Smoothing out the edges.

It was a month before Christmas and all through the house not a creature was stirring, except for the mouse. Outside, snow was falling. Inside, a young woman surfing the Net for mortgage information happened upon www.Quicken-Mortgage.com. With quick mouse movements, she could prequalify for a mortgage from one of six national lenders. Some of the companies, such as Chase Manhattan Mortgage Corp. and North American Mortgage Co., were familiar. The least familiar: HomeSide Lending.

HomeSide Lending, based in Jacksonville, FL, began operations in March 1996 when it acquired Bank of Boston's mortgage banking subsidiary, BancBoston Mortgage Corp. A few months later, it bought Barnett Bank's mortgage servicing operations, assets, and proprietary servicing software. From then on, corporate events moved dramatically: In January 1997, HomeSide underwent an initial public offering of its common stock on the New York Stock Exchange. A little more than a year later, National Australia Bank bought the company.

Today HomeSide is the fifth largest originator of loans and the sixth largest servicer of home mortgages in the U.S. Driving its growth is the most advanced technology in the industry, and it's that technology that helped get National Australia Bank interested in the company. "Technology," says Joe Pickett, HomeSide's chairman and chief executive, is one of the "key drivers" of the mortgage business. "As this industry continues to change, companies that focus on technology, size, and cost control will be rewarded."

As primarily a wholesale lender, most of HomeSide's commerce is done directly with correspondents and brokers. These customers have to get pricing, product information, and operations data from HomeSide and fill out myriad forms for each loan. In the past, HomeSide was awash in manuals and program guides; each morning it would fax out rate sheets.

Now those customers can get on the Internet, find wholesale.homeloan.com and transact business. "Our customers can log on using their customer code and PIN," says Robert Davis, a senior vice president in charge of production technology and electronic commerce. "They can get the rate sheet for a particular customer, download a file into a spreadsheet if necessary, and review product information and manuals. In addition, they can get a summary report of all loans they have in progress and are waiting to be funded." Earlier this year, HomeSide added a "lock-in" feature, allowing customers to lock-in a rate through the Web site, rather than over the phone.

But HomeSide's real goal is integrating its technologies. Having developed its own systems to support product operations, general ledger, and accounting and cash management functions. "We have tied the Internet into these production systems," says Davis. "The Internet is not computing anything financial, but it is pulling information from the financial systems and displaying it."

HomeSide boasts a loan portfolio of about $100 billion and does so with little reliance on bricks and mortar. It has two operations centers in Jacksonville and San Antonio and maintains a dozen or so other locations around the country, all connected via a local area network (LAN). "We have an electronic journal entry system which allows us to sit at remote sites to do all necessary finance work and submit it over the LAN," says Ann Mackey, senior vice president and finance director. "It allows a wide group of people in a lot of different places to enter data, and, more importantly, it allows them access to necessary information."

Late last year, Intuit Inc., the company that sells such financial software tools as Quicken and TurboTax, launched a Web site to help consumers choose a mortgage loan. The site, which is interactive, helps consumers make a comparison of different loan products offered by a variety of national lenders - including, from the beginning, HomeSide - and to prequalify for one of the loans. By March, consumers were able to fill out a streamlined application on site and apply for loans on-line.

Early this year, when interest rates began to drop, QuickenMortgage traffic expanded rapidly, eventually hitting 600,000 visits. Timing was fortuitous. Mortgage rates fell to their lowest levels in years, encouraging home buying as well as refinancing.

"QuickenMortgage has exceeded our expectations, both in terms of traffic and interest level of consumers wanting to use the Internet for mortgages," says Alison Berkley, Intuit's senior product manager. In addition, lenders, some of which didn't feel they needed Internet business, are now clamoring to be a part of the Web site. The number of banks offering rates on QuickenMortgage jumped to 11, and "at least five lenders a week ask to participate," Berkley says.

HomeSide found it was picking up a good deal of lending business from QuickenMortgage, in addition to the traffic from its own site. Electronic customers were different, says Davis, "and we found we weren't servicing them quite like they wanted to be serviced." For example, once the potential customer went through the prequalifying process, it was customary' for HomeSide to call the customer directly, but electronic customers preferred to be contacted via email. So HomeSide created a small group in its consumer direct area just to work the business that came in electronically.

Nationwide, the mortgage business in 1998 could reach the $800 billion level. Less than 1 percent of that will be originated over the Internet. However, some observers predict that by 2000, Internet originations could reach 8.5 percent.

The Internet could change the mortgage business entirely. Consumers who buy homes or do a refinancing dread the seemingly endless paperwork shuffle and visits to the bank or mortgage broker. "The more we can do electronically with less people," Davis concludes, "the better we are going to be able to serve those customers in a refinance boom like we are in today."

Vocabulary Builder

Electronic Journal Entry: Debit and credit data that is electronically transmitted and processed via the LAN.

Internet origination: A loan closed via the internet. At the moment not a possibility, but expected to be a big part of the mortgage business.

Local Area Network (LAN): Communications system that connects one computer to another, with applications remaining in a central location.

Lock-in: Establishing an interest rate at application that is guaranteed. One of the myriad parts of the mortgage business that can now be done via the Internet.

Transactional software: High-volume, consumer, interactive software built with security in mind because it transmits financial or credit card information.

Thought Leader

"In general, financial processes make the most sense on the Internet because all the information is essentially bits," says Alison Berkley, a senior product manager with Intuit Inc. "There is very little physical procurement required in finance. Internet users seem to be very comfortable with some aspects of transacting business on the Internet and less comfortable with others. They were more concerned about sending out data electronically." In the past, a major issue has been security, but that is abating. In such financial areas as mortgages, taxes, and investments, Berkley anticipates Internet usage will grow exponentially over the next few years.

There are certain areas, such as taxes and investments, that easily allow information to be downloaded, where it is clear the Internet makes sense, Berkley says. "For those types of processes we are further along. We already have a lot of that groundwork in place. In areas like mortgages, we have made some progress in on-line applications, but in terms of really integrating the whole process, including underwriting, appraisals, and title, we are still at the beginning."

The issue for companies today is not whether they want transactional capabilities on their Web sites, Berkley says, but whether they want to build the software themselves. "Being able to build transactional software is a different core competency than being able to provide financial products. Most companies realize integrating transactional capabilities makes sense and they are now at the point of evaluating how they want to get there. The question is, do they want to build or do they want to buy?"

Christopher Elliott, an Annapolis, MD-based freelance journalist, customizes his articles and Web sites for a host of clients, including Chief Executive. JoAnn Greco has automated the sales of her business and technology articles by replacing her tattered Rolodex with a Filemaker database. Logistics specialist Peter Buxbaum writes about, well, logistics, from his New Jersey home office. Despite his bent for covering finance and technology, Mesa, AZ-based writer Steve Bergsman relies on his wife for household finance and his son for computer maintenance.