The CFPB’s New Rate Tool: Should Consumers Be Concerned?

by Terri Ewing, Featured Contributor

HOLY COW, I never thought I would see so many people upset over the CFPB’s new rate tool. Honestly, I don’t see what all the furor is about.

Mortgage rates are all over the internet. Why? Because consumers love to look at rates. I think if you are a mortgage originator, you may lose touch with what a consumer really wants. They want to look at rates. It’s the first thing they do.

Here’s what they don’t do…they don’t read the fine print. All the disclosures everyone is upset about go unnoticed by most people. A monumental amount of mortgage rates are available on the internet and originators think every consumer is reading all the fine print to make sure they don’t get screwed. Everyone upset with this new tool has pretty much the same problem with it. Here is a condensed version of The Mortgage Professor’s problems with the rate tool on HousingWire and you can read that here.

Reasons Why You Shouldn’t Worry About the CFPB’s Rate Tool

Number One.

How many consumers are really going to see it? I typed mortgage rates and Colorado mortgage rates into Google and the CFPB was nowhere to be found on the front page. But all the usual sites were. Bankrate, Zillow, etc. They all have rates posted and services to find a rate for a certain area, loan amount, etc.

But I guess they have better disclosures and fine print?   So, because of that, consumers will not be screwed over by any of the lenders quoting those rates. Oh boy…really?

Number Two.

The CFPB does not collect information from the users of the tool and sell said information in the form of a lead. They also do not post the names of the lenders. In my mind, it’s a little like the service on hsh.com. They have average rates posted from polling different lenders. Many more than the CFPB has but they just started this. HSH also does not reveal what lenders they use. And people seem to respect the information from HSH.

Here’s Who You Should Worry About

Google, that’s who.

Recently, Google has flirted with their own rate tool. Except this is much more dangerous in my opinion. They tried this before and it never went anywhere so I hope this will work out the same. To read more about this click here.

Keep in mind, this is limited and no one really knows if it is still out there. However, if a consumer types into Google anything about rates or calculating a payment, Google themselves will pop up.

First, let’s talk a little about Google. It always baffles me when I hear people talk about them. There was a friend of mine who worked at a massive global company and one of the “higher ups” in the marketing department actually thought every listing on the front page of Google was paid for. And not the ads on the front page…the entire front page of organic listings! They actually thought you as a company had to write Google a check to be listed on the front page.

Then, there are the people who think they are pretty much magic. Type something into Google and let the magic happen. And it is like magic in that only the magician knows how the trick really works. I think it’s somewhere in between.

Yes, what Google does or any other search engine for that matter is quite impressive. However, Google is not perfect. There are many people and sites out there who believe they give preferential treatment to big name companies and make it harder for smaller sites to get higher rankings.

So, if they are right, that means already there are the biggest of the biggest on the front page. And, remember, the CFPB was not on the front page or even the 4^th page for that matter.

The sites on the front page are collecting leads and selling them to, I assume, pretty big lenders. Mortgage leads are not cheap. Fast forward to Google popping up and collecting leads. They are a for profit organization.

Do consumers go to those others sites listed on the front page or do they just stick with Google? Magic Google.

Now where do the lenders (who previously bought their leads from those sites listed on the front page) buy their leads from now? Google. And if all these lenders have to get their leads from the same place, the price goes up. And the price goes up for consumers. If we are all worried about the consumer, shouldn’t we be more worried about this than a rate tool from one place?

If you haven’t checked out the rate tool from the CFPB click on the link.

I’m sure not everyone will agree with me or maybe no one will after reading all the originators upset about the CFPB. However, I think we are getting bogged down in the minutia. Fees, escrows, locks, APR. Consumers may only look at one company’s rates or many different companies rates. But one thing I’m confident they are NOT doing is reading the fine print and disclosures. And another thing I’m sure of is…a monopoly on the front page for the search phrases related to mortgage rates and payments is definitely not good for consumers.