Once criticized for being slow to embrace online mortgage processing tools, the nation's largest mortgage bankers are now viewing these devices as an increasingly important part of servicing customers in the post dot-com era.
Over the last year, both traditional and Internet-only banks have acquired technology companies and their assets to give them a head start in mortgage e-commerce. Last April, Citibank acquired the assets of iown.com, an online mortgage quoting company, which is now a part of Citimortgage. In June, E*Trade Bank announced its acquisition of LoansDirect.com, and-after integrating it with existing systems-launched the new E*Trade Mortgage Web site in August. NetBank also acquired online mortgage quoting capabilities with its acquisition of State Street Bank. And the online lending site QuickenLoans acquired Michigan-based Rock Financial in order to increase the breadth of its offerings.
These developments underscore the banking industry's determination to carve out a niche in the New Economy, according to industry observers. "The jury is still out, but the banks are no longer dinosaurs in the online world," said Craig Focardi, senior analyst at TowerGroup.
Bank of America plans lots of enhancements related to mortgage processing on its Web site over the next year, according to spokesperson Julie Davis. "We are going to see a lot of things happening that will make mortgage processing easier, more streamlined and less intimidating."
In December, Bank of America formed an alliance with Ellie Mae, a provider of Internet and software solutions for mortgage originators, under which the bank's wholesale lending division will interface with Ellie Mae's ePASS Business Center. The deal gives users of Calyx, Contour and Genesis loan processing software-who represent 90 percent of all mortgage originators in the United States-access to Bank of America loan registration, loan status, custom pipeline reporting and locking capabilities.
ePASS is a standard platform accessible by tens of thousands of mortgage loan originators. By clicking on the Bank of America link on the ePASS home page, originators can access the bank's loan programs, find everything they need to know about processing a loan, and submit a loan to their local Bank of America wholesale office for registration and rate lock.
"Ellie Mae's technologies and the importance of connecting directly to mortgage originators played a big part in our decision," according to Ed Kalush, national wholesale production manager at Charlotte, N.C.-based Bank of America. "Both companies are committed to deploying the most advanced financial technology making the mortgage process smooth and simple for our originators."
Joining forces with Ellie Mae, he added, allows BofA to bring simple and easy-to-use capabilities to mortgage originators, to elevate customer service, and to provide innovative solutions to brokers and customers by further integrating additional tools to the platform.
TECHNOLOGY CHOICES ABOUND
The BofA-Ellie Mae combination affords mortgage originators tools that can simplify their workload. "With our combined automated capabilities, we've taken a big step in streamlining the whole loan process," said Sig Anderman, CEO at Pleasanton, Calif.-based Ellie Mae.
Many banks are either building their own mortgage e-commerce technology solutions in-house or partnering with a range of vendors to purchase solutions see sidebar, page 30. Chase Home Finance Production, a division of J.P. Morgan Chase, does both. "We evaluate our e-commerce activities with the same discipline as any other information technology investment," said Gregg Gorman, executive vice president.
Each investment needs good sponsorship, good agreement and excellent oversight, along with business discipline. "As the Internet has matured, it operates not as an adjunct to business, it is part of the day-to-day operations."
LendingTree, a leading Internet mortgage aggregator, offers software and business service solutions to banks and other financial services companies. Its core product, LendX, is a complete online consumer lending solution that can be customized to the systems and look and feel of a client's Web site.
"With LendX, we are looking to help clients close loans and create stickier transactions," said David Anderson, senior vice president of strategic initiatives at LendingTree. The LendX technology, which has approximately 40 implementations to date, allows complete online pricing of loans in a matter of minutes.
"We have a lot of understanding of consumer behavior and what exact information is required to price a loan," said Anderson. "This expertise allows us only to ask for the information that is absolutely necessary and to come back with the right products and prices."
Other vendors offering Web-based mortgage tools and management systems include Dexma, Dorado, GHR Systems, and Ultraprise Loan Technologies.
GETTING CONSUMER BUY-IN
Yet despite the array of technology solutions for processing mortgages online, consumers seem to be in no hurry to abandon older pen-and-paper techniques.
Online mortgage originations, both for purchases and refinancing, made up only 1 percent of total dollar volume in 2000, although that's expected to climb to 13 percent by 2005.
"There has been a slow adoption of consumers who are willing, ready and able to do mortgage applications online," said Gorman. "Straight-through processing does not exist yet and usually some part of the process will spill over to traditional channels."
The complexity of the mortgage application process plus the sensitive information that must be disclosed explain why consumers have been slow to embrace the Web as a one-stop solution for mortgage processing. Gorman said, "Even in this heavy refinancing environment, we think only one to two percent of consumers have filled out a mortgage application online. But perhaps they start on the Web and end up with a loan officer. Perhaps they found the information they needed online and then used that in the branch."
Still, the value of mortgage e-commerce tools as a supplement to traditional customer service channels appears to be driving their adoption by major industry players. Noted TowerGroup's Focardi, "In five years, there will be a blurring of channels so, for instance, you can go into a branch to finish a loan application that you started online, then return home and check the status of the application with online updates, maybe even generate closing documents online and then go to the branch to sign them. Bricks and clicks will be the rule moving forward."
Even for those customers who don't actually fill out any part of a loan application online, the Internet can provide a valuable service, such as online loan status tools. The potential to reduce volume at call centers and give consumers the right information at the right time both appear to be significant drivers to the investment in these tools.
Also spurring the adoption of mortgage e-commerce tools are cross-selling of products and customer retention. "The Internet has a lot of value in terms of retention," said Gorman. "If a customer is a repeat customer, she is a known party and we can preapprove her in ways we couldn't if she were not known."