Magazine article Mortgage Banking

Successful Online Companies: Hear What Five Successful Online Lenders Say about What's Key to Doing Business on the Web

Magazine article Mortgage Banking

Successful Online Companies: Hear What Five Successful Online Lenders Say about What's Key to Doing Business on the Web

Article excerpt

THE JURY IS IN ON WHAT MAKES A WEB SITE SUCCESSFUL, AND IT MAY NOT BE WHAT YOU THINK. We interviewed five successful mortgage companies (both brokers and bankers) that have demonstrated great success online over the last five years. The basic selection criteria for these companies were they must have been doing business online for more than a year and generate at least 50 percent of their business via their Web site. * The five companies all use their Web sites as a core part of their daily operations for lead generation or to value-add for their current and/or past clients. They all experienced growth in loan volume from 2002 to 2003. The median volume in 2002 among these companies was $105 million. In 2003 it was $133 million. The lowest volume was $38 million (produced by a one-man shop) and the highest was $1 billion (produced by a company with 14 loan originators). All the companies generate the majority of their business via the Internet, with an average of 76 percent of their business first touching their Web site. * These five companies have proven that Internet business is real and is a viable business channel in the industry.

How do they get the business?

Most of the companies interviewed did the majority of their Web site advertising via online portals. Online portals are consumer-facing mortgage-shopping sites that are typically rate-driven.

Paul Burger, chief executive officer of Hotloans.com, Glendale, California (www.hotloans.com), only advertises his site via the Web--and 90 percent of his business last year was Internet-generated. Alternatively, Jeff Sage, owner of Focus Lending Group Inc., Clearwater, Florida (www.focuslendinggroup.com), was the only company executive interviewed who does not receive most of his Web site traffic from the Web.

"I do send out postcards to all previous clients every other month," he says. However, even his offline referrals need to initiate the business via his site.

"It doesn't matter if my prospect is family, a friend or a referral from a previous client; everybody needs to fill out an app online," he says.

While David McDonnell, president of Turnstone Mortgage Co., Exton, Pennsylvania (www.turnstonemortgage.com), generates most of his Web site traffic via online portal sites, he has the same overall approach as Sage. Of the 20 percent of non-Internet-generated business McDonnell received last year, many of those leads were repeat customers and referrals who contacted the company via its Web site. The other forms of non-Web-site advertising noted collectively by the five companies interviewed were newspaper, television and radio.

How has online lending changed?

Across the board, the biggest noted change in online lending today is that the customer rules. "The [Internet] is a virtual encyclopedia," Sage says. "Anything you've ever wanted to know about mortgages can be found online. As a result, borrowers are more educated."

The accessibility of mortgage knowledge gives the borrower power. Gone are the days when a consumer has to call one company after another to find out what the rates are, let alone try to determine how competitive the quotes are.

What's the downside for lenders? More price competition and smaller margins.

Mitch Lichterman, president of Loanguy.com Inc., Los Angeles (www.loanguy.com), backs that up. "Online lending has become very competitive. There are more lenders using the Internet to market and bring leads. …

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