Over the past year the online channel for real estate and mortgage finance has taken a bigger leap than some industry practitioners have noticed. The phenomenal growth of Realtor.com has been obvious, but the rise of the multilender sites has brought some advances in the bread-and-butter use of Internet technology that have escaped wide notice.

Though Fannie Mae surveys showed a declining percentage of new Internet users saying they would use the Web to shop for homes or mortgages, that probably reflects the fact that Internet use is now growing in all income groups, not just among affluent consumers who buy homes and expensive electronic toys. The fact is, the 1997-98 refinance boom created an all-hands-on-deck situation that swamped all channels of the mortgage industry, including the Internet.

Multilender sites E-Loan and HomeShark found themselves handling a flood of business that forced them to open entire new loan-processing facilities. Both companies brought aboard expert mortgage industry personnel to help them tame the bedeviling details of loan processing. Intuit's QuickenMortgage, struggling to meet the demands of its participating lenders for increased processing of the mortgage leads generated at its website, entered into an agreement with Florida-based First Mortgage Network (FMN) to process its loans. Intuit also invested $6 million in FMN.

The stress-testing of the mortgage websites has taught them some valuable lessons, greatly increasing the level of sophistication they bring to the transaction.

We can expect Internet shopping for mortgages to increase substantially over the foreseeable future. The fact that Intuit and Microsoft have rolled out QuickenMortgage and HomeAdvisor means the bar has been raised and the pressure will stay on all players to increase the sophistication of their electronic interface with consumers. After all, these two firms are the giants of financial software for consumers, and the competition between them (not to mention other mega-competitors who have yet to weigh in) will be unrelenting.

Predictions that by the year 2005 40% of car loans and 30% of mortgages will be transacted over the Internet may prove more conservative than wild, as Java-enhanced tools, XML and other developments bring the consumer ever more convenient and customized access to real estate and mortgage loan information. The click-along surfing journey to one website after another will give place to single-screen inquiries that give consumers personalized answers and instant opportunities to transact.

However rosy the future may be, in today's skittish marketplace investors who used to throw money with dizzy abandon at Internet companies are taking a more careful look. Still, HomeShark has just announced a $20 million third round of investor funding, while rival E-Loan has just received a $25 million capital infusion and further cemented its relationship with Yahoo!. This investor enthusiasm for E-Loan and HomeShark testifies to the accomplishments and rosey promise of the Internet as a place where consumers in ever-increasing numbers will secure mortgage loans.

Keystroke Financial, the first multi-lender website, has kept a low profile than E-Loan, HomeShark, QuickenMortgage and HomeAdvisor, but a closer look at Keystroke shows the dizzying pace at which mortgage websites are improving. Keystroke has drawn enough attention from Wall Street that Deloitte and Touche is currently doing due diligence audits of Keystroke's production figures and processes in connection with pending deals.

In August, Keystroke had a $2 million day. That month Internet champ Countrywide closed a total of $62 million. August also stood out as a "perfect game" month for Keystroke because it closed 100% of the Internet applications it received, while its automated underwriting system achieved a 100% correlation with both Fannie Mae's Desktop Underwriter and Freddie Mac's Loan Prospector. Only a few technological heavy hitters in the secondary mortgage market have matched that feat.

Keystroke has begun licensing its Web Broker Internet origination and processing system as a turnkey solutions for lenders, and will soon roll out a thin-client version for brokers. Pilot lender for the program is Seattle-based Continental Savings Bank (www.continentalsavings.com). Keystroke says the system will give single-lender mortgage websites a level of functionality and consumer friendliness "that will easily compete with the Microsofts and the Intuits."

If you take a tour of all the mortgage websites mentioned here you will note that every one of them makes an effort to present itself as a resource for REALTORS®. HomeShark, for instance offers real estate marketing tools such as its FlyWare software to help agents market homes. The real estate agent, after all, is still the most likely person to tell homeseekers how and where to find a mortgage loan.

Published: September 17, 1998

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