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When Lenders Compete, You Lose

Posted on February 13 By MLP Blog

Your mortgage application may trigger an avalanche of annoying credit offers.

If you’re in the market for a mortgage or a new home, here’s something you’ll probably want to know: Even just shopping for a loan may bring you a huge response from potential suitors trying to solicit your business. And unfortunately, the Federal Trade Commission, which keeps an eye on consumer-credit affairs, doesn’t think it has the authority to do much about it.

The Washington Post recently described the phenomenon. Evidently, as lenders have seen their mortgage volumes decline, they’ve started looking for new leads to find mortgage shoppers. In response, up sprang a new market for these so-called “trigger lists,” which report information about people who have applied for a mortgage within the previous 24 hours.

How it works

The lists are based on credit-history information that Equifax (NYSE: EFX), Experian, and TransUnion sell after they get inquiries from mortgage brokers or loan officers checking out your credit. According to Mortgage News Daily, Dun & Bradstreet (NYSE: DNB) may also sell similar information. These lists are likely to contain a lot of information about your finances.

The FTC recently said it does not have the authority to stop the phenomenon because there’s no specific prohibition on telephone offers from lenders. It can, however, go after illegal mortgage scams and misuse of information gleaned from your credit files.

The National Association of Mortgage Brokers doesn’t like the practice. In a briefing paper, it said the practice can result in consumers’ being presented with numerous offers that they can’t easily compare. The group also says the practice may increase a consumer’s vulnerability to bait-and-switch schemes, which may lure customers away from a loan by offering terms that turn out to be too good to be true. There’s a risk of identity theft, too.

What you can do

If you’re in the market for a mortgage and you don’t want to be blanketed with offers from other lenders, you can do two things to prevent yourself from ending up on one of these lists.

First, make sure your phone number is on the National Do Not Call Registry. You can add your number or verify that you’re registered by visiting the registry’s website. It may take a month for the registration to fully take effect, but once it’s in place, it’s good for five years.

You can also cut off mortgage solicitations by opting out of all prescreened credit solicitations, including credit cards. Doing so will block the credit bureaus from selling your personal information to financial institutions for marketing purposes.

The credit industry has a dedicated website that explains the process. Through that site, you can opt out of prescreened offers for five years. If you want to permanently disappear from solicitation lists, you’ll need to print and mail a form. You can, of course, opt back in later if you choose.

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