NAFCU Calls for Closer Regulation of Zillow

Zillow, which helped devour newspaper revenue from classified advertising starting in the 1990s, has moved on to threaten real estate agents and lenders.

Now, NAFCU is crying foul. NAFCU sent out a news release Tuesday saying it has sent a letter to the U.S. House Financial Services Committee in response to the Seattle-based Zillow Group Inc. arrival in the mortgage market.

Zillow announced its plans last summer to buy Mortgage Lenders of America, and completed the deal in November. Zillow Group CEO Spencer Rascoff said Mortgage Lenders is relatively small for Zillow, but its purchase fits Zillow’s long-term plan as it moves from a media company to a sales platform.

“It’s foundational for us,” Rascoff said in an in an interview on CNBC last August.

The letter, addressed to Committee Chairwoman Maxine Waters, D-Calif., and Ranking Member Patrick McHenry, R-N.C., repeats NAFCU’s call for lawmakers “to continue to scrutinize the growing fintech sector” to ensure a level playing field between fintechs and regulated financial institutions.

Zillow and other non-bank lenders are subject to the enforcement and rulemaking authority of the CFPB, but NAFCU said they are not supervised as closely as credit unions and banks.

“It is important to note that credit unions do not view fintech companies in adversarial terms,” wrote Brad Thaler, NAFCU’s vice president of legislative affairs.  “However, credit unions are concerned when unregulated fintech companies exploit supervisory gaps to obtain a competitive advantage in the marketplace.”

In addition, Thaler flagged potential data security vulnerabilities in fintechs as they may not be subject to the same cybersecurity examinations credit unions are under the Gramm-Leach-Bliley Act. He said Congress needs to enact a strong national data security standard.

NAFCU has stressed that credit unions’ access to the secondary mortgage market be protected in any housing finance reform efforts.

Credit unions have been gaining share in the U.S. mortgage market. Out of the $1 trillion loan portfolio of credit unions as of Sept. 30, they held $511.6 billion in real estate loans up 9.7% from a year earlier.

Zillow started buying homes in several states last year. It refurbishes them and uses its platform to advertise them.

“We want to be able to provide the homebuyer of the Zillow-owned home with a mortgage. That’s the biggest impediment to them buying a home,” Rascoff said. “We want to be able to attach a mortgage and earn money—origination revenue—when a buyer is buying one of our homes.”

Mortgage Lenders of America was founded in 2000 and has approximately 300 employees. The company is led by Philip Kneibert. Kneibert will continue to lead the company as vice president and general manager of Mortgage Lenders of America reporting to Greg Schwartz. The company will continue to operate from its Kansas headquarters.