4 Ways To Ensure Your Online Lender Is Credible

Today, most mortgage shoppers start their process online. It’s so efficient that even the mortgage industry’s main regulator recommends it.

But how do you ensure a lender you find online is credible? Here are the top five ways.

Define your terms

Specifically, know the difference between an “online lender” and a lender you found online.

Online lenders (also known as marketplace lenders or fintech lenders) are the new startup lenders that have cropped up in the past five years. They were purported to reinvent mortgage lending with technology, but have recently learned that the mortgage process cannot be 100% digital for every loan because federal consumer protection laws and local property appraisal and settlement procedures are too complex.

Some online lenders have found themselves in trouble with regulators and investors. Others keep building, but may struggle to match long-established mortgage lenders when it comes to compliance, stability, and implementing the technology that simplifies your process.

To put online versus established lenders into perspective, it’s considered great success for an online mortgage startup to fund over $1 billion in mortgage loans in a year. That might sound large until you consider that the smallest of the nation’s top 40 mortgage lenders funded over $8 billion in loans last year, according to Inside Mortgage Finance.

Consult the top U.S. mortgage regulator

As online lenders proliferate, you can use the mortgage industry’s top regulator as a resource.

The Consumer Financial Protection Bureau (CFPB) has kept up with this trend and created education about online lenders so you know how to plan your budget, research lenders, and watch out for risk factors.

Seek out lender recommendations

Most home buyers used to start their process with a real estate agent, then later researched mortgages. But as it becomes easier to research mortgages online, buyers are starting mortgage research earlier.

It’s a good idea to research local lenders who know the local nuances of appraising property and settling a mortgage transaction – and there are always local nuances that impact the mortgage process.

If you want great advice plus the efficiencies of a digital mortgage process, it’s best to start by finding a great local lender (which you can do by reading lender reviews), then interviewing them about their digital offerings.

Zillow offers an online directory of licensed mortgage lenders with hundreds of thousands of consumer reviews. All lenders must be licensed to appear in the directory, and all lender information is confirmed with the NMLS. And all customer reviews are moderated to ensure they meet strict review guidelines.

Research lenders in the government’s lender licensing database

The same law that created the CFPB also created the National Mortgage Licensing System (NMLS), which assigns license numbers to every mortgage company and individual loan officer. To maintain their licenses, companies and individuals must complete continuing education on the latest regulations each year.

The NMLS Consumer Access site enables you to quickly look up any company or individual, and it’s a very valuable resource of federally vetted information on a company you might want to work with.

For companies, you can check:

Name, address, phone number, website, and email
Current and prior names the lender might also use
Number of loan officers
Number of active and inactive branch locations
Regulatory actions
State licenses and registrations (so you can see where they’re allowed to do business)

For individuals, you can check:

Name, address, and phone number
10-year employment history
Regulatory and disciplinary actions

The more information you have on hand, the better prepared you’ll be to choose the right lender.

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Note: The views and opinions expressed in this article are those of the author and do not necessarily reflect the opinion or position of Zillow.