The best of both worldsJack Tragesermortgage origination, Internet, broker advantages, integration
By now you must be wondering what to make of all the news you
hear about mortgage origination on the Internet. It seems like a
new headline jumps onto the front pages of mortgage and financial
publications every day, most of them at least partially conflicting
each other. If it all seems rather confusing, you're not alone! The
so-called "Mortgage Internet Pioneers" who sink millions into their
fledgling operations are still trying to get a handle on it all
themselves. As a broker, the good news is you are still positioned
better than anybody, despite what you may hear or read. You can
combine personal touch with technology and offer your borrowers the
best of both worlds.
First came the news that 25% of all residential mortgages will
be originated over the Internet by 2003. Although this was first
reported as the estimation of one person (a bank executive),
companies and publications with a vested interest in such a future
have been quick to parrot that estimation, usually passing it on as
established fact without attributing it to that one bank
Then, you heard about Microsoft and Quicken launching Web sites,
with their seemingly limitless funds and ability to reach millions
of consumers through established marketing vehicles and Internet
presence. Many assumed it was the beginning of the end for those of
us who make residential mortgages our only business. Believe it or
not, there were quite a few "Chicken-Littles" out there who thought
the sky, and their businesses, would cave in at any time. That was
more than a year ago already, and the suddenly strong emphasis on
point-of-sale technology indicates that the opposite may be true.
Consider the following:
*Before the Wholesale Access survey of Mortgage Brokers,
conventional wisdom in the industry held that there were between
18,000 and 24,000 Mortgage Brokers, and that they accounted for
50%-55% of all originations. According to Wholesale Access, at of
the end of 1998, the actual numbers were 36,000 brokers accounting
for 70% of all originations.
*Fannie Mae and Freddie Mac officially recognized the growing
importance of the broker's role by introducing Desktop Originator
and Loan Prospector beginning in 1995. Since then, they have both
made their automated underwriting engines accessible through the
Internet, in addition to their private networks-Fannie Mae's MORNET
and Freddie Mac's Goldworks.
*With the rise of interest rates and the slowdown of the refinance
market comes news of diminished production at nearly all the
well-known multi-lender Web sites. Refinances had been the one type
of loan that made more sense than any other for Web origination,
since it deals with non-first time buyers who are more
knowledgeable. Now that the refi market has dried up, the pipelines
of many Internet-only mortgage entities have dried up as well.
As a Mortgage Broker, you have two huge advantages in the
technical arena over both established lenders and mortgage online
newcomers (E-Loan, etc.). First of all, you still offer the
personal touch that, with the introduction of so many loan options,
is perhaps more important today than ever. Any large company that
hopes to realize greater profitability online than they can achieve
through traditional origination methods will need to eliminate much
of the personal touch. Why? Because personal touch requires people,
and people don't figure prominently in the plans of many of these
companies. As a broker, you have the ability to change direction
more quickly when new technology comes out. More importantly, you
can pick and choose which technological elements to employ, and
then use them to augment, or if necessary, replace your existing
business practices. Again, the best of both worlds.
In the case of origination Web sites, brokers should offer a way
for their prospects to educate themselves about loan programs and
apply for a loan online, but should not make it the only way.
Promote the Web site the way you've always promoted your business;
direct mail, radio, print advertising, business cards, etc. Don't
rely solely on banner ads on the Internet or the only people who
visit it will be shoppers with very little loyalty. Make sure you
have a toll-free number posted clearly on your site, so those who
prefer to switch to a real-live talking human can do so at any
If you ignore the Web and refuse to establish an Internet
presence, it's likely that the multi-lender Web sites and other
brokers with more foresight will get more of your loans. You won't
fare much better if you swing to the other extreme either, unless
you have investors as patient as E-Loan's, who absorb reports of
losses in the millions each month in the hopes of being established
when Internet lending really takes off. Remember, even the most
Internet-optimistic prediction holds that three quarters of all
loans will still be originated "offline" in 2003. The best bet is
to maintain the proper mix between personal touch and technology.
Be there for your borrowers, whether it's on the Internet, in their
homes, or in your office, and they'll be there for you.
Jack Trageser is Director of Marketing for Calyx Software.
He may be reached at Calyx Software, 6475 Camden Avenue, Suite 207,
San Jose, California 95120, by phone at (800) 362-2599, or by fax
at (408) 997-5520.