Mortgage technology

Consolidation will continue in the mortgage banking industry, and low profit margins, high leverage, and growing subprime originations will weaken a "relatively stable" credit profile overall for conventional mortgage bankers, according to Moody's Investors Service.In a new industry outlook report, the rating agency said it does not expect near-term downgrades in the industry "primarily due to improved risk management techniques and strong efforts to sustain healthy liquidity." Moody's said the "overwhelming influence" of Fannie Mae and Freddie Mac is "likely to intensify" as their automated technologies become standard and they expand their presence in the alternative-A and subprime markets. The report noted that much of the consolidation in the past two years has been incidental to commercial banking mergers, but said Moody's believes it will continue "irrespective of what happens" in the commercial banking industry. "Greater competition among mortgage originators, the costs of new technologies, and scale economies in servicing and securitization, make it increasingly difficult for smaller mortgage banks to survive as independent entities," Moody's said. The Moody's website address is http://www.moodys.com.

GetSmart, Burlingame, Calif., has announced the addition of three mortgage lenders to its online borrower's marketplace.Through GetSmart's MortgageFinder, consumers can now apply for loans from Bank One, Crestar, and Norwest Mortgage. The company said it offers one-stop shopping for home and debt consolidation loans, as well as credit card, auto, student, and small business loans. "GetSmart is an easy way for consumers and business owners to shop and compare financing products," said GetSmart CEO Bill Fisher. GetSmart's website address is http://www.getsmart.com.

HomeSeekers.com Inc., Minden, Nev., has acquired Genstar Media, a leading provider of personal websites for real estate agents and mortgage brokers.The acquisition included Genstar's 1,800 clients and the right to use the Genstar name. Genstar president Terry Pullan will continue to head the Genstar division for HomeSeekers.com. Doug Swanson, vice chairman of HomeSeekers.com, said Mr. Pullan developed the first prototype of a personal website for Realtors and mortgage brokers in 1996. Mr. Swanson said Mr. Pullan's "extensive experience in the real estate industry" and the products developed by Genstar "will be powerful additions" to the real estate offerings of HomeSeekers.com. HomeSeekers.com's website address is http://www.homeseekers.com.

Crestar Bank, Richmond, Va., has introduced a specialized website designed to facilitate online applications for home equity loans and offer access to the company's full range of products and services.A glossary of terms, rate and tax information, and a selection of loan terms can be found on the new site. Applicants receive a 10-basis-point discount on the regular interest rate for applying on-line. The site's address is http://www.yourequity.com and can also be accessed through Crestar's homepage (http://www.crestar.com).

Fleet Mortgage Group, Columbia, S.C., has announced an expanded alliance with Cybertek, a Dallas-based software application company, to develop a "next-generation" mortgage origination product.The product, Compass-LX, will incorporate the business rules and infrastructure of Fleet's proprietary Compass system into Cybertek's existing LoanXchange platform, Fleet said. The company said key members of its technical and business analysis team will become Cybertek employees with responsibility for implementing the combined system. "We have found the ideal solution to our technology needs by leveraging the best of two existing systems," said A. William Schenck, Fleet's chairman and CEO. Cybertek is a wholly owned subsidiary of Policy Management Systems Corp. Cybertek's website address is http://www.cybertek.com and PMSC's is http://www.pmsc.com.

Bankers Trust Corp.'s corporate trust and agency services has opened its investor reporting website (http://online.bankerstrust.com/invr).The website provides access to CUSIP-level reporting on nearly 6,000 publicly traded mortgage-backed and asset-backed housing securities. The initial rollout of the website enables users to view and download factor and payment information by payment date, structuring their queries by payment or CUSIP number, or by an entire deal. Several enhancements of the site are already planned for later this year, including additional customized reporting and access to certificate holder statements, collateral, loan level data files, and additional servicing reports provided by the trustee.

Chase Manhattan Mortgage, Edison, N.J., is considering developing its own multilender website, according to Dave Matthews, the company's senior vice president and CIO.Mr. Matthews told MortgageWire that "the growth of the Internet has been faster than anybody in technology, or on the business side, had anticipated." Because of the rapid growth, Chase plans to unveil a new homepage in September that directs borrowers to the site's consumer channel or correspondents to the site's business channel. Over time, Chase plans to phase in technology that allows correspondents to lock in loans online as well as provide borrowers the opportunity to receive a credit decision within 15 or 20 minutes. Mortgage brokers will also be able to access Chase's website from the borrower's kitchen table and receive a lending decision. Chase's website address is http://www.chase.com.

Although the effect of the Internet on the mortgage business remains unclear, one Wall Street analyst views the Internet as a completely new framework for asset origination in the U.S. market.It could lead to "abnormally high concentrations of mortgage assets, at least relative to the fragmented physical world arrangements bankers and borrowers currently know," according to Gary Craft, a senior research analyst for electronic commerce at Robertson Stephens, San Francisco. Mr. Craft's comments were included in a report released to coincide with the company's New Millennium conference. Writing in "Investment Opportunities in Banking's New Age: The Emerging Growth Sector for Mortgage Origination, Structuring, Placement and Trading," Mr. Craft says the notion of "breaking up the banks" is apparent within the mortgage lending industry. "Although banks will remain prominent figures in asset funding, they are likely to yield to non-depository organizations at the earlier point of credit origination, structure and underwriting," he writes. "As they do, these credit organization sites will channel their credit asset flow to potentially new sources that, in turn, will help structure and underwrite the credits for ultimate sale to funding sources."

Interlinq Software Corp., Kirkland, Wash., has released a new information conduit that it says can speed the mortgage-loan process by connecting lenders to an emerging electronic marketplace.The company said its MortgageWare Loan Management System/MortgageWare TC is the first interface to Fannie Mae's MortgageLinks information services platform. Currently, lenders rely on written reports or dial in to credit bureaus using various electronic data exchange standards. The new interface allows "an effortless flow of data in a common data standard, eliminating the need to re-key data," the company said. The software works with MortgageWare LMS version 8.1, which Interlinq recently released. Jim Leone, manager of mortgage information systems for Central Carolina Bank & Trust Co., Durham, N.C., beta-tested the interface and gave it a thumbs-up. "The end user spends less time keying in credit information and has more time to handle exceptions," Mr. Leone said. "It also eliminates the potential for clerical mistakes, which could result in poor underwriting decisions." Interlinq's website address is http://www.interlinq.com.

Mark Korell has resigned as chief executive of IMX Mortgage Exchange, San Ramon, Calif., MortgageWire has learned.He had been with the mortgage technology upstart for a year and resigned for "personal reasons," said IMX executive vice president and founder Stephen Fraser. Mr. Korell joined the company from Norwest Mortgage Corp., Des Moines, Iowa, where he was second in command under Mark Oman. IMX operates a fledgling electronic network that acts as a marriage broker, of sorts, between wholesale mortgage lender/investors and loan originators. More than 3,000 individual loan officers are now on the system and IMX is operating in California, Oregon, and Arizona with plans to enter 10 more top markets by mid-year 1999. Mr. Fraser said IMX is "well capitalized" and noted that the company plans to go public within the next year or so. He said Mr. Korell owns a "huge block" of IMX's privately held shares and will do well if the IPO becomes reality. After Mr. Korell left Norwest he was considered a candidate to manage Fleet Mortgage, a shop that has been in turmoil the past two years. Mr. Korell could not be reached for comment. IMX's website address is http://www.imx-exchange.com.

Chase Manhattan Mortgage Corp.'s correspondent division has announced a new website combining real-time loan status with Internet technology.The site offers lenders access to loan information and status data for every loan they fund through Chase. "Now when a Chase underwriter or funder enters a status in the system, the reports on the website are updated within seconds," said Deane Hall, executive vice president of Chase's correspondent division. Lenders can gain instant access to information -- such as which loans are about to expire -- view rate and price bulletins, and search an online version of the correspondent lending products and programs guide. "In the past a correspondent had to pick up the phone and call an account rep. Now he can access the system on the Internet and learn the status of the loan," said David Matthews, senior vice president and chief information officer for Chase Manhattan Mortgage. The website address is http://www.mortgage.chase.com/correspondent.

From a technology standpoint, the questions of particular interest from the Fannie Mae survey (see item above) were the percentage of borrowers with Internet access and the willingness of borrowers to purchase a mortgage in cyberspace.The results were surprising. Many more Americans have computers today than had them in 1996, but there has been a decrease in the percentage of people that say they would apply for a mortgage online. In 1996, 36% of adults said they had Internet access, either at home or at work. That number has jumped to 52%. Yet while 20% of adults two years ago said they would "probably or definitely try" originating a mortgage online, only 15% say they would do so today, according to Fannie Mae. Interestingly, there is virtually no difference in the percentage of Baby Boomers and Generation Xers who would try to originate a mortgage online.

Charter Research Inc., Boston, has released a new version of Conquest, its bond pricing and analysis tool.The company said the new release is "an entirely new category" of commercial mortgage-backed security analytical tool. Michael A. Ervolini, president and chief executive officer of Charter Research, said the proliferation of CMBS deals has created a need for "a higher level of performance" from the software. He said the new release improves the ability to access and analyze transactions and offers "the ability to tie bond pricing to the credit of the properties underlying each loan comprising a CMBS loan pool, which we call credit-driven analysis." Mr. Ervolini can be reached via e-mail at ervolini@charterresearch.com.

An electronic link that will enable lenders to bid on loans posted by mortgage brokers will be established by Freddie Mac and IMX, Freddie Mac has announced.Through Freddie Mac's GoldWorks network, lenders will be able to query, select, and bid on loans posted by brokers using IMX's MatchMaker software. "With more than 1,000 lenders on GoldWorks, brokers using MatchMaker will be able to receive real-time bids from the most expansive pool of lenders possible," said Bob Ryan, Freddie Mac's vice president of marketing and pricing. When a lender places a bid, the broker will be notified by MatchMaker as well as via e-mail or alphanumeric pager. Once a bid is accepted, the identities of the lender and the broker are revealed. The lock-in will be binding for both, and loan file delivery will proceed as it would in a traditional transaction, Freddie Mac said. IMX president Mark Korell said loans will be placed "not in hours or days, but in a matter of minutes." Freddie Mac's website address is http://www.freddiemac.com.

The race for Internet mortgage dominance can now begin in earnest as Microsoft enters the fray with its long-awaited HomeAdvisor site (http://www.homeadvisor.com).The site provides borrowers with access to mortgages from three prominent lenders -- American Finance & Investment, Homeside, and Principal Residential Mortgage. Familiar to borrowers on and off the Internet, these lenders also offer their mortgage products through E-Loan and QuickenMortgage, two online competitors of HomeAdvisor. In addition, HomeAdvisor provides advice on understanding the homebuying process, negotiating for a house, collecting demographic information, and comparing homes online. But the site, unfortunately, cannot answer the questions that have been on the minds of mortgage technologists for months: Does Microsoft, as some observers fear, intend to dominate the online mortgage marketplace, squeezing out long-time lenders? It's a contention the company denies. Or does Microsoft plan to coexist with lenders, many of whom are long-time Microsoft clients? Over the next several months, the answers to these questions will become more apparent.

Spending for Internet-based mortgage loan services will exceed $525 million in the year 2000, according to a new study by Killen & Associates, Palo Alto, Calif. The dominant share of the spending will occur in the U.S., where mortgage services are far ahead of those in other nations, the study says.Titled "Loans Over the Internet: New Opportunities and Threats," the study also found that only about 20% of banks worldwide will offer Web-based mortgage services by 2000, but that the number will triple by 2005. Killen and Associates' website address is http://www.killen.com.

For the first time, the federal government has begun using e-checks to make Internet payments.On behalf of the Defense Department, the U.S.Treasury's Financial Management Service issued the first ever e-check to GTE Internetworking to make a payment on a government contract. Approximately 50 government contractors are expected to participate in the market trial of e-check technology by year end, with a full-scale rollout by 2000. The e-check initiative was sponsored by Financial Services Technology Consortium, a not-for-profit research and development organization composed of banks, technology providers, academic institutions, and government agencies. Although mortgage lenders have so far not participated in the program, they may in the future.

London Bridge Software Holdings plc announced Wednesday that it has agreed in principle to purchase CheckFree's mortgage products division.The terms of the deal will not be released until negotiations are finalized and a definitive agreement is executed. The deal is expected to close in late July. The mortgage products division operations and most of its 103 associates will remain in Atlanta and in Orlando, Fla. CheckFree announced in April that it planned to sell off seven divisions so it could concentrate on financial electronic commerce processing. To date, the company has sold its check processing, electronic cash management, and wire transfer business. CheckFree expects to complete the announced divestitures by the end of July. London Bridge acquired CheckFree's Recovery Management Services business in August.

Lenders Interactive Network, Mercer Island, Wash., has announced a marketing agreement with Seattle-based Byte Enterprises.The partnership will enhance the functionality of Byte's software and LION's online mortgage program as well as market each other's products and services, the companies said. Because of the agreement, Byte software will be automatically updated with LION information. LION's loan search, for example, will include a "Byte" button that allows the LION user to select a loan program and transmit an encoded message containing program information into Byte's Qualifier Series. Amy O'Brien, director of quality assurance and auditing at Qpoint Home Mortgage Network, a joint client of LION and Byte, said the automated links will enable her company to update loan information more quickly and accurately. "As a result, we can provide quicker answers to our mortgage customers," she said. LION's website address is http://www.lioninc.com. Byte's is http://www.byteenterprises.com.

Contour Software has released software that will facilitate a variety of mortgage-related electronic transactions over the Internet, the company announced at the National Association of Mortgage Brokers '98 Annual Convention and Showcase in Chicago.The software, WebIT, will use the Internet to replace existing EDI solutions between mortgage companies and their vendors. Lenders can automatically transfer data onto a webpage from any vendor, instead of having to build EDI solutions that require data files, conversion routines, and communications software, Contour said. WebIT was designed to speed communications between trading partners and to provide a single Internet connection among trading partners, according to Scott Cooley, president of Contour Software. Kirk Knott, director of information systems for Old Republic Title Co., said it required "almost no effort on our part" for Contour to integrate the company's webpage with the WebIT software. Contour announced that the following 10 companies are its initial electronic commerce partners: The Money Store, Old Republic Title, Lereta Flood, PLU Flood, America's Flood, Fidelity National flood, Intell Flood, Factual Data Corp., Credit Profile Services, and PSAR.