Magazine article American Banker

Internet-Bred Competitors Put Squeeze on Smaller Lending Companies

Magazine article American Banker

Internet-Bred Competitors Put Squeeze on Smaller Lending Companies

Article excerpt

SAN FRANCISCO -

Daniel T. Stone finds himself between a rock and the Internet.

Mr. Stone, a vice president for secondary marketing and the wholesale division at MGM Mortgage Co. in Orange, Calif., says about 40% of MGM's loan officers operate out of realty agents' offices, where they are expected to gain an edge in making loans as homes are sold.

But thanks to Internet technology, real estate brokers are undercutting that strategy, using Internet services to broker loans themselves, Mr. Stone said. They "want to have a little control of not only the sale of the home but the loan transaction. And they want to take a piece of the pie," he said.

At a Mortgage Bankers Association secondary market conference last week, Mr. Stone and others from smaller mortgage companies said they are being squeezed by the new technology.

Though some complained of the new competition from real estate brokers, others said they are at a disadvantage against larger lenders whose technological clout has enabled them to form alliances recently with Fannie Mae and Freddie Mac. The big players, ranging from Norwest Mortgage to Countrywide Credit Industries, have developed their own underwriting systems and have negotiated special arrangements to sell most of their loans to one or other of the secondary market mortgage giants in exchange for the right to use their own systems.

Angelo R. Mozilo, chairman and chief executive officer of Countrywide, defended the deals as benefiting the consumer. They "put everybody on the same side," he said.

Countrywide's partnership with Fannie Mae, announced July 9, has "given us a lot of flexibility to grow faster, to leverage ourselves better," Mr. Mozilo said. As a result, lenders like Countrywide are now viewed more as "partners rather than adversaries" by Fannie and Freddie, he said.

But smaller mortgage bankers expressed concern. …

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