Keeping mortgage quotes honest
A second critical mission is to provide borrowers with various types of decision support that are seldom available from lenders but that nonetheless enhance the value of the loan prospects certified lenders receive from the PIC.
PICs as a business proposition
As a private business, PICs must create more revenue-generating value than they cost, which is a challenge because, while the PICs will provide significant value to consumers, the revenue must be paid by lenders. The value of the PIC to lenders is the high-quality loan prospects they provide, a large proportion of which will convert to closed loans, reflecting the decision support features of the PIC. This contrasts to the low-quality leads and low conversion rates characteristic of the lead generation sites that now dominate the Internet.
PICs would be encouraged by a minor rule change that would allow them to charge lenders on the basis of closed loans without having to be licensed as lenders or brokers. Given the persistent failures of government to protect mortgage borrowers in other ways, this is the least government can do.
The writer is professor of finance emeritus at the Wharton School of the University of Pennsylvania. Comments and questions can be left at www.mtgprofessor.com.
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