Executives say brokers will benefit ‘immensely’ from potential move
The inclusion in a national defense bill of an amendment seeking to ban mortgage “trigger leads” has been welcomed by the Broker Action Coalition (BAC), whose CEO and co-founder Katie Sweeney (pictured, top left) described the controversial practice as “abusive and often predatory.”
That proposal addresses the much-criticized generation of leads and sale of customer data by major credit bureaus to lenders when a borrower applies for a mortgage, and if implemented would see the practice prohibited.
In comments to Mortgage Professional America, Sweeney said the BAC had supported the legislation from the outset, and that reform had long been needed when it came to the practice of trigger leads.
While the Fair Credit Reporting Act, written in the 1970s, paved the way for the use of trigger leads, Sweeney said the mortgage industry and consumer homebuying experience had evolved “well beyond” those days, and expressed optimism at the prospect of the amendment’s passage.
“Given that the NDAA [National Defense Authorization Act] is one of the only pieces of legislation that passes every Congress, attaching this bill gives it the best chance of moving forward and providing some relief from the unsolicited sale of consumer data when looking to purchase or refinance a home,” she said.
Brokers stand to benefit “immensely” from trigger leads being outlawed, BAC chief advocacy officer and co-founder Brendan McKay told MPA. He said it would mean clients no longer being “hounded” by phone calls and texts from solicitors when the mortgage process begins, as well as communicating improving and confusion decreasing during the mortgage journey.
Under the current arrangements, it’s often the case that consumers incorrectly assume their loan officer sold their information when they begin to receive trigger lead solicitations, McKay said. “It makes sense on the surface – their loan officer did something and then something else happened. It’s a logical conclusion, but it leads to immediate distrust. That confusion stops overnight with the passing of this bill.”
The practice has also drawn criticism for allowing credit bureaus to sell consumer data to lenders without the applicant’s direct consent, another shortcoming McKay said the new legislation would correct.
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Controversial practice a long-standing source of mortgage industry ire
Trigger leads have long remained a bone of contention for brokers across the country. Sweeney noted that the issue was far and away the most important legislative matter identified by brokers surveyed by the BAC upon the organization’s launch.
That’s led to the Coalition conducting more than 210 meetings since the beginning of this congressional session discussing the practice, she said, and the best way to reform the current rules.
The BAC’s advocates have sent tens of thousands of letters to their representatives asking for support, according to Sweeney. “Our approach is a little different than many of our industry peers in that we represent the perspective of the consumer and the originator who is often fielding concerned phone calls from those consumers,” she explained.
“We’re able to bring real world examples directly from the districts of prominent elected officials to show them how their neighbors back home are being impacted by this misleading and often overwhelming practice.”
The trigger lead amendment has been included in the manager’s package of the NDAA – but a version of the bill which doesn’t feature that portion has already been passed by the House.
Both chambers are scheduled to meet this month to try and match the two versions of the bill as closely as possible, with Sweeney hoping for a strong push by mortgage and real estate professionals to get the amendment over the line. “Everyone in the housing industry needs to complete a call to action emailing their member of Congress now,” she said.
BAC keeps strong focus on FHFA’s TPO surcharge
McKay highlighted another current area of regulatory concern for the BAC: namely, a 15-basis-point surcharge on all third-party originating (TPO) loans by the Federal Housing Finance Agency (FHFA), the majority of which are wholesale mortgages.
The FHFA views those loan types as riskier than retail direct – but McKay said a recently-completed survey conducted by the BAC shows that to be an incorrect view. “Over the next few months, we’ll release the results to the rest of the community and engage in conversations with FHFA to right this wrong,” he said.
McKay said over $1 billion in unjustified fess had been collected from mortgage broker consumers under that rule – “and we intend to address this.” Discussions will continue, meanwhile with the Consumer Financial Protection Bureau (CFPB) about adjusting an APR calculation he said is “currently broken’ for a number of reasons.
That’s especially the case, according to McKay, on borrower paid commission (BPC) transactions. “We believe that just as lender costs should be factored into the APR calculator,” he said, “so should lender credits.”
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