Copyright © 1998 The Seattle Times Company
Posted at 12:38 a.m. PST; Saturday, November 21, 1998
Online mortgages gaining popularity
by Kathy Bergstrom
Des Moines Register
It's one thing to buy a book or a compact disc over the Internet, but quite another to use it for one of the largest financial transactions you'll ever conduct. Yet mortgage companies predict the number of people willing to apply for a
mortgage online will grow significantly in the next five years.
It's estimated about 2.5 percent of all mortgage transactions this year will be conducted over the Internet, said Warren Myer, president of Myers Internet Services in San Jose, Calif. Experts say that could grow from 10 to 25 percent by
2003.
No one claims the Internet will replace face-to-face contact. But experts predict more and more people will see it as a convenient way to comparison shop and possibly get better deals.
Principal Residential Mortgage of Des Moines, Iowa, is a participating lender on Intuit's QuickenMortgage and Microsoft's HomeAdvisor Web sites. With their name recognition, Microsoft and Intuit can attract large numbers of potential
customers, said David Everett, vice president of nationwide lending and chief information officer for Principal Residential.
The company's own site offers basic information about rates and loan programs but does not have an application function, he said.
Principal pays Intuit and Microsoft to be included on their sites both for setup and transactions. Everett would not say whether the company has earned back its initial investment, but said "we feel great about how things have
gone."
Companies such as two-year-old HomeShark of San Francisco are banking on the potential of online mortgages.
HomeShark is different from sites such as HomeAdvisor and QuickenMortgage, because it is actually a mortgage broker, said Ned Hoyt, co-founder and chief executive officer. Rather than referring applications to participating lenders, the
company handles the whole process.
It projects about 10 to 15 percent of mortgage business will be conducted over the Internet in the next five years.
The company believes the advantages of its site are the breadth of content, low fees and sophisticated application software, according to Hoyt, who said HomeShark charges a half-point fee to lenders, which only one other site matches.
HomeShark is not profitable now but just raised $20 million in financing, which will be used to expand its national distribution and marketing efforts, enhance its technology and expand its offerings, he said.
More consumers are using the Internet to gather information or shop for mortgage rates than actually applying for mortgages, according to Myer. His company manages two mortgage sites, Mortgage-Net.com and BestRate.com.
A recent survey by a California company called Transamerica Intellitech showed that of 1,000 California residents who refinanced their homes in the first quarter of this year, 63 percent used the Internet.
But only 14 percent completed the transaction there, Myer said.
The Internet also appears to be better suited for people who are refinancing, he said.
"We're seeing that many people are taking advantage of the Internet as a way to collect information about products," Everett said. Through sites such as HomeAdvisor and QuickenMortgage, "they can see a personalized analysis
of what loan products might be a good fit for them."
Everett would not say how much business has been referred to Principal from Web sites, but said traffic has met or exceeded expectations.
E-commerce is growing, and mortgage business has been slower "because fundamentally it's just a bigger transaction," Hoyt said. As companies improve their sites, the value, cost savings and speed of service will continue to
increase and attract more customers, he said.
Internet users are price-sensitive and seeking a better deal, Myer said. But convenience is another big reason they choose to use the Internet.
One problem with getting a loan on the Internet is that consumers don't always know whom they're dealing with, he said. If a mortgage company asks for a deposit, consumers should be sure to check out the company first, he said.
Another problem with online mortgage companies is they often get a large amount of business in a very short time when rates swing, Myer said.
Customers can judge a company's service by its response to questions and requests, he said. Consumers who lock in on a mortgage rate should ask for written verification either by fax or e-mail, he said.
Mortgage lending still is regulated by states, so consumers also should make sure the lenders they choose are licensed to do business in their states. That's one of many gray areas and legal issues that still need to be ironed out, Myer
said.
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