Magazine article Mortgage Banking

E-LOAN's GOT MONEY

Magazine article Mortgage Banking

E-LOAN's GOT MONEY

Article excerpt

Capital rich and publicly traded, E-LOAN is shaking up the mortgage world. Now with a warehouse line and Desktop Underwriter access, the e-lender can control its destiny as a mortgage banker. Next stop: Europe, the Far East, Down Under and maybe your borrowers.

ON THE DAY MORTGAGE BANKING VISITED THE FUBLIN CALIFORNIA, OFFICES OF E-LOAN, INC., CHRIS LARSEN ASKED JANINA PAWLOWSKI IF SHE WANTED TO BE CHIEF EXECUTIVE OFFICER OF THE COMPANY--AGAIN.

Larsen and Pawlowski founded E-LOAN in 1996, and for the first two years Pawlowski was chief executive officer. But two years later she could see that Larsen, then president, wanted to take the reigns of the company and she asked him if he wanted to switch. Larsen answered yes, they shook hands on it and changed jobs. Now, with his two years at the top almost over, Larsen returned the favor.

Chris Larsen is still chief executive of E-LOAN. Pawlowski turned him down for the job swap. "He's more suited to the position than I am," she says. "I'm more focused on the product, customer, organization and development, and he is more the outside guy. When it comes to the analysts, he is wonderful."

This wasn't the first time Pawlowski made a seemingly inexplicable decision. The great myth of E-LOAN, told in the pages of Forbes magazine and on National Public Radio, is that E-LOAN, in late summer 1998, had burned through its operating cash and was on the verge of being sold to Intuit Corporation. Although it would have been tough to walk away from the company they founded, both Larsen and Pawlowski would have ended up very rich--with about $10 million in-pocket and $16 million in Intuit stock each.

But just as the deal was about to conclude, Pawlowski dreamed about her grandmother having a dying baby. The message she took away from the dream was to hold on to the company With time running out on the Intuit acquisition deal, they reversed course and sold 23 percent of ELOAN to Yahoo!, Softbank and Sequoia Capital for $25.4 million and kept the company.

As yet, there is no fairy-tale ending to this story.

E-LOAN remains among the largest online mortgage companies today and is arguably the most visible, especially in California-a huge mortgage market.

According to a Deutsche Bank Securities study by James Marks, "Revving up the On-Line Mortgage Machine," done earlier this year, F-LOAN held onto the largest market share in the e-commerce mortgage industry. In the first quarter, the company did about $470 million of mortgage loans.

E-LOAN functions as both an online mortgage broker and a mortgage bank. Its monthly volume funded as a mortgage banker is 83 percent as of its second quarter, ended June 30. Last year, E-LOAN reported revenues of s6.8 million. By second-quarter 1999, revenues already totaled $4.6 million. Business, it seems, should go nowhere but up.

According to Jamie Punishell with Forrester Research in Boston, online mortgage originations today account for less than 1 percent of total mortgage lending. "As the 'Net equips consumers with better information and more alternatives, mortgage lending on the 'Net will climb to $91.2 bib lion by 2003, almost 10 percent of the market," says Punishell. Already for 1999, Larsen estimates that online mortgage business could hit 1.4 percent of all mortgages (or roughly $18 billion, according to a Forrester Research report from January).

Punishell adds, "while the market remains insignificant today, executives convey a sense of urgency about their online efforts. Why? They have seen the explosion in other markets like the brokerage business. Lenders feel the online credit market is ready to blast off-and they want to be along for the ride."

Pleasure and pain

That's the problem-the online mortgage business is getting crowded. Besides F-LOAN, mortgages can be obtained via the Internet with such companies as iOwn (formerly HomeShark), HomeAdvisorTM (Microsoft), LendingTree, GetSmart, QuickenMortgage(r) (Intuit), mortgage. …

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