Mortgagegrader.com

On-line site helps find lowest-cost mortgageLew Sichelman, United Feature SyndicatePublished December 10, 2006
Reed Hauge was more than a little shocked when the hard costs on the quoted loan were $5,200 less than those his mortgage-broker buddy had offered. He was rather peeved, too."I was a little disappointed my broker friend wasn't giving me that good a deal after all," says the Irvine, Calif., businessman.

Hauge is the first borrower to use Mortgage Grader, a new Web-based platform (www.mortgagegrader.com) that allows consumers to shop the market for the best rate and terms with complete anonymity, without ever giving away who you are or where you are, and without telling lenders whether you are black or white.And he's more than satisfied."It's fantastic," he says. "I told my cousin he has to go through this. I told my real estate agent about it, too."Five years in the making, Mortgage Grader permits wannabe borrowers to make side-by-side comparisons of various loan products in a manner that's similar to going online to search for the lowest airfares. And the founder of the patented technology is betting it will shake the very foundation of the mortgage market."Mortgage Grader is going to turn the entire industry on its side and empower every mortgage shopper by illuminating what really matters--a true comparison of the loan features, total costs and interest rates of several lenders," says Jeff Lazerson, a mortgage broker who runs Portfolio Mortgage Corp. in Laguna Niguel, Calif."It's all done with one application and one credit-report inquiry," he says. "And the best part is, nobody knows who you are. Your loan-application information is turned into a PIN number, so it's impossible for the lender to identify you."That kind of hunting is all but impossible now. These days, the rate you initially see or hear is very often not the one you end up with. Yes, there is a certain amount of bait-and-switch going on to get unsuspecting borrowers in the door so unethical brokers can see what they can really charge. But for the most part, lenders are like every other business that advertises its lowest cost.In the lending game, though, the rate you end up with is based on your particular income, credit history, work record and other risk factors, and it's not always the lowest rate available in the marketplace. Moreover, your costs are likely to change every time you consider a loan product or possibly a more or less expensive house.Even late in the game, sometimes even after you've been approved, the rate and terms can change if your cash-on-hand savings has fallen below a level the lender requires or you make a big-ticket purchase that impacts your credit score. And sometimes, it's an unexpected, last-second switch for which there is no decent explanation.In short, it's a system that makes comparative shopping all but impossible. Which led Lazerson to build a better mousetrap.Mortgage Grader, a neutral, third-party software program, enables shoppers for a home loan to make apples-to-apples comparisons of the various offerings thrown their way. Because it underwrites and prices applicants generically, it ensures the same pricing to anyone who qualifies, avoiding even unintentional discrimination."It's all anonymous," Lazerson says. "The results are the results; there's no hanky-panky. Mortgage Grader is systematically fair and equal."Better yet, it's impossible for the lender to negotiate with any borrower. "If the borrower fits what the lender wants, there's no reason to bargain with anybody," says the loan broker. "The logic of the software drives prime loans first, then Alt-A and then subprime. That's the way it should be."That's the feature that borrower Hauge liked best. Sure, he was glad to save five grand. But he really liked the fact that the program is aligned to his interests, not the mortgage broker's."I discovered that what's good for the borrower isn't necessarily good for the broker," he says. "There is a certain conflict of interest in that the broker tries to find a good loan but also make as much money as he can. So there's something wonderful about having something that's on your side, without any hidden agenda."Mortgages have moving parts: the rate and loan features such as prepayment penalties and fees. The higher the rate, the less consumer-friendly the features; and the larger the fees, the higher the loan broker's commission.According to Lazerson, the mortgage business is loaded with fat."Loan-officer incentives are geared to hit the commission jackpot by charging extra points and fees, up-selling the interest rate and sticking ugly and unnecessary land mines in the loan," he says. "It's a sin how much profit is built into these deals."For a flat fee, Mortgage Grader eliminates the fat. In Hauge's case, the software was able to find him the exact loan his pal found him--with $5,200 less in fees."I saw the shock on his face when he saw what he'd save," says Lazerson. "His eyes were popping out of his head. And before he could get up from his chair, I handed him a loan approval, rate-lock letter and good-faith estimate. Just a few weeks later, the loan closed exactly as promised."Borrowers are sure to love that, and Lazerson thinks lenders will like it, too. For one thing, it promises to reduce lenders' overhead because there will be less need for expensive "brick and mortar" offices. For another, it will defend them against accusations of discrimination because the system is color-blind.Currently, Mortgage Grader has the ability to scan the products offered by about two-dozen lenders, including several of the nation's largest. The list of loans "covers everything from soup to nuts," says Lazerson. "Everything borrowers are asking for these days is there."Nevertheless, Mortgage Grader is still in its infancy. Currently, the system is licensed in California and Colorado. But Lazerson plans to be approved in Florida and New York shortly, and then take the exams in Arizona, Idaho, Minnesota and Massachusetts."Within a year or so," he promises, "we will be nationwide."

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