Online Mortgage Companies
The acceptance of Internet-based commerce has given
rise to the creation of a unique sort of mortgage company
that exists only online. While most mortgage firms do
have an online presence for providing information, companies
such as Lendingtree.com are “virtual companies,”
which exist primarily in cyberspace and actually take
and approve applications online.
Currently, only a small percentage of mortgage transactions
are done on the Internet, but that figure is expected
to increase exponentially over the next few years. By
2005, 10 percent of residential mortgages are expected
to be online transactions. But, while fewer transactions
are actually completed on the Internet, many borrowers
use the Internet as a starting point to gather information.
Many of the online mortgage firms are brokers and not
direct lenders; and some are embracing the auction model
by taking an applicant’s information and allowing
mortgage companies to bid for their business. Online
brokers, because they can market to a much broader audience,
often charge lower fees than a traditional mortgage
broker. Discount online mortgage brokers follow the
lead of discount stock brokers, which have gained popularity
by offering inexpensive transaction fees and online
Online mortgage companies do offer numerous advantages.
Besides typically charging lower fees, the automation
inherent in the online medium means originations can
take place in a shorter period of time, and the entire
process becomes more efficient. The Myers Internet/Mortgage
Banking Internet Mortgage Industry Survey reveals that
the presence of online mortgage companies has reduced
the time it takes to process and close a loan. The survey
also points out that more mortgage companies are using
the Internet as a means of expanding their territories.
The end result is increased competition in the mortgage
field, which ultimately yields better rates and more
services for consumers.