E-Brokers Creating Market Efficiency
Written: Dec 21 '99
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There is a wonderful trend in the evolution of the electronic brokerages---and that is to create efficiencies in the market that were, at best, a dream just a few years earlier. Before the advent of the e-brokers, the best an average home buyer could do was to browse the top rates listed in the newspaper, choose the best quote, and trust that the broker on the other end would come through a rate as good as was advertised four weeks later at their close of escrow. Of course this was rarely if ever the case. Excuses ran the gamut from "you didn't qualify for that lender's program", to "the rates suddenly rose on the day you locked". But in truth, brokers had little incentive not to simply add a few eights of a point onto borrowers rates-above and beyond the day's rates-when their loans closed. After all, 1) the borrowers had no access to the broker's information about lender programs and could not possibly verify the rates; 2) their escrow was closing in days and borrowers had no time to back out; and 3) all the other brokers were doing the same thing. Thus the bait and switch was the standard, and borrowers had little leverage to find low rates on the secondary market.
Then in came the e-brokers, like E-loan. Here a borrower gets to see the rates for which they qualify and can actually choose to lock an advertised rate! No possibility of bait and switch! This is the best thing about E-loan (among other e-brokers). Of course e-brokers often given better rates (due to their lower cost outfits) then many other traditional brokers even advertise. I chose E-loan to refinance my house last year after reading a survey of e-brokers in Smart Money magazine that found E-loan to have the best rates. They got me a wonderful rate, better than any published rate I saw on the day I locked. Plus I received a rebate on the fees. I must say that the customer service was just atrocious. Really, really bad. But I was very happy with the money I saved. Plus I recently have been working with them on a new purchase, and the new loan officer is ten times better than the one I had last year.
Recommended:
Yes
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