick T. McHenry, R-N.C., and in the Senate by Sen. David Perdue, R-Ga., to eliminate the use of mortgage trigger leads in connection with loan applications. The credit industry opposes the effort. Eric J. Ellman, senior vice president for public policy and legal affairs for the Consumer Data Industry Association, which represents the credit bureaus, told me that “mortgage trigger leads are a valuable tool” that can help “consumers save money,” especially those “who might not be as savvy a shopper” as others.

As to abuses, Ellman said “there are abuses in everything,” but you “don’t ban the practice” simply for that reason. Instead “you make sure there are guard rails in place” to protect unsuspecting consumers. These protections already exist, according to Ellman: Federal and state unfair and deceptive trade practice laws that make it illegal for marketers to “lie, cheat or steal” or charge usurious interest rates. Consumers who feel misled by marketers using trigger leads can file complaints with their state attorney general or the Consumer Financial Protection Bureau, he said.

Consumer advocates scoff at that defense and are critical of mortgage trigger leads. Ed Mierzwinski, federal consumer program director for advocacy group U.S.PIRG and a credit practices expert, argues that “it’s usually the bad guys who buy this stuff” and borrowers tend to be in the dark about their existence — and how they get used.