Editor’s note: Ten years ago, the first home listings were put on the Internet. In this special Inman News series, our editorial team explores the implications of this decade of online experimenting, investing and haggling.
Ah, the good ol’ days.
Credit reports that took two weeks to get. Out-of-date printed interest rates. All consumer interaction had to be done in person or on the telephone because e-mail didn’t exist yet.
Seem like a distant memory? In fact, it was only 10 years ago that the Internet appeared on the scene and the housing sector began taking notice. Since then, however, the Internet has dramatically changed the mortgage industry.
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“The old days when you’d schedule an appointment with a client and go meet them and bring an application and start the process was way too slow,” said Mark Prather, president of Mark 1 Mortgage in Southern California. “Now, you need to get rolling right now. If you can’t get approval in the next hour or two, you’re not competitive.”
The Internet has not only sped up the process, but it has also increased mortgage employees’ productivity. They say that has freed them up to spend less time on paperwork and more time with consumers, many of whom are better educated about mortgages than they were before, thanks to information readily accessible on the Web.
Gary Welch describes the change as making the entire mortgage process less laborious for both the consumer and the loan officer. Welch, VP and manager of HomeBanc‘s e-commerce department, said consumers now go to the company’s Web site on their own time and fill out a questionnaire that will transmit their basic information to the Atlanta-based lender.
That gives loan officers a preview of what to expect and what products to possibly offer, when they talk with the borrower.
“It’s kind of like a doctor going into a patient’s room–he or she has already seen the patient’s file,” said Welch, who has worked in the mortgage industry for 13 years.
And it’s not just those companies that have a strong online presence that have benefited from the Internet. The Internet has allowed information to be transmitted instantly to both borrowers and investors, said Alan Fentriss, a loan officer with Mid-Pacific Mortgage in Honolulu.
“I can call up incredible minutia about every type of loan in just seconds,” said Fentriss, who’s been in the business for more than a decade.
Interest rates can be locked in online immediately and closing documents can be e-mailed back and forth instead of waiting for FedEx to deliver them, he said.
Before, “things proceeded at a snail’s pace,” he said. Credit reports, for example, are now available in minutes, not weeks, Prather pointed out. The amount of time needed for underwriting has been cut drastically as well.
The Internet, Fentriss estimates, has easily quadrupled the company’s productivity. Even something as seemingly simple as getting an appraisal delayed the process while the loan officer waited for the appraiser to take pictures, get the film developed, glue the photos onto the appraisal report and mail the report to the mortgage company.
Now, Fentriss said, the appraiser takes color pictures with a digital camera, downloads them into the report and e-mails the entire file, complete with pictures. The mortgage company can then quickly forward the appraisal to the underwriter.
And as Hawaii houses have attracted investors and second-home seekers, the Internet has allowed companies like Mid-Pacific Mortgage to meet those demands.
“I can do a loan for a guy in Manhattan just as easily as I can for someone sitting across the street from my office,” Fentriss said. “There’s really no difference. Even locally here, I often won’t meet someone until closing.”
The Web has allowed some companies to branch out in ways that wouldn’t have been possible without such a medium. Thornburg Mortgage in Santa Fe, N.M., has been in business since 1993, but essentially was an investor in its early years. Now, it has expanded into retail origination, a move that EVP Joseph Badal said would have been extremely costly without the Web.
“We would have had to build up a complete support base” of loan offices around the country, Badal said. Instead, the company reaches borrowers directly through its Web site, and has no loan offices. Retail origination accounts for about 35 to 40 percent of Thornburg’s business.
Of course, the Internet is not without new challenges. Badal has found borrowers often have an initial suspicion that they’re going to give up personal service if they select an online mortgage company.
And determining whether the client prefers telephone or e-mail communication can be a challenge, Welch said. Some people prefer to receive everything over the Internet, while others use it solely for their initial contact with HomeBanc.
All borrowers, however, still expect a quick response to their questions.
“Now that we have all these different ways to communicate, people expect a more rapid response than they used to,” Welch said.
E-mail is well suited to rapid response, Prather said, adding that he makes half as many telephone calls as he did before e-mail was available. With e-mail, he said, he can send back a one-word response to a question, which is much less time-consuming than a telephone call.
That speed is ultimately the Internet’s biggest benefit for the mortgage sector. The process depends on human relationships, mortgage employees point out, but the Internet lets them focus more on people than paperwork.
“With the Internet, it’s creating greater efficiencies. When you’re more efficient, you can do more, when you do more, you can offer more services,” Prather said.
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