Mortgage originators brace for rising costs as ban on abusive trigger leads nears

“We are seeing lead costs trend higher across the board,” said Praveen Chandramohan, senior vice president at Cotality Mortgage Data Solutions. “Because the ban removes a high-volume, low-cost source of data, lenders are reallocating those budgets into bidding-based environments.”

Chandramohan said increased competition on platforms such as Google Ads and third-party lead aggregators is pushing up the cost per lead. He estimates that costs for internet leads on some platforms have risen about 45% year over year.

“Lenders are paying a premium now to secure ‘first-party’ intent because it will soon be one of the few legal ways to acquire new customer data at scale,” Chandramohan added. 

The lead pyramid

Industry experts described the lead generation market as a pyramid. At the top are internet-generated leads — the most expensive option, often costing hundreds of dollars each. Direct mail occupies the middle tier — scalable but inconsistent in performance. At the base are trigger leads, which can cost only a few cents or dollars, with additional fees when a phone number is included.

If the trigger leads layer disappears, companies will be forced to compete for a limited supply of alternatives. The number of consumers actively filling out online forms, for example, is finite — meaning that costs are likely to rise.

“There’s more people chasing fewer goods and so prices go through the roof. I would expect internet lead prices to increase significantly, because they’re one of the few areas where a consumer is actively asking to be called,” said Drew Warmington, founder of iLeads.

Bankrate described this as “a shift to focus on quality.”

“Because we don’t rely on the ‘trigger lead’ supply chain, our pricing remains stable while the rest of the market faces a supply shock,” the company said in a statement. “As the ‘junk’ supply of unsolicited leads vanishes, lenders are aggressively reallocating budgets toward Bankrate’s permissioned, organic search, and marketplace traffic. This surge in demand for vetted, high-intent consumers could likely drive a premium on lead costs across the industry, simply because Bankrate’s ‘hand-raiser’ model is now the only viable path forward.” 

Patrick Brennan, head of government relations at LendingTree — which supported the legislation — said that “on the whole, the quality and value of a lead to the end user will be much greater.” According to him, limiting trigger leads should create a more beneficial consumer experience, one that ultimately produces more high-intent consumers in the marketplace.

Who benefits from the restriction?

The legislation drew broad support across the mortgage industry, with advocates pointing to the hundreds of calls and text messages borrowers can receive after applying for a home loan.

Bob Broeksmit, president and CEO of the Mortgage Bankers Association (MBA), called the measure “a major victory” that will “protect” consumers from “the barrage of unwanted calls, texts and emails.”

Vendors in the credit reporting sector argue that the restriction on prescreened consumer reports primarily benefits large lenders and servicers, potentially limiting homeowners’ ability to secure better pricing. While opposing abusive practices, they note that the use of such reports is already governed by federal and state laws, including the Fair Credit Reporting Act and the Telephone Consumer Protection Act.

“Limiting the use of these tools to lenders with existing customer relationships may unfairly advantage the largest lenders and servicers, while potentially shutting out small community lenders and mortgage brokers,” said Dan Smith, president and CEO of the Consumer Data Industry Association (CDIA), which proposed a legislative restriction that focused on phone calls.

On the supply side, credit reporting firms will now weigh the benefits of selling prescreened reports to a smaller market against the associated costs and liabilities, sources said.

The three major bureaus – Equifax, Experian and TransUnion – did not reply to HousingWire‘s requests for comments. There’s still some confusion on how the legislation will work in practice, these sources added.

‘High and dry’

The bill’s impact is expected to vary by business model.

Banks, credit unions and servicers will still be able to use triggers within their existing portfolios as a defensive customer-retention tool. Distributed retail lenders and brokers, which typically depend on local referrals and derive less than 5% of volume from trigger leads, are likely to remain focused on referral partnerships, Chandramohan said.

By contrast, direct-to-consumer and call-center operations face greater disruption, since trigger leads can represent anywhere from 10% to more than 30% of total lead volume. Chandramohan added that these firms are shifting spending toward online advertising, first-party high-intent leads — both exclusive and shared — and proprietary lists built through predictive modeling.

“Triggers are used by pretty much every lender I know of, from large shops down to single-person brokerages — and I’ve been in mortgage marketing for 30 years this year,” said Warmington. “I think there’s going to be a lot of chaos in the industry, quite frankly.” 

Warmington added that some mortgage lenders and originators could suddenly find themselves “stuck high and dry” after relying on trigger leads for years — even as he acknowledged that abusive use of the tactic has been harmful to consumers. He described the disruption as an “unintended consequence of legislation.”