Arranging for a home mortgage on the Internet may save borrowers money, but so far relatively few have cashed in. Ned Hoyt wants to change that.
Hoyt, chief executive of IOwn.com Inc., an online mortgage brokerage based in San Francisco, maintains that his customers "can save $750 to $1,000 on a typical $150,000 mortgage" at a fixed rate over 30 years.
Even so, he said that nationally only 1 percent of borrowers obtained online mortgages last year. However, he predicts that will change dramatically within five years when 10 percent to 30 percent of mortgages will be completed online.
That will require a major boost in consumer confidence in electronic commerce, but Hoyt believes the acceptance of online mortgages will speed up as consumers reach a certain comfort level.
"After they have done other online transactions--buying books, stocks, et cetera--there will be a natural evolution to mortgages," said Hoyt, who was in Chicago for a recent National Technology in Mortgage Banking Conference presented by the Mortgage Bankers Association of America (MBA).
IOwn.com provides mortgage rates, pre-qualification and pre-approval guides, information about home buying and the opportunity to apply for "a mortgage from a top lender at a deep discount."
Hoyt stressed that the strongest appeal of online mortgages is the lower price.
The potential for the electronic mortgage market is huge. Even a small slice of the $1.4 trillion annual residential mortgage pie represents major bucks.
Another expert's estimate of online mortgages is higher than Hoyt's. Chuck Williams, president and chief executive of Brightware Inc., based in Novato, Calif., said that 2.7 percent of those who recently visited the top 75 commercial World Wide Web sites converted those visits into mortgages.
One of the questions that emerged from the MBA conference was whether high-tech methods eventually will win out over the traditional system. Will home buyers want to deal with a computer--rather than a human being--in obtaining the largest loan of their lives?
"Technology offers tremendous promise, and is changing the face of real estate," said Paul Reid, executive vice president of the MBA, who spoke at the conference.
"The Internet has come into its own. Estimates are that by 2003 60 percent of all U.S. households will be online," Reid said.
Many mortgage Web sites already offer loan rates, calculators, loan application forms and much more. What is missing, according to the MBA, is the "high level of personal assistance customers receive in other channels," including face-to-face and telephone consultation with a mortgage expert.
However, shifting the customer from the Web to a person reduces the cost benefits of using the Net.
Brightware's Williams said that servicing each customer on the Net costs only 4 cents, but a phone call to an agent costs $2.26 and answering e-mail costs $2.75.
Brightware's solution was to install software that creates an interactive environment "that rivals the interaction of a customer and an agent in person," he said. "It's an online virtual rep. We personalize the automated experience."
On the Internet, potential customers are asked to answer such basic questions as where they live, whether they are first-time home buyers, the loan amount required, and the type and value of the residence they want to buy. Then different types of mortgages are recommended and the consumer can check prices of different loans.
Despite the rapid increase in the use of the Internet, the online mortgage business still can be summarized as a lot of lookers and few buyers.
But some firms are capitalizing on the Internet by providing new electronic services. One of them is IMX Exchange Inc., based in San Francisco. John Hummer, president and chief executive, calls his firm "the stock exchange of the mortgage industry."
IMX acts as a link between mortgage brokers and lenders. The exchange was created as a neutral third party that provides cost-saving benefits to the mortgage industry via the Internet.
Operating in California since 1997, IMX announced at the MBA conference that it is beginning to expand into a national operation, first into the Western and Rocky Mountain regions and then into Texas, Illinois, Florida, New York and Virginia.
IMX says its service provides borrowers with the competitive pricing power of the Internet, plus the market expertise and personal service of a mortgage broker.
There is no cost to the borrower, but a transaction fee is paid to IMX by the lender when the loan closes.
"Using IMX is in the best interest of consumers because they may be able to get a cheaper loan through the exchange than at their local lender," said Michael Neylan, executive vice president of an IMX subsidiary, IDF Corp.
Another step in increasing the speed of automated underwriting was announced at the MBA conference by Fannie Mae, the nation's largest source of financing for home mortgages. Fannie Mae's new electonic appraisal process was launched recently.
Appraiser Connection will enable lenders to order an appraisal and to check the status of the appraisal online, which will reduce time spent faxing documents or waiting by the telephone for a response concerning an appraisal.
Fannie Mae also operates a Web site (www.HomePath.com) that enables users to obtain a broad array of information on buying or refinancing a home.