Given the growing volume of mortgage information on the Internet, how many lenders do we really need? A lot less than we have today, say two Texas university professors.

John S. Baen and Randall S. Guttery of the University of North Texas, writing in the Journal of Real Estate Portfolio Management, argue that in the future we may see a technologically-driven mortgage system where borrowers post their loan requirements online and then "lenders would bid their contract rates, closing costs, and discount points. Once the borrower selects the mortgage lender, virtually all of the origination process is performed electronically."

It's an interesting and well-grounded argument. Technology will plainly change the mortgage marketplace, in large measure because borrowers don't care whether a loan comes from one lender or another. What they do care about is price, thus if 10 lenders are offering FHA loans, and all FHA loans are the same, the only issue is price and the ability for lenders to deliver what they promise.

That said, while loan products may be largely standardized, borrowers and their finances are not and thus one can see a continuing demand for savvy loan officers, individuals who know how to match mortgage programs with individual borrower needs.

All of which brings us to David Reed, a loan officer with Texas-based Partners Mortgage, a part of SouthTrust Corp. I "met" him online several years ago and feel that Reed is one of a new breed of online lenders, individuals who are not only top loan officers but who also understand the benefits and limits of new technology and online marketing.

Reed launched a Website in January, 1996, and the results are instructive.

"We were one of the few mortgage Websites up and I anticipated, literally, 30 or so new loans per month."

Given local pricing, that would translate into about $4 million a month in new originations. Reed thought such numbers were reasonable because he is located in Austin, an area he describes as, "one of the most 'wired' cities in the country. "

"Instead," said Reed, "we got 3 or 4 per month and received 200 page views per month. This continued for nearly a year and a half. We weren't being found. I studied search engines and their personalities extensively and then began re-submitting our Website to the various engines. Almost overnight, we were getting a thousand hits per month and it has been growing since, with just about 2,000 page views per month since the first of the year."

This brings us to Miller's 4th rule for online success, to wit: The best site in the world isn't worth a dime if no one can find it.

"In the past 90 days," said Reed, "we have closed nearly $8 million in loans we would not otherwise have gotten, particularly in the Dallas/Ft. Worth area where we don't have a physical location."

"I learned early on that surfers use the Internet to gather information in order to make a decision locally," Reed notes. "In other words, they'll surf the net to come to a buying decision then take that data to their local lender and say 'match it'. If they can't, that's where I step in."

And what about visitor privacy? Many online citizens are strongly opposed to data collection practices commonly found on the Web.

"We are concerned about surfer privacy and acknowledge that on our loan application page," said Reed.

Reed says his site offers three ways to apply for a loan online: a short form, a downloadable software program, and a scanned application that can be returned as an e-mail attachment. But what he mostly gets are phone calls and e-mails.

"Surfers," said Reed, "don't like to scatter their private data across the web, regardless of who the recipient is. "

"We don't provide the surfer with many 'toys' on our site such as calculators, preapproval programs, etc. I want the prospect to call me for that information so I can establish a bond with them early on," he says.

"Our site is more 'consumer oriented' instead of hard-sell. We provide timely market data, information on home buying, and try to keep the surfer in our Website instead of sending them to other sites for data. We do link to other sites, but only if I think it will help our chances of getting the loan...comparing our rates to a national average, for example."

Will lenders such as Reed survive in the high-tech loan world that is certain to come? The likely answer is "yes," but then there aren't many lenders like Reed.

Question Of The Week

Q Why are my name and the purchase price of my home a matter of public record?

A As a matter of public policy, real estate ownership and purchase prices are generally recorded in local public records offices. There are several purposes for such recordation:

• The records show who owns what -- this can be enormously important if records are lost or there is a dispute.

• The records show which lender has the first claim in the event the property must be sold at foreclosure. The lender with the first claim is the one most likely to be paid in full.

• The records can be used to establish property values, and from those values it is possible to determine the local tax base.

It is possible in some cases to mask ownership (by buying in the name of a partnership, for example) and purchase prices. However, even when possible such strategies can have significant legal and tax complications and should not be considered without first consulting appropriate professionals.

Weekly Resource

More and more state realty commissions and departments are now online. The Association of Real Estate License Law Officials -- also known as "ARELLO" -- maintains a site with links to many state regulators as well as other information which may be of interest.

Published: August 25, 1998

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