FYI
1999
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E-Mortgages Are Data-Packed,
But Still Tricky to Navigate
By KAREN HUBE
Staff Reporter of THE WALL STREET JOURNAL
When Mark Stailey decided to refinance his mortgage last year, he was amazed how easy it was to find competitive mortgage deals on the Internet.
Things fell apart, though, when the 35-year-old Danville, Calif., resident tried to apply online for the deals he found.
"I filled out two online applications and never heard back from the lenders," says Mr. Stailey, president and chief operating officer of Insmark Inc., a financial software-marketing firm. He finally resorted to calling and using a third lender whose deal he spotted online.
The Internet is revolutionizing mortgage shopping, enabling borrowers quickly to get an overview of the market and detailed information about rates, points, closing costs and monthly payments. "The good news is that these sites have demystified the whole mortgage process," says James Punishill, an analyst at Forrester Research in Boston.
But that doesn't mean getting your mortgage online is guaranteed to be easier or cheaper than dealing with a lender over the telephone or in person. Online surfers may encounter glitches or "bugs" in the programming that can result in trouble navigating through the application process or erroneous loan information.
Even the biggest online mortgage companies may not be problem-free. Tuesday, E-Loan, Dublin, Calif., among the most popular sites, included an $1,150 title-insurance fee in its estimated closing costs on a loan for a property in Michigan. But it turns out that in Michigan, the seller pays that fee, not the buyer.
And when it comes to finding the best deal, "the Internet is not necessarily a panacea for pricing," says Keith Gumbinger, vice president of HSH Associates, a Butler, N.J., mortgage-tracking service. You might find a better deal at your local bank, "and then again, you might not," he says.
Mortgage Web Sites
E-Loan
www.e-loan.com
iQualify
www.iqualify.com
Keystroke Financial
www.keystroke.com
Mortgage
www.mortgage.com/
default_mor2.asp
Finet's Interloan
www.interloan.com
Mortgagebot
www.mortgagebot.com
Microsoft's Home Advisor
www.homeadvisor.msn.
com/dl/default.asp
Quicken Mortgage
www.quickenmortgage.com
Just making comparisons may not be as simple as it seems. Recently, for instance, someone wanting to borrow $240,000 to purchase a $300,000 home in Michigan could have gotten the same rate through E-Loan and a traditional mortgage broker. Both E-Loan and Home Loan Specialists, Livonia, Mich., owned by Lender Ltd., were quoting a rate of 6.875% with zero points for a 30-year-fixed-rate loan.
Home Loan Specialists seemed to have the edge, however, because E-Loan's estimated closing costs were listed as being significantly higher. But after taking into account the $1,150 fee that E-Loan erroneously included in its estimate, the online company's closing costs were about $200 lower.
Some of the best online deals may be offered by a lender you have never have heard of. "It's difficult to tell whether you're dealing with a small mom and pop operation or a hugely capitalized firm," says Mr. Gumbinger.
If you find an online deal you like, you can only get so far trying to point and click your way to a loan: After applying online, borrowers must conduct the rest of the process through the mail, over the phone or by fax.
Such problems, and consumers' hesitance to offer personal information about themselves online, accounts for the fact that fewer than 10% of online mortgage shoppers are actually applying for mortgage on the Internet. But some analysts say the market is poised to erupt: The volume of loans originated online is projected to explode to $250 billion by 2003 from $4 billion last year, according to a January study by Deutsche Bank Securities.
E-mortgage "companies are furtively working to fix problems," says Mr. Punishill. "The process will get better and better every year."
Some online sites, such as iQualify.com, owned by Finet Holdings Corp., an electronic-commerce company in Walnut Creek, Calif., have tried to simplify the application process by requiring fewer documents from the borrower. For example, says President Dan Rawitch, "We don't require tax returns."
Others are emphasizing customer service. Keystroke Financial, Seattle, which owns the mortgage site Keystroke.com, launched a purely automated online process in 1995, but recently has added telephone assistance to shepherd consumers through the application process.
Yet others are trying to attract business by offering "gifts" to borrowers who secure a mortgage on their site. For example, Microsoft Corp.'s HomeAdvisor, at homeadvisor.com, is giving desktop personal computers to the first 1,000 borrowers who close a loan for $250,000 or more. For smaller loans, the site is giving out 300 hand-held computers.
So far, most of the largest traditional mortgage lenders have been slow to develop their Web sites, says George Yacik, vice president of SMR Research Corp., Hackettstown, N.J. "Only one-third actually allow people to apply online," says Mr. Yacik.
Indeed, the online mortgage world is filled with names that most borrowers have probably never heard of or never associated with mortgages, such as E-Loan, Mortgage.com, Intuit Inc.'s Quickenmortgage.com, iOwn.com (formerly HomeShark.com), Microsoft's HomeAdvisor, iQualify.com, Finet's Interloan.com and Mortgagebot.com., a unit of M & I Mortgage Corp.
Some, like Mortgage.com and Mortgagebot.com, are direct lenders, which means they underwrite loans themselves.
Others, such as Keystroke Financial and Interloan, are brokers. They troll for the best deal for consumers and process the applications.
Yet others are essentially referral services or matchmakers. They find a loan for a borrower and then step out of the process. Among these are Microsoft's HomeAdvisor and Finet's iQualify.com
Then there are mortgage auction sites, such as the Lending Tree and Priceline, which solicit bids from lenders based on a consumer's profile.
Most sites charge a fee or a percentage of the loan when a borrower applies. Most, such as Quickenmortgage.com, which charges $250, say their fee is rebated at closing.
But, Mr. Gumbinger says, "Nobody in this world that I'm aware of is providing an absolutely free service."
He suggests that borrowers check out online services by getting "in touch with licensing authorities in [the service's] own state," or with the state mortgage or banking regulator. "Never send money or reveal any personal information about yourself, before you understand the company," he says.
Additionally, be sure you understand what the Web sites are promising, he says. Some advertise "approval" within minutes, when in fact "approval in minutes probably has an arms-length list of conditions," says Mr. Gumbinger.
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