1. The Online Mortgage Industry Lisa Bembenick | Naresh Bhaskar | Joe Carlen Chad Carter | Lbujomir Cvetkovic Heinz, CMU | Spring 2000 95-731: Business Strategy and Electronic Commerce Homework 1 | 01-25-2000

2. Major Market Players l Government: Fannie Mae Freddie Mac l Banks: Chase Manhattan PNC Mellon l Brokerage Firms: eMortgage Hotloans Mortgage Auction America’s Cashline

3. A Sample Front Page

4. Basic Process Outline: 1 l Government and Banks: Consumers submit application on line Government/Banks approve application directly Consumer receives loan directly through either the Bank or Government institution

5. Basic Process Outline: 2 l Brokerage Firms: Consumers submit application online Brokerage firm approves application and connects consumer to lending institution Consumer receives loan through lending institution

6. A Sample Signup Page

7. THE ONLINE MORTGAGE APPLICATION PROCESS l Process fairly uniform across the larger players: 1) Complete mandatory information form detailing personal contact, credit, housing purchase, and other relevant information. 2) However, there are some discrepancies regarding applicant authentication. For example: E-mortgage performs a comprehensive credit check before offering any valuable information to the client. MortgageDirect requires valid phone number and then immediately offers menu of potential "best fit" lenders from which applicant may choose.

8. Customer Profile l Who are the customers? Renters or first-time buyers Owners looking to refinance Customers with a loan in process Owners looking to buy an *additional home Also, customers can be segmented according to mortgage amount (e.g., customers with mortgages over and under $252 K) * * Source: http://www.mellon.com

9. Attracting Customers l How do they attract customers? Word of Mouth Referrals Media Advertising Direct Mail Web Banner Adverts On Websites where mortgages is not the primary service (e.g., banking), online mortgage service is “bundled” with the main line of business

10. Value-Add Features Consumer can submit applications to various firms, seek the best rates -- all without having to leave the home –Payment calculator –Car loans –Refinancing

11. Additional Value-Add Some firms will auction consumers’ loan requests and lenders will bid for business Other Services –Free Credit Assessment (HotL) –Home value estimate (eM) –Financial planning (PNC) –Reverse mortgages for Seniors (Gvt) –Loans for people with Disabilities (Gvt)

12. Average Mortgage Rates National 1999 average mortgage rates* MortgageRatePoints 30 Year Fixed8.261.00 15 Year Fixed7.861.00 1 Year Adjustable6.561.00 *Source: http://www.mortgage-net.com/trends/market/

13. Some Sample Prices l 30-year fixed mortgage: Today’s low rates: 7.89 (MortgageAuction)* Rate 8.5/ Points 1/8 / APR (PNC) Rate 8.0 / Points 0.99 / APR 8.152 (Hotloans) l 15-year fixed mortgage: Today’s low rates: 7.67 (Mortgage Auction)* Rate 8.0 / Points 3/8/ 8.44 (PNC) Rate 7.625 / Points 0.99 / 7.862 APR (Hotloans) * Quotes as on 01-23-2000 on http://www.mortgageauction.com

14. Product Trial Inducements l Loans for all credit types (Fairbank Mortgage) l Direct Lender with no upfront application fees and same day pre-approvals (EquityOne Inc ) l Free analysis and consultation (Valley United Mortgage) l Low mortgage rates, great customer service (Security National Mortgage) l No Broker fee or middlemen (e-Mortgage)

15. Repeat Customer Generation l Flexible Adjustable Rate Mortgages (ARM): This could be fixed for 3,5,7 or 10 years. Security of a fixed-rate loan; (e-Mortgage) l Submit one application to 250 lenders: Lenders bid for loan business in a real time auction. (MortgageAuction) l Online ‘Rate Tracker System’ for customers: Customer chooses his/her desired rate and, once that rate becomes available, the customer is notified immediately. (Hotloans)