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Selling loans in cyberspace.

Many companies are rushing to build marketing sites on the Internet. Mortgage lenders are building home pages and getting comfortable with the idea of nabbing new business over the Net.

Traditional marketing techniques are going the way of the deep-sea diver who was heading to the surface only to meet his ship, which was sinking. In other words, expect some changes in the immediate future.

Incredible advances in communications technology are rapidly changing the way business is being done now and the impact will be even greater in the future. Traditional selling techniques are being changed and, in many cases, are made obsolete by the Internet and other on-line services. The Internet is forcing the mortgage industry to rethink its marketing strategies.

Members of the industry also are raising some valid questions regarding the Internet. What role will it play in mortgage marketing? Why will consumers use it to find you? What will they expect? What will your results likely be? What is it not good for? How will its use support your existing methods for originating loans? How can you get started?

No longer is it a question of if you will have a presence on the Internet but when. Today, virtually every major corporation and thousands of small businesses have set up shop on the Internet, and more specifically, the World Wide Web. What's even more amazing is how many web sites, or "home pages," are currently under development.

A home page is simply the first page of your company brochure. From the home page, you can use a mouse to jump to an unlimited number of other pages containing content your customers will find helpful. It's similar to an index in a book where you can search topics and choose the topic desired.

As the technology industry goes, so goes the rest of the business world. It was the technology industry that first made prolific use of PCs, that used local area networks, that embraced e-mail, and has now embraced the Internet.

It's amazing how quickly things change. Just a few months ago, computer programmers would search magazines and request demo disks and brochures for software tools they needed. Today, it's taboo to request printed materials or demo disks. Every programming tool provider includes its Internet address in its advertising. Programmers can download any demonstration programs, research product details, ask questions and, in short, find everything needed. Brochures are virtually obsolete. While it always takes time before nontechnology industries adopt these ways, it inevitably happens.

Forty million households

No doubt you have seen the constant barrage of Internet-related articles in the press. Internet addresses are even being included in TV commercials. More than 40 million households (40 percent) have PCs, and a large percentage of these have access to the Internet. Recent statistics show there are more than 30 million users with access to the Internet. Just recently, America Online, CompuServe, Prodigy and Microsoft Network (built into Windows 95) have all added Internet access capabilities for their users.

So why is it so important for mortgage companies to consider the Internet? The Internet is the perfect medium for consumers to research and learn about everything related to the homebuying process. Some of the most popular sites on the Internet are locations where consumers can research products before making a purchase decision.

Already, hundreds of thousands of consumers are using the Internet to search for homes, shop mortgage rates and learn everything they need to know about buying and financing a home. Like the technology industry, it is only a matter of time before every mortgage company lists its Internet address in advertisements.

A better way to advertise

Imagine your local newspaper real estate section with all of those ads for your competition and with a couple of them featuring their Internet addresses. Consumers comfortable with the Internet and who are reading the ads because they have immediate financing needs will connect to these home pages from the comfort of their home or office. They will do this because they can get more information about your company and products and review your rates and products without the pressure of a loan officer.

When it comes time to choose a mortgage company, can you guess who they would likely contact? This contact may even be by e-mail or by completing the on-line inquiry card available on the mortgage company's home page.

An equally likely scenario is that computer-literate consumers will skip the newspaper and search the Internet first. They will use the Internet to find a mortgage company in the area, compare rates and educate themselves. This is fairly easy to do using the search tools available. If the rates are competitive, and they like what is on the screen, it is likely they will place a telephone call or complete the electronic inquiry card.

What not to put on the Net

Some mortgage professionals have wondered if consumers would be willing to just go ahead and complete a loan application on-line. This has been offered on the Internet, but has been largely unsuccessful for several reasons.

The Internet is not a secure environment, so consumers don't like to put personal financial details about themselves on the Net. More important, choosing a loan product is very complex and beyond the capabilities of the majority of consumers. Consumers want honest and professional loan officers to guide them through the process. It's unlikely consumers will give you their business without meeting face-to-face with a loan officer from the community.

This is where your company offers real value to your clients. Each client's financial status, objectives, future plans and other issues must be reviewed in-depth with a professional to determine the best loan program. Prospective borrowers cannot learn everything they need to know to make a solid decision from the Internet. This task is beyond the ability of most consumers, and it's too easy to make mistakes. A face-to-face meeting is the start of an important relationship that the Internet could never achieve.

The fears that major lenders will use on-line services to displace current mortgage origination methods in my view are without foundation and the result of ignorance of the limitations of technology. On the other hand, much simpler transactions of commodity-like products will become a reality. This is why most large banks are setting up shop on the Internet and offering online car loans, CD purchases and so on.

One mortgage product that could be completed via the Internet is refinance loans. A consumer wishing to replace a fixed-rate mortgage with another fixed-rate mortgage purely to obtain a lower interest rate could find real comfort with the Internet and its ability to find the best deal. When security issues are resolved, we might just see high refi volumes handled by the Net.

What consumers really want

So what is it that consumers shopping the Internet really want? They want valuable information, and unlike print media, the more the better. And there is no excuse for lack of content. Computer storage space is dirt cheap. And because the mouse makes it is so easy to navigate, consumers want every possible topic covered. They want answers to every question, and they want answers in-depth.

Consumers flock to the Internet for three reasons, which I call the "three Es." They are education, entertainment and e-mail.

Content should cover consumer concerns such as: What exactly is an APR? What are all those closing costs? What is title insurance? Who decides on a loan approval? In addition, consumers want company-specific information such as today's rates, product details, company history and information about mortgage company staff. Listings of other companies that provide services such as appraisers, title companies and Realtors also may be covered (see sidebar on "Ten Top Real Estate Internet Sites").

Throw in some calculations, such as payment calculators, refinance analysis and rent-vs.-buy analysis, and you have a home page to be proud of. In short, for virtually every question a past borrower has asked, your home page should have an answer.

What should be on a home page

A great home page should even be entertaining. Dull doesn't sell, and the longer you keep a prospect on your home page, the more likely you are to get the deal. In addition, research indicates that people tend not to respond to Web ads on their first visit, but only on subsequent visits.

The third 'E' is e-mail. Part of a good home page is an inquiry card for the user to complete for more information. A potential borrower may want a meeting, and this electronic postcard can determine what times are good for such a meeting. A free prequalification should be mentioned. This electronic postcard is nothing other than a predefined e-mail. But this isn't the only use for e-mail. It also can be used to answer questions.

E-mail is also great for use after the initial application. Your computer-literate customer should be treated differently from others. Use e-mail to send all letters that don't require signatures, to ask questions that come from the processor or loan officer and to provide status information about the loan in process. E-mail should not replace the telephone for urgent issues or a friendly call just to say hello. The Internet is an improved method for interacting with customers, but it lacks personality.

Setting up on the Net

For most, setting up a Web site entails working with a service provider who will perform the technical work for you. Hundreds of service providers are popping up nationwide. Start by watching your local newspaper for ads, searching the Net, or asking your favorite computer store or consultant.

You should use the Internet yourself first so that you get a feel for what a good page is and isn't. Visit some of your competitors' sites to see what you like and dislike. It's easy to learn what everyone else is doing and then improve upon it. Map out on paper what you like, and this can become your outline to submit to your service provider for an estimate of costs.

An easier and cheaper alternative is to hire a company that specializes in designing home pages for mortgage companies. These service providers usually can offer a turn-key solution that can have you up and running the next day. They accomplish this by customizing a standard mortgage company home page to your unique needs. Hundreds of already designed pages will allow you to plug in your own content such as rate information, product details and company history. You can customize these "canned" home pages and create an entertaining and educational site specific to your company, without spending thousands of dollars to reinvent the wheel.

A third option is to do it all yourself. This is the most complex and expensive, but may be the ticket for those willing to make the effort for a fully customized home page unlike any other. This entails hiring programmers to write in the HTML and PERL programming languages, having someone completely design the system (not a job for the programmers), generating the graphics, accumulating lots of documents and more. These projects often take many months to complete. A potential problem is that you may not currently own copyrights to content (consumer-oriented documents) required to be successful.

Regardless of your method, certain hardware and communications requirements are involved. An Internet server requires high-end computers, expensive communications lines and someone to set them up and maintain them (typically a $10k+ investment). Most service providers can offer all this for you for as low as $60 per month. Service providers have become the method of choice for most companies because they are less expensive. Web sites can be maintained by the service provider and don't require substantial investments in hardware and communications.

The majority of current service providers work with all types of businesses to help design home pages, but "verticalization" is coming to this market with home-page designers beginning to specialize in certain industries. Look for a firm that understands your business, the mortgage industry and how to design home pages.

Costs for service providers consist of an initial fee, a monthly fee and customization costs. Initial fees are usually less than $1,000 for a canned mortgage home page, and monthly fees start at $60, but can climb far higher for some vendors. The Internet is so new that prices vary wildly, and therefore, it really pays to shop. Customizations are usually quoted on an hourly basis in the range with typical programming charges ($50 to $100 per hour).

There are few mortgage-specific service providers currently because the home page design industry is so new.

Maintaining your home page

Once you have set up your own home page, little maintenance is required. This primarily consists of daily checking your e-mail and updating your rates. Occasionally, you will want to update or add content. You will be wise to continually establish as many "hot links" to your home page as possible. A hot link is a mention of your company on someone else's home page. The user can then click on this hot-linked option and access your home page.

Tying into a popular site

Perhaps the most popular site on the Internet for home shoppers is Home Buyers Fair ( This site contains lots of good information for potential homebuyers and includes many hot links to mortgage lenders. Lenders with current hot links include Norwest Mortgage, PHH US Mortgage, American Finance & Investment, Mortgage Access, RCI Funding, GE Capital's Residential Express and North American Mortgage. Because Home Buyers Fair receives 12,000 visits and 250,000 hits per month, there is great value to having a hot link from this service (more than 4,000 consumers prequalify themselves with the prequal calculator). Any home page can hot link from any other home page with the provider's permission. (Most will charge for this.) The more hot links you have, the more traffic you build.

One area where hot links are sure to grow is in rate compilation services placing this information on the Internet. HSH Associates, Butler, New Jersey, offers a comprehensive listing of loan rates nationwide that is very popular among consumers on the Net. It receives about 30,000 visits per month. "The HSH Web site acts as a clearinghouse for consumers who want instant access to a variety of mortgage financing information," says Paul Havemann, vice president of HSH Associates. "Mortgage shoppers can get an up-to-date view of the market with daily national average rates, based on a survey of 2,500 lenders. We also offer a wide variety of educational resources including the latest ARM indexes, how-to articles for first-time buyers and our ARM Check Kit. Our Lender Showcase page allows lenders to advertise their products nationwide and provides buyers with actual pricing for mortgages."

It's also important to have your site listed in directory search tools on the Internet. They go by names such as Webcrawler (, Global Network Navigator ( and Yahoo ( Users who run a search for "mortgage," "home financing" or "loans" should find their company listed. Ask your service provider if hot links or directory search entries are a part of their service to you. This can be a significant part of their value.

Traffic building still essential

The success of your site depends on building traffic. This is accomplished by your advertising, hot links and directory lists.

Some firms have enjoyed an amazing amount of success. For example, 4 percent of people who accessed product information from Montgomery Mutual Insurance Company's home page ended up investing money with them. They found that 61 percent of their visitors were within 10 years of retiring, which proves that the Internet is not used just by Generation X. As of July, more than 100 banks have set up sites on the Web.

We could only find about 75 mortgage company web sites, and most were poorly done. A poor home page is one that lists outdated rates and a couple of documents about the company, but is unlikely to generate very much business. Internet users expect to receive value for their time spent browsing in your site.

Early adapters will profit more

The mortgage industry is lagging in its use of technology, and this is one area where it cannot afford to lag. However, this creates a bigger window of opportunity for those mortgage companies that are quick to establish their stakes in the Internet gold mine. Bank of America received more than 10,000 consumer visits on its first month, and Fannie Mae received 444,500 "hits" in its first two months. A "hit" is a page access, but each consumer might have multiple hits to a given home page, so this number is always difficult to evaluate.

One of the most important aspects of the Internet is its ability to level the playing field. Every home page has an equal footing. Everyone competes equally. Your success depends on your creativity and your ambitions. It does not depend on your company size, the beauty of your offices or the number of branches. Often smaller companies are quicker to take advantage of the Internet because they can make faster technology decisions. The advantage goes to those who got there first because it takes time to build crucial hyperlinks and site traffic.

The Internet should be seen as complementary to your existing origination efforts. It is a system that generates leads, educates your customer, enhances communications, answers questions and tells your story. It improves and enhances everything you currently offer. Contrary to popular fears and unlike some other industries, this technological revolution will not change the mortgage industry landscape. Rather, it changes how we market to and interact with consumers.

The Internet offers something for everyone. Soon advertising, business cards and even letterheads will be sporting Internet addresses. Never before has any technology phenomenon converted consumers so quickly. The Internet is the fastest growing source for quality leads, and its growth is faster than any existing medium. How long can you afford to wait?


By IRED News

1. Alan Pinel Real Estate, Saratoga, California

An elegantly designed site of home listings in the Silicon Valley

Internet Address: http://wwwapr/com

2. National Real Estate Exchange Network, Maui, Hawaii

This site offers a list of properties that can be exchanged and traded

Internet Address: http://maui/net/~qmartyn/exchange/html

3. Real Estate 101 for Colorado, Castle Rock, Colorado

A summary of regulations when buying and selling real estate in Colorado

Internet Address: http//

4. Homes Internet Magazine, Manchester, Vermont

A listing of properties from the New England area

Internet Address:

5. Sand Dollar Realty, Padre Island, Texas

A guide and listings in this Texas resort community

Internet Address:

6. Barbara Sue Seals Properties, Inc., Portand, Oregon

A top real estate agent creates a site that is full of listings

Internet Address:

7. Arnon Corporation, Ottawa, Canada

A commercial real estate site that offers listings of apartment and office space

Internet Address:

8. California Association of Realtors, Los Angeles, California

A real estate trade group site with economic information and web pages of agents

Internet Address:

9. Hawaii Real Estate Network, Kaapa, Hawaii

Real estate listings from the Hawaiian Islands

Internet Address:

Of an estimated 4,000 real estate home pages on the Internet, here are 10 hot sites identified by IRED News, an independent real estate information publisher that offers real estate news and a global Internet directory of real estate web sites (

IRED News is produced by Inman News Features, Oakland, California, and Becky Swann, Grapevine, Texas, 1-800-775-4682.

RELATED ARTICLE: Scott Cooley's Top 10 WWW Mortgage Company Home Pages

www.homefair/com/homefair/amfin.html (American Finance and Investment) (Corporate American Mortgage Corp.) Mortgage Corp) (Fair Oaks Financial Services) (HomeOwners Finance Center) Mortgage Company)

www.lend/com (Lendcom, Inc.) (FinanCenter) (Bank of America) (HSH Associates)

(note: all of these addresses must be preceded with "http://"for a proper address)



We surveyed 10 mortgage companies that are currently on the Internet. We also interviewed a few consumers who have closed loans on the Internet.

Arthur Aranda at Garden State Mortgage, New Jersey, reports, "Our Web page has generated new mortgage customer leads virtually every day since it was launched. To date we have closed one loan and have four headed toward closing. In addition, we have a growing list of prospective mortgage customers that we now stay in touch with through e-mail. When these customers are ready to apply for a mortgage, we'll be ready to provide them with quick and professional service." Aranda feels that he could convert more of the Internet leads if he had more time - so he is planning to hire a loan officer to manage his growing Internet mortgage traffic.

Dick Lepre at Homeowners Finance, California, went on-line in March 1995. He reports getting hundreds of inquiries a month. Lepre would not disclose how many loans he has closed for competitive reasons but states that they were in the double digits. His main concern is that competition on the Internet is increasing, and he has to constantly think of new strategies to attract mortgage shoppers to his site. "The Internet has been better for my mortgage business than I expected," he says.

Mark Leaver at Fair Oaks Financial, California, went on-line in February 1995. He has closed nine loans and has two more loans headed toward closing. He averages two leads a day and feels that the Internet is about as effective as print or radio advertising.

David Lusk of Ryland Mortgage, Georgia, who had been on the Internet for two weeks when interviewed, has received $1.8 million in mortgage leads and is in the process of taking his first application.

One consumer who was interviewed found mortgage shopping via the Internet convenient and educational. According to Mike Carey, Ph.D., "I am relocating to IBM in San Jose from the University of Wisconsin. One of my students told me about using the World Wide Web - so I used it to start looking around. I found some good mortgage companies, and used the San Jose Mercury classified advertising on the Internet to look for temporary housing. The advantage of using the World Wide Web is asynchrony - instead of calling folks and being put on hold and so on, one can do things by e-mail. Also it game me a chance to look around without getting a sales pitch."

Other consumers reported the advantages of using the Internet were the ability to shop for rates on-line, the ability to learn about the process, and being able to use the payment and refinance analysis calculators. Most consumers still feel the need for human interaction prior to filling out a loan application, but believe the Internet is a good starting point.



During the past year we experienced some obvious and not-so-obvious advantages and disadvantages to using the Internet.


1. The survey we did revealed that the Internet is about as good as print in generating mortgage leads. However, advertising on the Internet is considerably cheaper than print. Most companies felt they were in a very early stage of the development of the World Wide Web and that business would only get better.

2. The Internet is far superior to other media when it comes to mortgage origination for relocation buyers. This is because the Internet allows potential buyers to obtain information on the destination city, including property listings, mortgage companies, Realtors, apartments, places to visit and restaurants. One mortgage company in California recently dosed a loan for a homebuyer moving from Alabama to Utah.

3. Most companies reported they were getting more leads than expected, with the best Internet ads bringing in three to five leads per day. The current volume of leads is significant to make this lead-generation method a strong contender. More importantly, the Internet is growing tremendously so this will only improve.

4. The Internet reaches buyers early in the home-shopping process. The Internet is a rich source of information, and potential homebuyers can use the Internet to learn about the homebuying process even before they contact a Realtor. It's great for capturing the lead first and for reaching first-time homebuyers.

5. It's shown to be a good source for VA loans as a high percentage of homebuyers eligible for VA loans have access to the Internet (most U.S. military personnel have access). Several mortgage companies have reported a higher percentage of VA loan requests on the Internet compared with radio or print.


1. The rate of converting leads to actual applications seems lower than would be expected. This is probably because the Internet is a great tool for gathering information - but has not became an established way of doing business.

2. The Internet is a worldwide network, and it is difficult to target customers in a smaller geographical area. A high percentage of mortgage customers, however, prefer to do business with a local company. Many of the companies reported that the probability of closing a loan also is dependent on how far away they are from their client. In addition, many consumers do not understand that the mortgage industry is state-regulated and often fill out ondine applications for mortgage companies that cannot handle the transaction because of state regulations. It's important to mention on your home page what geographic areas you cover.

3. It is easy for a consumer to fill out on-line applications or send e-mail requests to many mortgage companies simultaneously. We found that consumers who place a phone call to the mortgage company have a much better chance of turning into a real loan than someone filling out an on-line inquiry card. Some consumers simultaneously apply to multiple mortgage companies. One consumer sent e-mail simultaneously to eight different mortgage companies requesting rate information.

4. Internet shoppers are savvy and more demanding than the average consumer. They also expect the loan officer to be knowledgeable. This is probably because a high percentage of Internet users have college degrees and are in professional jobs. Some consumers complained that they do not get a fast-enough response when they send e-mail to a mortgage company. It is very important for a loan officer to respond to e-mail messages several times during the day.

Warren H. Myer is president of Myers Internet Services, an Internet design and marketing firm in San lose, California, that helps mortgage companies advertise on the Internet.

Scott Cooley is president of Campbell, California-based Contour Software, Inc. His Internet e-mail address is mhs:scott@ contour.
COPYRIGHT 1995 Mortgage Bankers Association of America
No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 1995 Gale, Cengage Learning. All rights reserved.

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Title Annotation:includes related articles; mortgages
Author:Cooley, Scott
Publication:Mortgage Banking
Article Type:Cover Story
Date:Dec 1, 1995
Previous Article:Being in the right game.
Next Article:The risks of mortgage automation.

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