Online and Nonprime Opportunities

By Morse, Neil J. | Mortgage Banking, February 2004 | Go to article overview

Online and Nonprime Opportunities


Morse, Neil J., Mortgage Banking


PHIL HUFF, PRESIDENT, ELYNX LTD., CINCINnati, has good news/bad news advice for the mortgage industry about electronic mortgages. According to Huff, the full e-mortgage may not be here (or even near), but it is certain to arrive one day. A panelist at the Mortgage Bankers Association's (MBA's) 90th Annual Convention & Expo last October in San Diego, Huff said, "Don't wait around doing nothing. You can implement a lot of things now." Urging listeners to resist complacency, he added: "We must still march [forward] uniformly" to achieve the e-mortgage "along the way." Huff acknowledged that putting together all the pieces of a complete, electronic mortgage is daunting, noting, "It's overwhelming to the average person."

In the swirl of conversation about an all-electronic mortgage transaction, one conclusion is certain, said Richard Jones, chief information officer for Countrywide Financial Corporation, Calabasas, California: "It's really not a technology issue anymore." Jones made the remark at Thomson Media's 5th annual Mortgage EC Conference in Las Vegas in December. "The capability to do an e-mortgage has been around a long time," Jones noted, "so it's really other things [holding it up], like customer acceptance." In other words, "emotional and political hurdles," he said. And then there are the lawyers. "The legalities of the electronically signed loan have not been totally tested by law," Jones noted. "What if in three years the loan is called up and contested in a court of law? It hasn't occurred yet, but there is a nervousness about acceptance in court."

Jones said, "It's going to be a while before you can do a home loan the way you might buy a book on Amazon.com." According to Jones, Countrywide funded more than $410 billion in home loans in the first 11 months of 2003--about 45 percent of them included major portions of the transaction conducted via the Internet.

Regina Lowrie, president and chief executive officer of Gateway Funding Diversified Mortgage Services, Fort Washington, Pennsylvania, said her company is "going to get back to basics" now that originations have slowed--meaning back to "diversification of our business channels," she explained. Last year Gateway Funding generated some $2.7 billion in originations, mostly conventional and government-insured loans, according to Lowrie. To respond to the marketplace, the company is establishing a home-equity division because, said Lowrie, "the individual [borrower] who refinanced at 5.25 percent at 30 years is not going to want to give up that rate, so I see home-equity, second mortgages, lines of credit growing."

Speaking in September at Wayne, Pennsylvania-based GHR Systems Inc.'s fourth annual Client Conference in Galloway, New Jersey, Lowrie acknowledged that her company is "going to have to deliver [nonconforming products] as quickly as we do our conventional loans." And, as competition increases and rates rise, Lowrie said, "margins will continue to shrink"--so her firm is looking for opportunities to acquire small companies and branches, because some owners may want to take the money out of their companies.

Praising the nimble style of mortgage brokers, Steve Alonso, chairman and chief executive officer of Oak Street Mortgage LLC, Carmel, Indiana, said, "It never ceases to amaze me, to see how [brokers] do business. …

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