April, 2012

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FE FEATURE Lebda says that 1 percent of all mortgage originations begin with a visit to LendingTree or another online site. According to the Mortgagebot survey, one in every 38 site visits led to a submitted application. A little more than one in three site visitors searched for rates, and a little less than one in four started an application. Some of the pieces of Internet lending have been available for several years, but some of the more robust technology has only recently come into play. "Consumers have always been ahead of the lenders in terms of technology," Lantz said. "Lenders have had to replace a lot of legacy systems. Now more and more lenders have started using an online loan origination system. Lenders are seeing that the borrowers are increasingly shopping online." With consumers becoming more comfortable with online shopping, lenders have become more open to joining the sites, Lantz says. "They want to be where the shoppers are. The online tools that are available make it easier for the consumer to shop across several lenders." In a February ad campaign, LendingTree was guaranteeing borrowers at least four quotes. According to Lantz, many get even more than that, with some receiving up to 18 different preliminary (prior to divulg- ing personal information) offers. Mortgage Marvel also offers mul- tiple quotes and enables borrow- ers to filter some of the results (e.g., only local lenders). Got Tech? Five tips lenders and originators need now to make the most of their online presence. W 1 hile many lenders have joined online portals such as LendingTree, Zillow, and Mortgage Marvel, others have yet to maximize the synergies of an online premise. Lenders offering online mortgages can benefit from some specific strate- gies that separate the successful online lender from the also-rans: Employ a Fast, Efficient Call Center: The online lead services provide potential borrowers with the speed and convenience of instant quotes, but there is a disconnect if someone from the call center fails to respond quickly. "Whoever is fastest to get back to the customer wins," Churchhill Mortgage COO Matt Clarke says. Douglas Lebda, chairman, CEO, and director of LendingTree, agrees. "Customer service is tremendously important," he said. "It's something that we see with all of our successful lenders." 2 Offer Comprehensive Online Systems: Some lenders have gone further than simply handing off an online lead to the call center. Some offer comprehensive data collection, while others offer various levels of full applications, credit checks, profiles, rate lock-ins, and disclosures. The difference in business between the more comprehensive systems and the simpler ones can be significant. Clarke expects the firm's conversion rate of 10 to 12 percent with the current online data collection system to grow as high as 30 to 50 percent once a more comprehensive online loan origination system that includes all of the above elements goes live later this spring. ∂3 Deploy Top-Level Security: If there is even a hint that a customer's data may be at risk of be- ing compromised, borrowers will not put their information online, making the channel ineffective at best. The security practices and procedures go hand in hand with honesty and trans- parency, all of which are essential in establishing an aura of being a trusted financial services provider. Even if a lender has never had a reputation problem, the aura of trust is more essential than ever, particularly in light of the financial services industry's recent issues of foreclosures, robo- signings, and similar matters, accord- ing to Clarke. Lebda calls building trust with the consumer one of the top drivers for successful online lending, adding that differences in customer service tend Online lending enables con- sumers to view quotes from local and national lenders in a more expansive way than they had with newspaper advertisements years ago. The average consumer not only receives multiple quotes, but then can also choose which lender(s) to contact, all without leaving the Internet. How much of the actual lending process the borrower actually does online de- pends largely on the capability of the individual lender. Some just take very basic information on- line, while others go all the way to rate locks and disclosures. Zillow and competitor LendingTree pay the financial ser- vices provider once the prospect clicks through to the lender's site. Mortgage Marvel collects its fee after a completed application. "This is a very efficient way for lenders to get volume," Lebda said. "There is no downside. They can come on the platform and take the volume that they can handle. This enables them to source more leads and to do more deals in a month." The recent trend for borrowers to move online is just reaching early phases of the mass market stage, according to Cotter, who says that online lending is at the start of the "hockey stick curve" growth phase that other Internet businesses have already seen. "There's been a great shift in customer expectations over the last three years," Cotter said. "They expect to be able to do everything on the web." to be the top item that customers cite in reviews of online lending sites. 4 Thoroughly Train Staff: Lending officers and anyone else communicating with customers online or on the phone need to have full knowledge of all loan products their companies offer—including which product best meets a customer's particular financial situation—and have to be thoroughly trained in communicating effectively with the Internet-enabled borrower. Today's borrower is more informed about the lending process. Today's borrower feels empowered. So the lender can't treat the borrower "like it's doing him a favor," Lebda said. 5 Commit to the Channel: Online lending "can't be an afterthought," Lebda says. "You have to adjust to the channel." For example, a lender may have been content with an inbound call center. But outbound calls are essential to follow up with consumers who access the lender's online site. An automated pricing engine is essential, as is a customer relationship management system and email tracking technology. "For most people, it's not a one- session shopping experience," Lebda said. "You have to be able to track the borrower from the initial conversation all the way through to the loan lock." THE M REPORT | 35

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