Mortgage Lead Glut=Opportunity

E-Loan cuts their affiliate program, LendingTree restructures their affiliate pricing, and LowerMyBills slashes their affiliate pay-outs. What is this trend indicating?

A mortgage lead glut.

Unlike many of the traditional service providers to the mortgage industry (i.e., credit, title, settlement, etc.) Internet mortgage lead generators are in unchartered waters.  They have not weathered the cyclical down stroke of the mortgage market. This inexperience will bring both challenges and opportunities to the lead market.

One of quietly rippling challenges facing mortgage lead providers is a rapidly building supply of Internet leads. This surplus is a combined effect of some truly unique situations:

• Rapid decompression of the mortgage market
• Grand implosion of several large lenders and lead buyers
• Severe tightening of credit guidelines
• Unique Federal borrower relief programs
• Two dramatic Fed rate slashes
• Larger lenders using the rate reductions and Federal programs to harvest their portfolios

Consequently, as lenders have vaporized into the mist of bankruptcy borrowers are surging to the Internet for one last opportunity to save their homes or lock in a juicy fixed rate.

That forces the question. Where is the opportunity? Well, if I am a lender it means:

• Less competition on each Internet lead (selling a lead 4-5 times is now a lead providers’ dream)
• Less experienced Internet mortgage originators in the market
• Bargains on leads, even in refinance and more targeted geography
• Opportunity to be one of the only “local” lenders talking to the borrower

Is there any silver-lining for lead providers? Certainly, but it may depend on who you are. As larger infrastructures, like LowerMyBills and LendingTree make adjustments, more agile providers may be able to grow their platforms and market share. Here are some strategies that are thriving with the absence of traditional volume pressures:

• Small providers’ quality and conversion rates are shining through. Lead providers like ZipSearch, QuinStreet, Bills.com, ConsumerTrack, and ReallyGreatRate
• More nimble providers are creating very capable campaigns to target unique Federal programs like HOPE, FHASecure, and reverse mortgages
• New entrants, like Adchemy, are able to build unique and stable platforms for future growth
• Larger providers like LowerMyBills and LendingTree are able to slash poorer performing ad buys and surge their own quality

Two large looming questions beg to be answered by time:

1. Will there be a changing of the guard in the top tier of lead companies like there traditionally is with loan originators during this cycle?
2. Will some strong, clever lender surge into the top tier of loan originators with an Internet originations strategy, like Quicken Loans did in the last downturn?