“I have one e-mail message offering a 2.95 percent mortgage, and another saying that poor credit is not a problem. Should I take these seriously?”
Follow my lead and take them to the delete bin.
When I log onto my computer in the morning, I might find 100 letters in my inbox, of which about 75 will be spam. The largest category are those that want to enhance my sexual capacity in one way or another, but those looking to interest me in a mortgage run a close second.
A spamster I once spoke to told me why mortgage spam makes outrageous claims. “The more outrageous the claim,” he said very matter-of-factly, “the higher the response rate.” This is why we read about “2.95 percent mortgages”; “poor credit not a problem”; “we cut your payment by 45 percent”; “buy the home you couldn’t dream you could afford”; “you are approved”; and on and on.
These claims, like those for enhancing my sexuality, are all fantasy. Most of the people who make the claims aren’t loan providers and have no say regarding mortgage prices or the borrower approval process. Mortgage lenders and brokers initiate very little mortgage spam.
Most mortgage spam comes from lead generation sites that are in the business of compiling information on potential mortgage borrowers, then selling it to lenders or brokers. The sole purpose of the enticing messages is to induce you to fill out a questionnaire. A completed questionnaire is a lead, for which loan providers will pay $40 or more, depending on how much information it contains.
When I examined lead generation sites two years ago, I called them “auction sites” because they promised borrowers that up to four loan providers would contact them and bid for their loan. I found nine of them at the time, of which LendingTree was the largest. But I don’t recognize any of the nine in the spam I am getting, which seems to originate with new players.
This is a very easy business to enter. All you need is a Web site with a questionnaire for potential borrowers to fill out; a deal with a spam distributor to spread your outrageous claims as widely across the Internet as possible; and deals with loan providers, or with a lead wholesaler, to sell the leads.
If you fill out the questionnaire of a mortgage spamster, you will be solicited by one or more loan providers. You will know nothing about them but they will know a lot about you. Having paid good money for that information, they are highly motivated to land you as a client. To accomplish that, some of them may make promises that are as phony as those of the spamster who enticed you into the process.
Postscript: A few days after drafting this piece, I logged onto my e-mail server and was startled to find…NO SPAM! An inquiry disclosed that the firm operating my e-mail account had installed a state-of-the-art filtering program that had successfully blocked it all. It looked great, so why was I feeling uneasy?
For one thing, I wondered about the possibility that the filter might have caught some legitimate stuff in addition to the spam. Fortunately, I was able to check this because my e-mail is accessible from two sources, one of which is not filtered. And sure enough, I found a letter from a reader that the filter erroneously classified as spam.
In general, the more effective a filter is in screening out spam, the greater the likelihood that it will also grab some non-spam. The filter on my server worked a little too well.
My spamless e-mail register made me uneasy for another reason. I realized that if the filter had been installed a few weeks earlier, I never would have written this column, which arose out of my own experience with mortgage spam. The filter was cutting me off from information I wanted, even if I was advising every one else to ignore it.
So I drafted a note to the technician who installed the filter: “Cory, I really love having a clean e-mail register. I particularly delight in no longer having to look at ads questioning my sexual prowess, but could you please give me back my mortgage spam?”
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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