HomeHome Buyers Surf the Net: The UltimateMarketing Tool for Lenders
by
Stephanie Anne Chisholm
Man & Communication: A Historical Overview
Written communication dates back to the Stone Age, when the head of onefamily would leave a carved block of stone at the door of another to expressgoodwill and friendship. As the tradition evolved, the block of stone wasreplaced by a small rectangular piece of paper. Leaping forward to 1455,the printing press was invented in Mainz, Germany by Johann Gutenberg. Thefirst book printed on press was the bible.
The first five books of the Old Testament had evolved into final formsometime between 300-400 BC, but were not printed mechanically using movabletype until 1800 years later. Early printers developed a primitive methodof setting type using carved wooden letters, often elaborate in typefaceor letter design. In 1532, Machiavelli's Prince was published posthumously.At first, books that were not hand-printed were considered pedestrian; graduallythey were accepted. In China, a scholar's educational level could easilybe determined by his calligraphy penstrokes. In Egypt, ancient hierogliphicsfound on the Rosetta Stone gave modern scientists a glimpse of life centuriesago. During the nineteenth century, calling cards with hand-drawn decorationand verse were left by visitors to a home. Today, use of the modern businesscard is a commonly accepted practice in worldwide corporate culture.
In 1773, Dr. Benjamin Franklin of Philadelphia, publisher of Poor Richard'sAlmanac, became the first postmaster general in what would soon become theUnited States of America. The Declaration of Independence was signed onJuly 4, 1776, and the Constitution of the United States of America was signedin 1787. In 1803, President Thomas Jefferson negotiated the Louisiana Purchasewith France, doubling the size of our country. In 1820, Missouri becamethe gateway to the West, with St. Joseph being the eastern starting pointof the Pony Express. Previously, a letter from New York to San Franciscohad to travel by ship through the Isthmus of Panama, typically taking overa month to arrive at the west coast.
The 1990's: Speed Thrills
Nearly 170 years later, electronic mail and voice mail were first introducedin the early 1990's. Today, very few telephone calls result in an actualconversation. We communicate through a complex network; the average loanoriginator's business card has up to five different numbers for telephone,pager, voicemail, e-mail, fax and numbers. The era of the traditional switchboardoperator giving a personal greeting and directing your call is rapidly becomingphased out. Through phone lines we can not only send a memo to one person,but we can route the message to an entire group, attaching a file whichwill be instantly downloaded into the receiver's electronic mailbox (E-mail).Gone is the quintessential secretary of yesterday's office, for the executiveof the '90's typically drafts and prints his or her own letters and documents.
What Next for the Net?
1996 -- and the mortgage banking industry is abuzz with internet technology.Everyone is talking about "the net," but does anyone really understandit? In 1969, the United States government developed internet technologyto allow scientists global access to data for the purpose of expanding researchcapabilities. In the Vietnam War era of the late sixties and the Cold Warperiod in the early seventies and eighties, Washington wanted to 'spreadthe risk,' so to speak, in the event of nuclear attack. If one city wentdown, the internet or network of phone lines linking computer systems allover the world would continue to function.
Today, one in eight consumers gains access to the internet by becomingan on-line subscriber to a service such as America On-Line, Prodigy or Compuserve.By utilizing a program such as Webcrawler, the user can access the WorldWide Web, where the word mortgage appears in excess of 2,873 times in varioustext documents, worksheets and databases.
Demographic Profiles
Preliminary internet demographics revealed that roughly 2/3 of those"surfing the net" were male. In 1996, we observe a trend towarda more even 50/50% male/female breakdown. The user profile is upper-middleclass, highly educated, proficient in computing skills and has an averagehousehold income of $75,000 or higher. In terms of lifestyle, this groupvacations at least twice a year, has two cars, already owns their firsthome and may very well possess a second one. In January, more than 10,000people attended the first internet show at the Jacob Javits center in NewYork City. Ages ranged from 15-80 and attendees included students and teachers,"techno-dweebs," as well as corporate types in suit and tie, employeesand entrepreneurs alike, and parents with children leading the way frominteractive display to interactive display. Distributors included The NewYork Times, Apple, Microsoft, CBS TV & Radio, America-On-Line, and manymore.
Who's Surfing The Net? New England Leaders Speak Out
Ray Graber, applied technology systems group director of The Bank ofBoston, www.bkb.com, compares the internet browser to spectators at a golftournament. "The men and women who love to play golf and watch it onTV represent the upper strata of society. They have the disposable incometo invest hundreds in the best equipment, spend thousands joining the mostexclusive clubs, and play on courses all over the world. Have you ever noticedwhich companies target golfers with their advertising campaigns? I'll tellyou one thing, you'll see golfers watching a TV commercial for Jaguar, BMWand Mercedes before you'll see a spot for a Ford or Buick. These days, wesee all of the major automobile manufacturers with their own homepage. Youcan order a car on-line without ever stepping foot on the showroom floor."
Graber continues, "It is this same type of upscale audience whowill take the time to go out and learn the new internet technology. Theprofile of the internet user is a perfect match for mortgage banking. Theygo on-line, and by the time they reach our website, we have a pre-qualifiedbuyer," says Graber.
Bank of Boston, a $44 billion dollar banking giant, is an internet leaderin the banking industry. According to Mr. Graber, "We started to lookat the technology one year ago, and spoke to our 30 banking groups worldwide.We view the medium as a unique, personalized distribution channel. We measureda 10% worldwide increase in internet usage and realized that this is a greatway to reach our customers."
The company put up their homepage last November, using their NYSE ticker-tapesymbol, BKB, as their URL or internet address: www.bkb.com. Ray Graber speaksenthusiastically about the response thus far, "In the few short monthsthat we've been up, inquiries have poured in from 23 countries. You canfind an ATM in Brookline or review Brazil's economic forecast, all on-line.We get over 1,000 hits (inquiries) a day on our mortgage calculator alone.A loan originator responds directly to each registration within 24 hours.In January, we got our first responses from Sweden and France. Last month,we had the most hits from Brazil (324), Argentina (211), Canada (143), TheUnited Kingdom (109), and Japan (103), respectively. We have logged 80-90messages per month on our bi-lingual English/Spanish site in Sao Paulo,Brazil. We offer international banking services ranging from portfolio managementto basic savings and checking. We are truly a global entity with PC bankingin 49 different countries. The interest (no pun intended!) has been tremendous- we can't sleep at night thinking about how the internet has just begunto impact the banking community. The world is truly at your fingertips!"
Dan Casey, New England regional computer specialist for Norwest Mortgageis in the process of putting his company on-line in all fifty states. Caseyexplains that "Companies who are investing in the internet now aregoing to be winners. As a company, Norwest has passed through the basiclearning curve; we have emerged as an industry leader. It's like buyingIBM or Microsoft stock ten years ago, before everyone had their own PC.We anticipate explosive growth from now throughout the year 2000 and beyond.All of our loan originators have their own laptop computer and can now underwritea loan in minutes, taking the buyer to closing in days. The home purchasetransaction previously took a minimum of 60 days. Even realtors are goingon-line, which is hard to believe! Banks, however, are much further aheadon the technology loop."
John Schleck, manager of PNC Mortgage's Hartford-based Connecticut region,already has all 14 loan originators trained on the laptop. According toSchleck, "All of the managers at PNC use E-mail to communicate daily.We are far and away ahead of our completion on every front. The laptopsprovided to each employee are purchased by the company. Other lenders maketheir originators buy their equipment." As we sat in his office, Mr.Schleck was pulling up a credit report, downloading it via modem, and hadit printed in a matter of moments. He continues, "PNC recognizes agreat opportunity in the internet. As more potential homebuyers and homeownerswho are refinancing or seeking any type of residential mortgage go on-line,absent lenders will miss a unique opportunity. We're planning to be up inall fifty states within the year. We'd be crazy not to. Technology is hereto stay. If you're in the mortgage business, you need to either embracetechnology or get run over by it."
Kevin Carroll, CRA manager for Boston Federal Savings Bank anticipatesgrowth in the low- to moderate-income groups as well. On-line at www.bfsb.com,potential borrowers can not only complete a pre-qualification worksheet,but also have the ability to plug in programs available at the bank whichcan be tailored to an individual's needs. The mortgage calculator instantlygives the borrower their bottom line monthly mortgage payment, for eachprogram selected, based on income to debt ratios. Mr. Carroll explains that,"Internet technology is becoming available to everyone, across allincome levels and socio-economic groups. Public libraries are beginningto access the internet. The technology is available. The question is, nothow will they learn how to use it, but how quickly?" President Clintonhas the goal to provide all of the nation's public schools with internetaccess in the next three years, starting in California.
Robin Cileno, vice-president of residential lending for the New Englandregion at BankAmerica Mortgage is looking at the internet as a way to linkher region to the company's national resources, on-line. "BankAmericaMortgage has set up a website on America On-Line. We're at www.bofa.com."
Beyond the Banking Community:
The Non-Profit Sector
Hillary C. Sloate is the YMCA computer center director and works at atthe Dorchester, Massachusetts location. Mrs. Sloate says, "People underestimatethe value of an education. If you are not raised in an environment whereeducation is valued, you don't even think about going to college. At theYMCA, we are working very hard to foster education and technology awareness.Once people get it, ideas spread like wildfire."
Most YMCA locations across the US offer a complete range of classes incomputers. Mrs. Sloate continues, "For adults, we offer an intro toWindows class which is free to parents of pre-school children. It is especiallygeared to parents, particularly women, who need to gain skills in the workforce.There is an increase of community-based resource centers such as the TechnologyCenters Network in Newton, Mass. They connect all of the networks; memberscan get an internet account through inter-global communications. It's aclearing-house of information. The technology is available in low-incomecommunities. The problem is that the people aren't taking advantage of it,because they aren't aware that it exists. We send press releases to TheGlobe, The Baystate Banner, The Dorchester Community News, and even to theneighboring town of Milton which is not exactly low-income. We even advertiseon BNN, Boston Neighborhood Network, a public-access cable channel,"says Sloate. "The bottom line? If they keep their eyes open, they'llhear about it. Last week, I read in the Herald about a new website, www.roxbury.com.,for residents of Roxbury... Check it out!"
Becky Linhart, director of finance, at CHAPA, (Citizen's Housing &Planning Association, based in Boston, Massachusetts), is working on thedevelopment of their website, which will be in place by April 15th. Thesite will involve non-profit associations across Massachusetts and New England.CHAPA's focus is homebuyer training and education. Seminars targeted towardlow- to moderate-income first-time condominium and homebuyers are scheduledthroughout the summer of this year. Funding from Fannie Mae and FreddieMac will allow CHAPA to bring this technology to the non-profit sector.
Tim Pacilio, president of Silvermine Associates, a mortgage banking technologyconsultant based in Guilford, Connecticut, makes the following observations:"This is the first year that the kids who started college in the mid-eightieswith their own PC in hand are starting to buy homes of their own. The first-timehomebuyer between 25-30 is more proficient in computing skills than anyother generation to enter the buyer's market. They represent a far moreeducated segment who will come to a realtor or mortgage lender's officealready having done their homework. It's a shame that many of the realtorsand mortgage lenders in the 40-plus age group don't have a clue about what'sbeen going on. What's worse is that some of them don't want to know."
Dan Casey, of Norwest Mortgage agrees, "The younger baby-boomers,the 30-40 crowd, just missed the introduction of computers to college campusesin 1984 with the Apple McIntosh. They went to school with typewriter inhand and left the same way. This generation was then forced to learn computingskills in the workplace. If they didn't take touch typing in junior high,they had to learn it if they wanted to keep their jobs. In today's office,computer skills are required for most occupations, not just secretarial.Managers and sales people typically write and edit their own correspondenceusing their own laptop."
Where do we go from here?
The Future
On February 28, 1996, The New York Times trumpeted the following headline:AT&T'S CUSTOMERS TO GET FREE TIME ON THE INTERNET - MILLIONS OFFEREDA LINK - Phone Giant's Entry Is Seen as Big Step in Moving the MainstreamOn-Line. Headline news of the Republican Primaries and Congressional TaxCuts paled in comparison.
The article began, "AT&T said yesterday that it would offerits telephone customers five hours of free Internet access each month fora year, bringing computer network service a step closer to becoming a utilitylike electricity or water." In addition, residential customers willhave the option to set up a personal electronic mail box and access thenational phone directory for less than $20 per month. "The Internetis taking one step further to being a mass medium," said Eli M. Noam,director of the Institute for Tele-Information at Columbia University inNew York.
AT&T estimates that 16-20 million phone customers have a personalcomputer with a modem. In March, the company will provide its residentialcustomers free software for using the World Wide Web and offer 24 hour telephonetechnical support. Both MCI and Sprint, AT&T's rivals, will not be farbehind.
"This is the beginning of the end of the telephone as we know it,"said Paul Saffo, a director of the Institute of the Future, a research centerin Menlo Park, California. "The race is on to use a phone line to connectyou to more than other people, and to do more than voice. The phone linehas been turned into an information utility conduit."
Just how will this new technology will impact New England mortgage bankers?As of April 1, 1996, five Connecticut-based banks - representing only 1%of the market in the state - have taken the leap into the future by settingup their own website on the internet. These cyberspace pioneers are: Centerbank,People's Bank, Webster Bank, Lafayette American Bank & Trust and Bankof New Haven. According to an independent survey conducted by The MortgageAlmanac in February, the other 99% are "under construction." Inaddition, there are several New England-based banks, Banc Boston Mortgage,BayBank and Salem Five, who are now reaching borrowers with sophisticatedhomepage design, colorful graphics and financial tools such as pre-qualificationcalculators and ratio worksheets.
Today, homebuyers, lenders, realtors, government agencies and non-profitorganizations are all rushing to get on-line faster than people rushed toSan Francisco to find gold in 1849. And, technology experts predict growthas spectacular as that of the gold rush in internet use throughout the nextmillennium. The mortgage banking community as a whole must embrace thisinnovative marketing opportunity by first educating themselves, then passingknowledge onto customers. Indeed, those institutions who pioneer the internettechnology will surely strike gold and ultimately reap great financial rewards.Those who are slow to adapt to the new technology will most certainly beleft in the dust.