In Part 1 of this story, I talked about giving away credit scores as a foundation for attracting potential borrowers to Zillow’s new mortgage division. While it might be possible to eek out a profit by selling more advanced credit monitoring solutions, this is not why Zillow should offer the scores.

Instead, the “Zcore” should be looked at more like Google’s Gmail. Google serves up AdWords to the inboxes of all Gmail users, but that’s not they main reason they offer this free email service. To get Gmail, you need a free Google account. With a Google account, each Gmail user is instantly set up to use all of Google’s other tools. Gmail users are more likely to be Google Docs users, and Google Reader users, and all around Google junkies. Zillow can do likewise by offering a “Zcore” to consumers who sign up for a Zillow account. Once they have an account, shopping for a mortgage though Zillow is an easy next step.

A free, third party user account system is the key to building a mortgage transaction platform that turns the table on Morpheus’ Enigma. It allows the borrower to begin a qualified mortgage shopping experience from a completely anonymous position. With their “Zcore” in hand, the borrower has all the information a loan originator will need to get a qualified quote on what loan programs and prices will be available to them.

At this point, Zillow can build a communication platform that let’s borrowers “apply” for a loan to a combination of lenders who pay Zillow for the opportunity, and to lenders of the borrower’s own choosing. Lenders will only know the borrower’s anonymous Zillow user name. They would communicate through Zillow by email, instant messenger, chat, or even a Skype based phone tool.

Now comes the tricky part. All other third party mortgage transaction platforms share one giant, glaring weak link in their business plan. Policing the lenders who participate. With the status quo, I’m not sure if there’s even a decent way to do it. When absurdly low rates get posted on BankRate, it’s the other advertising lenders who complain. How does BankRate determine what is a lie, and what is just lower than what the competition can offer? They can’t. They don’t.

Meanwhile, Zillow already has the foundation for a solution in place. Their discussion forums. Here, the borrowers continued anonymity means they will be able to discus their financial situation, and the lender’s solutions to their situation with fellow borrowers, real estate professionals, and even other lenders. Consumers would be encouraged to participate, but it’s the peer review from other RE & mortgage professionals that is key. Both would be able earn karma points for helping the borrower sort through the offers. Theses karma points would could then be traded for advertising opportunities throughout Zillow.

OK, the septics among us are still seeing some glaring holes. One would be the karma points. Looking at Active Rain, or Trulia Voices, it’s obvious to me that simply posting something shouldn’t be the primary way to earn points. A set of rules would need to be implemented. The lion’s share of Karma would come from “thumbs up” voting by the consumer. In the case of lenders, it would also come from similar voting by real estate agents. Another problem would come from LO’s who would post, “I can do better, call me” type posts. The solution here is to only let LO’s comment in markets they do not serve. It sounds counterintuitive, but remember that they’re earning points that can then be used for sponsorship and advertising opportunities.

I hope quite a few loan originators are looking at this system and thinking, “that sucks”. After all, much of an LO’s leverage will disappear in a platform like this. I think it would be very hard to be a bad actor. Their would be lot’s of scrutiny from fellow LO’s who know all the tricks, and it would take a considerable commitment to establish a presence without paying for the opportunity. But for honest mortgage originators, who are willing to share their experience and expertise, this would be an awesome opportunity. More importantly, it would give consumers a chance to invert the rabbit hole that to date, has made online mortgage shopping a less then fulfilling experience.

Tagged as: Zillow Mortgage