Consumers aren't reaping the full benefits of technology available to mortgage lenders, because many lenders just aren't up to speed.

All the hype about the kinder, gentler, less expensive mortgage that's easier to access remains largely little more than, well, hype.

That's particularly true among smaller lenders as a digital divide has begun to open between the "have" larger lenders and the "have-not" smaller lenders, according to Silver Spring, MD-based MORTECH, LLC a mortgage banking industry consulting firm.

MORTECH 2001, a survey of 360 lenders conducted between November 2001 and February 2002, reveals that the number of lenders that have automated loan origination and processing has doubled over the past decade, but the technology river doesn't run deep.

Only six percent of lenders are Extensible Markup Language (XML) but most, 64 percent don't even know what it is, MORTECH reported. XML, along with other standards, is emerging as an industry standard for describing business data for application integration and business-to-business commerce on the Internet. That means, the electronic applications on one company's computer system can talk to another company's applications without a hiccup and without retooling.

Electronic signatures? Forget about it. The technology is there, but only 1 percent of loan originators have implemented electronic signatures and only 4 percent use electronic mortgage exchange.

Earlier this year, Mountain View, CA-based BridgeSpan Inc. announced what it called nation's first mortgage platform that enables lenders to process home loans from start to finish totally online. The e-Mortgage Axis platform is designed to tie the mortgage process -- from origination to closing and delivery -- to Fannie Mae. The completely online process integrates e-signatures and is supposed to reduce costs in funding and production by $400 to $700 per loan, BridgeSpan boasts.

One major feature in e-Mortgage Axis is XML Smart Documents, a product of the Mortgage Industry Standards Maintenance Organization (MISMO), the mortgage industry's electronic commerce standards developer established in 1999 by the same address Mortgage Bankers Association of America.

Consumers want electronic mortgages.

Seventy five percent of consumers are willing to complete the entire mortgage process online, according to "Myers Internet/Mortgage Banking Internet Mortgage Industry Survey" released last month by Myers Internet, Inc. a San Jose-based Web services developer for mortgage originators.

"Were all the connections in place (recording a mortgage electronically at the court house), the process will be shorter and cheaper. Good lenders will share some of the savings to their customers," said Jeff Lebowitz, president of MORTECH, LLC.

Savings aside, the hoped for big benefit in mortgage processing would be a smoother, less error prone and less surprise-laden process, says Scott Cooley, founder of Contour Software, the loan origination software division of EllieMae.com a Pleasanton, CA-based business-to-business provider of Internet services for the residential mortgage brokerage industry.

"A lot of errors are made in the home loan process which can create problems for the consumer. Better automation will reduce these errors as it takes out some of the human factor in processing the data. No one likes to have their closing delayed because of incorrect closing documents being delivered at the closing table," said Cooley.

"It tells you that many lenders aren't putting much emphasis on technology to streamline the process. If more lenders did so, consumers would benefit more. At some point, they'll be forced to or be forced out of business. Technology is increasingly determining the winners and the losers in our industry," Cooley added.

Lebowitz said those lenders who are installing technology at greater depths are larger lenders. The MORTECH study shows lenders spent an estimated $2.7 billion on all technologies last year, with the largest 18 percent of lenders accounting for two-thirds of that spending.

"Digging down a little further, 34 percent of lenders originating $5 billion or more have integrated XML into some part of their operation. To the extent that technology has strategic impact, the average lender is operating at a serious technological disadvantage," Lebowitz said.

"Consumers who prefer electronic communications with their service providers will most likely be doing business with larger lenders in the future," he added.

Initially, that could put technologically-savvy consumers at a disadvantage. Shopping among the fewer lenders with better technology-driven service, could cause consumers to overlook better rates. Shopping both types of lenders to seek the best of both worlds could undermine technology's promise to save time.

What's more likely is that consumers will shop, as they always have -- for better or for worse -- for the best rate

Myers survey found that most consumers, 76 percent of them, consider interest rates the most important factor in choosing a mortgage company. Among the more than 500 consumers surveyed, 54 percent also said they would rather do business with a company that was 2,000 miles away if they could get rates that were 0.125 percent better.

Only 41 percent said service was more important.

If the technology was in place, they could have both.

Published: April 3, 2002

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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.