Do Internet auction sites promote competition?
By: Jack Guttentag Last week I indicated that Internet auction sites may be a good way for borrowers with poor credit or other weaknesses to find one or more reputable lenders who are willing to work with them. This column considers whether auction sites promote lender competition in ways that benefit borrowers. (Second in a four-part series. See part 1.) The answer depends first on whether the initial price quotes provided through the sites are complete enough to allow borrowers to make intelligent choices. Second, it depends on whether borrowers are protected against “sharp practices” by lenders during the period between initial price quotes and the time when the price is “locked”. Initial Price Quotes: Fixed-rate mortgages (FRMs) have 3 price components: interest rate, points (upfront charges expressed as a percent of the loan), and lender fees (upfront charges expressed in dollars). Borrowers can’t shop effectively unless they have all three. Lending Tree is unique among auction si
