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Zillow doesn’t see itself as a real estate “vertical.” Instead, it regards itself as a media company that creates advertising opportunities around what is arguably the most significant “life events” purchase: buying a home.

In that spirit, the company is developing numerous interesting marketing vehicles aimed at consumers in all phases of home buying (and in the future home remodeling). One critical piece of that equation is getting a home loan or an equity line of credit. Enter the new Zillow Mortgage Marketplace.

Basically the site is a lead-gen tool for lenders, but without any fees. Lead-gen isn’t the business model; lenders can use the site for free. Zillow makes money on ads that will be served to consumers visiting the various pages of the Mortgage Marketplace. If the site is successful with the new offering, it will put pressure on conventional lead-gen sites for lenders such as LendingTree, among others.

One thing that’s very interesting about what Zillow is doing is that it’s going to allow borrowers to rate lenders so that consumers can make determinations about whether to do business with them accordingly. This is a unique feature of the site, in my understanding, and may spur others to do the same. That should flush out some of the “bait and switch” tactics that exist in the home loans market.

Consumers (would-be borrowers) apply online to receive loan offers from multiple lenders. They have to provide a good deal of information, including an estimated credit score. But borrowers are allowed to remain anonymous and don’t offer their SSNs. This prevents aggressive lenders from hounding consumers with calls, which happens in other mortgage lead-gen scenarios.

Participating lenders are verified by Zillow and loan “offers” are submitted to borrowers in something like a reverse auction. Lenders can see the other offers submitted to an individual borrower and try to “one up” the best offer on the table. Consumers can then choose which lenders to contact.

In my call with Zillow I got into an arcane discussion about consumer perceptions, contracts, and potential liability for Zillow. The company has thought through nearly 100 percent of the legal issues associated with brokering these potential deals. Indeed, no “transaction” takes place through the site. Ultimately, lender and borrower have to strike a deal independently, with the information exchanged through Zillow as the foundation of that potential deal.

I was told also that mortgage brokers and lenders were already very heavy users of the Zillow site and that the company sought to create a mortgage product that would benefit those lenders and consumers simultaneously and improve upon lead-gen products already in the market.

Zillow said that it already had “hundreds of lenders registered and confirmed at launch even without product details, ” indicating a high degree of demand — somewhat surprisingly — in a down market.

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I agree with Michael Cheng. If you have a great credit score, stable, verifiable income, verifiable cash on hand or assets, you are a dream client. By comparison shopping, you will be able to obtain a Loan Estimate from at least three different types of lenders: Talk with the mortgage department of where you currently bank. You already have a banking relationship with them. This is a good place to start. Next, apply with a local, licensed non-bank mortgage lender. Somebody located in the town in which you live.  Last, apply with a local mortgage broker.

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