April, 2012

TheMReport — News and strategies for the evolving mortgage marketplace.

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FEATURE with online mortgages. The 24/7 availability of Internet information is another critical factor. Borrowers can shop for mortgages at their convenience, rather than just during "banker's hours." The Mortgagebot survey shows that 45 percent of respondents were originating half of their mortgages via the company's technol- ogy in 2010, up from 38 percent in 2008 and 17 percent in 2003. Nationally, online loans accounted for less than 1 percent of all mort- gages in 2000, according to Mortgagebot. Today by contrast, as many as four out of five borrowers begin their shopping for mort- gages online, adds Douglas Lebda, chairman, CEO, and director of LendingTree, the online lending portal founded in 1996. Movement to online origination is a natural progression for many lenders, with Churchill and many others relying more on the channel for a larger portion of their business in the future. But Clarke empha- sizes that whether doing business online or face-to-face, consumers want to know they are working with a lender they can trust. So reputation, security, and transparency are more important than simply offering the online channel. Lebda points to customer service as another essential element. When Internet mortgage lending was in its infancy, it was acceptable to contact borrowers in three or four days. Today, however, the response needs to be immediate through email, phone call, or an Internet chat So reputation, security, and transparency are more important than simply offering the online channel. Not for Everyone H owever, there are still those borrowers who are distrustful of lenders, particularly after the foreclosures, mortgage modifica- tion snafus, and other problems that led to the recently announced $25 billion settlement between the government and the nation's larg- est mortgage servicers, says Matt Clarke, COO of Churchill Mortgage, based in Brentwood, Tennessee. Many borrowers are still hesitant to go online for mortgages and want to make sure that they can interact with a lender in a face-to-face meeting. Churchill has dabbled with online mort- gages in the past but found that conversion rates of the leads from the sites like Zillow Mortgage Marketplace and LendingTree were only 3 to 5 percent, according to Clarke. "Some people [borrowers] were annoyed because right after they went online, they received 10 phone calls from lenders." Still, Clarke and others see the channel becoming an increasing source for business as the capabilities continue to evolve, with lend- ers adding increasing features online. 34 | THE M REPORT session. Since borrowers can see multiple offers, competitive pricing is essential as well. Churchill expects an increase in the Internet portion of its business due to the installation of a comprehensive online loan origination system this spring. Currently, the lender offers online data collection for poten- tial borrowers, but not the full application, credit decisioning, rate lock, and disclosures that will be offered through the new system. Lebda admits that the online channel isn't for everyone. The lender has to commit to the channel, rather than adding it as an afterthought (see sidebar for more tips for successful online lenders). Increasing Appeal E rin Lantz, director of Zillow Mortgage Marketplace, says that online loan requests through her firm's portal grew 174 percent between 2010 and 2011. Further growth is expected in 2012, though Lantz declined to be more specific, citing SEC rules regarding pub- licly traded companies making forecasts.

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