From the appraiser’s perspective: FNC Inc. and Bill Rayburn, connecting appraisers and lenders--Part two
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 executive. 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 time. 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.