For the mortgage industry the process of enabling borrowers to apply for their loans over the Internet has made great strides, but is still in its infancy. Only 10% of retail mortgage websites are really equipped to handled even part of the mortgage transaction itself. The websites seriously enabling a borrower to go online to apply for a loan - without merely phoning, faxing or emailing a live loan agent - are limited largely to a the new multilender platforms such as E-Loan, HomeShark, Lending Tree and QuickenMortgage.

A recent Transamerica Intellitech study of 1000 refinancing homeowners noted that 62% of those borrowers used the Web to explore interest rates and other mortgage options, but complained that "only" 14% of them applied for their loans online. Given the limited number of sites that enable transactions, that 14% is actually a pretty healthy indication that the borrowing public will respond positively as opportunities to apply online increase.

Before the mortgage industry as a whole starts to invest in the high-end technology required to operate a truly transactional mortgage website, we can expect to see greater automation of lender-to-broker and lender-to-correspondent interactions. After all, it is at the wholesale level where reduced rekeying of data and lessened dependency on phone and fax are sure to produce significant economies. The promise of saving money through Web commerce is the one that makes mortgage company chief financial officers sit up and take notice.

Moreover, big companies are often swamped by incoming calls, said Norwest Mortgage systems architect David Rae. And gearing up to handle phone traffic is expensive.

Forrester Research estimates that a typical call from a customer to a call center lasts 10 minutes and costs about ten bucks, whereas a request via the Web lasts two minutes and costs fifty cents. Forrester predicts that by the year 2000, companies that implement Internet-based service will lower their call-center labor costs by 43%. Without Internet solutions, the same labor costs will likely rise by 3%. The message is clear in the thin-margin mortgage industry, where victory goes to the low-cost player.

Norwest Mortgage Inc. is currently testing an IBM self-service product called WebSphere which will significantly reduce phone, fax and Fedex interactions with brokers and correspondents, saving Norwest and its customers considerable money. Not only that, says Norwest systems architect David Rae, letting brokers and correspondent lenders send loan packages and transact other business electronically - in minutes instead of hours or days, and at their own convenience - will build their loyalty to Norwest. For one thing, Norwest expects the system to enable increased loan volume for those customers as well as itself.

"It's going to allow them to do things like get real-time pricing and loan status, register commitments, handle closing documents, get pipeline reports, all without picking up the phone or waiting by the fax machine," said Rae. "That means increased efficiency and big time savings."

Dealing with borrowers electronically can be a crapshoot that most mortgage brokers and loan officers are reluctant to risk. Clunky and time-consuming as they may be, hard documents and face-to-face interaction are familiar means of managing the transaction. But once Norwest's business customers get used to operating electronically business to business, the next step will be to enhance their Web interface with borrowers. Just as the progression from the typewriter to the computer enabled them to perform a variety of new tasks, they surely will want to extend the efficiencies and convenience they enjoy with WebSphere.

For a closer look at how all this works, you can go to the IBM site to download the entire Norwest case study in a PDF file.

Published: October 19, 1998

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