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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 interfaces.

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.