Come check out Zillow Mortgage Marketplace's Special Offer Program! Get Up to $1000 Lowe's Gift Card

Zillow Mortgage Marketplace launches Lowe's Gift Card Special Offer Program today. Learn more about it here.  

If you have any more questions, contact us at mortgagesupport@zillow.com.
  • August 02 2011 - US
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Answers (18)

Profile picture for OK State Lender
As you can see, there is only one lender using this offer. The rest must think that this is not a good idea.
  • August 04 2011
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Profile picture for Blue Nile
Well,  the amount of the gift cards now is different than they were in April...

In April:


Now:


(So that Lowes gift card for hpvac's example is only $300, and likely only cost Zillow $225.  And the lender only pays the advertisement cost of they fund the loan, which is better then paying the "pay per click" for someone not even interested in a loan).
  • August 03 2011
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Profile picture for Blue Nile
I believe it is Zillow that is calculating the APR depending upon which fields the numbers are put in, which is not deception, but either carelessness or ignorance.  And it has been brought up as an issue before, but hpvanc is pointing out the calculations are being done different this week than last.  I haven't paid that much attention.  The only place they are slightly relevant is with adjustable rates, but then the assumptions that have to be made in order to calculate an APR are so extreme that the APR is still useless.

The bottom line is what is the rate, and what are the out of pocket costs, and what are the terms.

Yes, if someone was trying to pass on a direct advertisement expense, there would be a problem; but those that choose to do the advertisement choose to do it across the board, so that fee is already built into their rates regardless if one wants the give-away or not.  And since overhead and advertisement is so much less on Zillow than other lead sources, the lenders can afford to do the extra advertisement cost to get the perk for their customers since they have to charge the same markups for the same lenders for the same programs regardless.

I still would rather choose a lender that minimizes their advertisement in order to give the best rates and service.
  • August 03 2011
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Profile picture for OK State Lender
Pasadenan,

You are correct. As I learned today at a RESPA seminar, Zillow has figured out to pass this as an advertising expense to the lender, which makes it perfectly legal.
However, I also learned about the new FTC rules, that I attached below, which are related to Deceptive Advertising by mortgage professionals.
I am not saying that any lender is deceiving in any way, but if it is found that the lender increased the rate or charged any other fee to compensate for the Gift card, then the borrower did somehow pay for this service. This means that the borrower could have gotten a better deal if they did not elect to receive the Gift Card..
I also think that there is a big glitch in calculation of APR as Mr. hpvanc
showed below. That could be viewed as Deceptive Advertising.

  • August 03 2011
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Profile picture for OK State Lender
How is it possible to have the APR and the rate the same?
Every lender in the loan request below shows same APR and same Rate.
Even if the someone else pays all the closing costs, the APR has to reflect the financing cost.

Was this covered in another thread?

More the reason for Zillow counsel to review the new rules:

http://www.ftc.gov/opa/2011/07/mortgageads.shtm
  • August 03 2011
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Profile picture for Blue Nile
Of course it is legitimate... it is an "advertising expense" that comes off of the officer's markup; thus there is no disclosure required and it doesn't affect the APR.

The markup rates are required now to be "fixed" for each broker with each of their lenders (in 90 day time spans).  But they can advertise as they want.  And they are not giving away the cards, Zillow is, as an advertisement for Lowes...

And Zillow makes advertisement revenue off of this scheme as the loan officer pays the advertisement rate to get that advertisement perk.
  • August 03 2011
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Profile picture for hpvanc
Take a look at rate request #ZR-CHXDQKS, it looks to me like they are trying to factor in the Take a look at rate request #ZR-CHXDQKS, it looks to me like they are trying to factor in the $1000 gift card into APR and cheapest calculations.  Would that be legit?  The entire concept seems to go against the intent of the disclosure requirements.


  • August 03 2011
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Profile picture for OK State Lender
Erin, Can you run this by you counsel? http://www.ftc.gov/opa/2011/07/mortgageads.shtm Thanks, Andi
  • August 03 2011
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Profile picture for Blue Nile
Of course, it is also an advertisement means for Lowes, so I imagine that Lowes is selling the cards at a discount to Zillow for the advertisement benefits.

But one lender confirmed the lenders are charged the full $1k when one of their clients "earns" the card, for the "advertisement fee".  (Similar to the pay per contact).  So whatever the difference is, amounts to Zillow's net return for the advertisement revenue for the program.

I imagine Zillow makes about $250 for every card given away.  And certainly Lowes makes at least $250 for each card given away too due to product sales and cards that aren't used.
  • August 02 2011
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Profile picture for Blue Nile
They've been doing it since April (on a trial basis with a couple lenders).

Zillow Mortgage Marketplace Testing "Special Offer Program"

Yes, the lender is paying for the card, but technically Zillow is buying the card as a Zillow advertisement incentive, and the lender is paying Zillow an advertisement fee.

And many lenders have many different ways they chose to spend their advertisement dollars.

As it is not being considered a "kickback" from the lender, it doesn't show up on the HUD-1 form.  And the lender does not need to disclose their advertisement costs, except to the IRS on their tax return forms.

Zillow says the program is popular.  I think that the majority of people would rather have the best terms, but there are always a few that are looking for "gifts" that pay no attention to how they are paid for.
  • August 02 2011
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Profile picture for Michael Helton
This is a thread to watch. 

Erin, I am thinking you may want to go get a second opinion from non-Zillow counsel.
  • August 02 2011
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Profile picture for hpvanc
I have a comment:

You spent a lot of time "structuring and designing this program" to stay in compliance with the letter of the law while completely violating the spirit and intent of the law.  This is why so many marketing and sales promotions give the companies that attempt them a bad reputation. 

Congratulations to Zillow Mortgage Marketplace on figuring out how to become the lowest common ethical denominator of the mortgage sales industry.  Enjoy the black eye you have self inflicted, and may the lenders participating with you enjoy theirs too.
  • August 02 2011
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Profile picture for Blue Nile
Why?  Why would anyone want their rates or fee costs increased in order to cover the "advertising" costs to pay for the gift card?

Wouldn't they rather have more savings on their mortgage terms?
  • August 02 2011
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Profile picture for OK State Lender
I am no attorney, so this is my personal opinion.

My understanding is that you can not entice a borrower with any kind of gift, just so they will close with you.

But then again sounds like you have done your research. I for one will not participate in this.

Good luck,

Andi
  • August 02 2011
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Profile picture for Erin Lantz
Andi - Our legal team is of the opinion that Section 8 of RESPA addresses kickbacks related to the referral of settlement services. The intent is to prevent the unnecessary increase of the cost of settlement services that lands on consumers.  Section 8 does not apply to a gift provided by the lender to a borrower.
  • August 02 2011
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Profile picture for OK State Lender
Erin,

With all due respect, your blog does not say anything about how you are getting around Section 8 of RESPA Rules.

I personally declined the invitation to participate in this offer because my understanding of that rule is that kickbacks are not allowed.

Please, explain how this is not a violation of Section 8 of RESPA rules.
How can a lender offer up to $1,000 in Lowes Gift Cards, only to those borrowers that close a loan with them.

Thanks,

Andi
  • August 02 2011
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Profile picture for Erin Lantz
OK State Lender,

Thanks for your interest.  We spent a lot of time designing and structuring this program in a way that complies with all applicable regulations and laws.  You can learn more about the details in my blog post, and if you have any other questions, please contact us at mortgagesupport@zillow.com.
  • August 02 2011
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Profile picture for OK State Lender
Wow, are you serious?
Did you guys run this past your in house counsel?
I may not be correct, but this is a major RESPA violation.
You can not offer a gift to a borrower based on them closing a loan with you.

If you guys found a loophole, then please by all means, do share it with us.

Anyone else feel the same?
  • August 02 2011
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