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Brokers Gain In Future Shakeout Of Online Mortgages

by Broderick Perkins

Shopping for a home purchase mortgage on the Internet is a lot like Web shopping for a new car.

Car shoppers log on to search out invoice vs. mark-up prices, options, colors and performance features, but when it's time to plunk down their cash, they take their findings to the local auto broker to make the purchase.

Those habits bode well for local mortgage brokers who stand to up their slice of the home purchase mortgage pie from the current 65 to 70 percent market share to 80 percent by 2005, according to Scott Cooley, president of Campbell, CA-based Contour Software, an electronic mortgage software maker with some 40,000 outstanding licenses.

"If that car turns out to be a lemon, you want to be able to go down to where you made the purchase. There's a lot to be said for the local company's involvement in your purchase," Cooley said.

Cooley's comments were recorded recently on his annual look ahead at the online mortgage market. They point to a future where mortgage consumers' choices flourish in the virtual world just as they have in the brick and mortar market place.

He says the hand-holding first-time home buyers need will boost local mortgage brokers' hold on the market as larger wholesalers like Countrywide and Norwest Mortgage continue their stronghold on the refinance and home equity markets.

"Large servicers of the world are going to have one-click refis. You go to the Web site and they pretty much do it for you. Home equity is going to be pure Internet play. You don't need the hand holding. It's all rate, rate, rate. There is not the service level you need to close on a house," said Cooley.

In his annual forecast for the online mortgage industry, Cooley's forecast includes:

For the industry

By 2005, 85 percent of all second mortgages will be completed online by large national lenders. "Mortgage brokers offer the most value in the purchase transactions where hand holding is a big plus. For refi's and seconds, this value-add just doesn't go very far."

Within five years 80 percent of the loan origination volume will be processed through the top six wholesalers. "The big get bigger and the small stay small," he says.

Mortgage industry jobs will be lost to machines. By 2005, loan origination will lose half it's work force as large government-sponsored entities further improve and automate underwriting systems.

Many e-lenders will be acquired by companies that can cheaply attract consumers to their mortgage products. Large financial service companies with significant Web traffic will lead the mortgage merger trend.

More and more online mortgage ventures will include business-to-business sites that help streamline various segments in the industry, including companies like IMX Exchange, Ultraprise, Corp. and Xpede.

For consumers

Risk-based pricing will flourish in the next half decade. Borrowers will only obtain rate quotes for which they actually qualify.

Content will remain king. Wholesalers who develop interactive, easy-to-use, information-rich electronic commerce solutions will claim a large portion of broker purchase loan originations.

Consumers will routinely view their closing documents on-line prior to closing as imaging solutions gain newfound respect within the industry.

"The main point is that local originators and especially the local mortgage brokers will dominate the market. The Internet will act as the tool to find and evaluate these companies but it won't eliminate them. It's also saying that for most consumers, the E-lenders aren't the best way to go for purchase mortgages," Cooley said.

Also See:

Online Mortgages Not For First-Timers

Shopping For A Mortgage Online

Should You Get a Mortgage Online?

Published: January 13, 2000

Use of this article without permission is a violation of federal copyright laws.

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Broderick Perkins parlayed a career in old-school journalism into a contemporary digital news service that really hits home.

The award-winning consumer journalist, originally from Wilmington, DE, is founder, publisher and executive editor of the bootstrap DeadlineNews Group, a Silicon Valley-based editorial content and consulting service specializing in residential real estate, consumer news and related editorial consulting services.

The DeadlineNews Group includes the website, DeadlineNews.com, offering real estate editorial content and consulting services, and its back shop, the Deadline Newsroom, an open house on news that really hits home.

Perkins obtained his formal journalism education from University of Delaware and a journalism boot camp, the Institute of Journalism Education at the University of California-Berkeley. He went on to 20 years of service as a daily newspaper journalist at the Wilmington, DE News Journal and San Jose, CA Mercury News.

Perkins covered housing on the San Jose Mercury News reporting team which earned a General News Reporting Pulitzer Prize in 1989 for coverage of the Loma Prieta earthquake.

He has also produced real estate, consumer and small business content for the Wall Street Journal, Los Angeles Times, RealtyTimes.com, Nolo.com, Better Homes and Gardens, the National Association of Realtors, Homestore/Move and Intuit/Quicken among more than three dozen publications.

In addition to managing the DeadlineNews Group, Perkins most recently served as chief editorial consultant for Nolo's Essential Guide To Buying Your First Home, Nolo, and writes real estate television scripts for RealtyTimes.com.

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