Real Estate NewsMortgage Lender Websites Gaining Ground
When a 1998 Intellitech survey showed that only 14% of 1,000 refinancing
homeowners actually applied online, that study got a lot of play in
mortgage industry circles as comforting proof that the Internet was
still a marginal channel supported by unperfected technology and
still-sketchy business models. Word had it that
E-LOAN, HomeShark, and
QuickenMortgage - the new multi-lender
sites grabbing all the headlines - were unable to chalk up conversion rates
better than 15-20% on the leads they sent to participating lenders. When
compared with average closed-loan ratios of 65% for conventional mortgage brokers, the
performance of the online channel seemed rather pitiful.
However, because the development of the online channel is happening so
rapidly, it"s wiser to focus on the strongest accomplishments of
Internet mortgage players rather than their early fumblings. After
all, 62% of those homeowners surveyed reported using the Internet to
shop for a mortgage, which placed them only a mouse click away from
applying online as well. And some of the online mortgage websites,
notably Access National Mortgage and Keystroke Financial, have tallied average conversion ratios in the 80-90% range, results that any
traditional broker would envy. The big difference was that Access and
Keystroke charge consumers a fee to make an actual application to weed
out the tirekickers. Moreover, like iQualify they establish a key
building block for profitability by incurring no expense before
receiving revenue. Sites like these are the proving ground for giving
borrowers an automated underwriting decision in minutes, enabling them
to know they will be approved for a loan before they tender their credit
card numbers to make an actual application.
Can E-LOAN, HomeShark and QuickenMortgage follow suit to achieve similar
results? Absolutely, if they so choose, but not without slowing the
velocity of their hell-bent-for-leather efforts to establish brand and
build traffic. At this stage of the game, they see a visitor as being
almost as good as a borrower and early profitability as a lesser goal
than developing marketshare and brand recognition.
The crucial piece in realizing the potential of online originations is
the processing piece. Again, a common view is that once you get past
the sophisticated consumer interface, the hand-off to back-end loan
processing reverts to old-fashioned 50s-era procedures and cranky old
technology. In many cases that"s true. Currently no more than 10% of
mortgage websites are yet equipped to handle even part of the mortgage
transaction, beyond offering a phone and number or an email address.
But under the competitive pressure of sophisticated sites such as
GetSmart, Intuit"s QuickenMortgage and Microsoft"s HomeAdvisor, the
hand-off from the consumer site to back office is growing more and more
seamless, allowing consumers to key in their information once for
automated transfer to the back-end database. Moreover, companies like
Contour, Mortgage.com and Framework are now offering outsourcing services to
processing Internet-generated loans for lenders cheaper and more quickly than they
can do it for themselves.
Though some Internet mortgage players are still struggling with problems
of scale, Framework, for one, specializes in large system like the New
York City"s 911 network. Framework boasts that its system is capable of
processing ALL of the record $1.4 trillion in mortgages generated on and
off the Internet for 1998.
As the Internet mortgage players increasingly turn their efforts toward
gaining the respect and trust of Realtors and home buyers, it would be
shortsighted to bet they won"t succeed. You have only to look at the
rich trove of consumer information and tutorial help available on sites
such as HomeAdvisor and the other leading multilender sites to conclude
that consumers will come more and more to trust them as resources and
transactional platforms.