Home Buyers Surf the Net: The Ultimate Marketing Tool for Lenders

by

Stephanie Anne Chisholm

Man & Communication: A Historical Overview

Written communication dates back to the Stone Age, when the head of one family would leave a carved block of stone at the door of another to express goodwill and friendship. As the tradition evolved, the block of stone was replaced by a small rectangular piece of paper. Leaping forward to 1455, the printing press was invented in Mainz, Germany by Johann Gutenberg. The first book printed on press was the bible.

The first five books of the Old Testament had evolved into final form sometime between 300-400 BC, but were not printed mechanically using movable type until 1800 years later. Early printers developed a primitive method of setting type using carved wooden letters, often elaborate in typeface or letter design. In 1532, Machiavelli's Prince was published posthumously. At first, books that were not hand-printed were considered pedestrian; gradually they were accepted. In China, a scholar's educational level could easily be determined by his calligraphy penstrokes. In Egypt, ancient hierogliphics found on the Rosetta Stone gave modern scientists a glimpse of life centuries ago. During the nineteenth century, calling cards with hand-drawn decoration and verse were left by visitors to a home. Today, use of the modern business card is a commonly accepted practice in worldwide corporate culture.

In 1773, Dr. Benjamin Franklin of Philadelphia, publisher of Poor Richard's Almanac, became the first postmaster general in what would soon become the United States of America. The Declaration of Independence was signed on July 4, 1776, and the Constitution of the United States of America was signed in 1787. In 1803, President Thomas Jefferson negotiated the Louisiana Purchase with France, doubling the size of our country. In 1820, Missouri became the gateway to the West, with St. Joseph being the eastern starting point of the Pony Express. Previously, a letter from New York to San Francisco had to travel by ship through the Isthmus of Panama, typically taking over a month to arrive at the west coast.

The 1990's: Speed Thrills

Nearly 170 years later, electronic mail and voice mail were first introduced in the early 1990's. Today, very few telephone calls result in an actual conversation. We communicate through a complex network; the average loan originator's business card has up to five different numbers for telephone, pager, voicemail, e-mail, fax and numbers. The era of the traditional switchboard operator giving a personal greeting and directing your call is rapidly becoming phased 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 which will be instantly downloaded into the receiver's electronic mailbox (E-mail). Gone is the quintessential secretary of yesterday's office, for the executive of 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 understand it? In 1969, the United States government developed internet technology to allow scientists global access to data for the purpose of expanding research capabilities. In the Vietnam War era of the late sixties and the Cold War period in the early seventies and eighties, Washington wanted to 'spread the risk,' so to speak, in the event of nuclear attack. If one city went down, the internet or network of phone lines linking computer systems all over the world would continue to function.

Today, one in eight consumers gains access to the internet by becoming an 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 World Wide Web, where the word mortgage appears in excess of 2,873 times in various text 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 toward a more even 50/50% male/female breakdown. The user profile is upper-middle class, highly educated, proficient in computing skills and has an average household income of $75,000 or higher. In terms of lifestyle, this group vacations at least twice a year, has two cars, already owns their first home and may very well possess a second one. In January, more than 10,000 people attended the first internet show at the Jacob Javits center in New York City. Ages ranged from 15-80 and attendees included students and teachers, "techno-dweebs," as well as corporate types in suit and tie, employees and entrepreneurs alike, and parents with children leading the way from interactive display to interactive display. Distributors included The New York Times, Apple, Microsoft, CBS TV & Radio, America-On-Line, and many more.

Who's Surfing The Net? New England Leaders Speak Out

Ray Graber, applied technology systems group director of The Bank of Boston, www.bkb.com, compares the internet browser to spectators at a golf tournament. "The men and women who love to play golf and watch it on TV represent the upper strata of society. They have the disposable income to invest hundreds in the best equipment, spend thousands joining the most exclusive clubs, and play on courses all over the world. Have you ever noticed which companies target golfers with their advertising campaigns? I'll tell you one thing, you'll see golfers watching a TV commercial for Jaguar, BMW and Mercedes before you'll see a spot for a Ford or Buick. These days, we see all of the major automobile manufacturers with their own homepage. You can order a car on-line without ever stepping foot on the showroom floor."

Graber continues, "It is this same type of upscale audience who will take the time to go out and learn the new internet technology. The profile of the internet user is a perfect match for mortgage banking. They go on-line, and by the time they reach our website, we have a pre-qualified buyer," says Graber.

Bank of Boston, a $44 billion dollar banking giant, is an internet leader in the banking industry. According to Mr. Graber, "We started to look at the technology one year ago, and spoke to our 30 banking groups worldwide. We view the medium as a unique, personalized distribution channel. We measured a 10% worldwide increase in internet usage and realized that this is a great way to reach our customers."

The company put up their homepage last November, using their NYSE ticker-tape symbol, BKB, as their URL or internet address: www.bkb.com. Ray Graber speaks enthusiastically about the response thus far, "In the few short months that we've been up, inquiries have poured in from 23 countries. You can find 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), The United Kingdom (109), and Japan (103), respectively. We have logged 80-90 messages per month on our bi-lingual English/Spanish site in Sao Paulo, Brazil. We offer international banking services ranging from portfolio management to basic savings and checking. We are truly a global entity with PC banking in 49 different countries. The interest (no pun intended!) has been tremendous - we can't sleep at night thinking about how the internet has just begun to impact the banking community. The world is truly at your fingertips!"

Dan Casey, New England regional computer specialist for Norwest Mortgage is in the process of putting his company on-line in all fifty states. Casey explains that "Companies who are investing in the internet now are going to be winners. As a company, Norwest has passed through the basic learning curve; we have emerged as an industry leader. It's like buying IBM 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 underwrite a loan in minutes, taking the buyer to closing in days. The home purchase transaction previously took a minimum of 60 days. Even realtors are going on-line, which is hard to believe! Banks, however, are much further ahead on 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 to Schleck, "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 laptops provided to each employee are purchased by the company. Other lenders make their originators buy their equipment." As we sat in his office, Mr. Schleck was pulling up a credit report, downloading it via modem, and had it printed in a matter of moments. He continues, "PNC recognizes a great opportunity in the internet. As more potential homebuyers and homeowners who 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 in all fifty states within the year. We'd be crazy not to. Technology is here to stay. If you're in the mortgage business, you need to either embrace technology or get run over by it."

Kevin Carroll, CRA manager for Boston Federal Savings Bank anticipates growth 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 which can be tailored to an individual's needs. The mortgage calculator instantly gives the borrower their bottom line monthly mortgage payment, for each program selected, based on income to debt ratios. Mr. Carroll explains that, "Internet technology is becoming available to everyone, across all income levels and socio-economic groups. Public libraries are beginning to access the internet. The technology is available. The question is, not how will they learn how to use it, but how quickly?" President Clinton has the goal to provide all of the nation's public schools with internet access in the next three years, starting in California.

Robin Cileno, vice-president of residential lending for the New England region at BankAmerica Mortgage is looking at the internet as a way to link her region to the company's national resources, on-line. "BankAmerica Mortgage 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 at the Dorchester, Massachusetts location. Mrs. Sloate says, "People underestimate the value of an education. If you are not raised in an environment where education is valued, you don't even think about going to college. At the YMCA, 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 in computers. Mrs. Sloate continues, "For adults, we offer an intro to Windows class which is free to parents of pre-school children. It is especially geared to parents, particularly women, who need to gain skills in the workforce. There is an increase of community-based resource centers such as the Technology Centers Network in Newton, Mass. They connect all of the networks; members can get an internet account through inter-global communications. It's a clearing-house of information. The technology is available in low-income communities. 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 The Globe, The Baystate Banner, The Dorchester Community News, and even to the neighboring town of Milton which is not exactly low-income. We even advertise on BNN, Boston Neighborhood Network, a public-access cable channel," says Sloate. "The bottom line? If they keep their eyes open, they'll hear 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 the development of their website, which will be in place by April 15th. The site will involve non-profit associations across Massachusetts and New England. CHAPA's focus is homebuyer training and education. Seminars targeted toward low- to moderate-income first-time condominium and homebuyers are scheduled throughout the summer of this year. Funding from Fannie Mae and Freddie Mac will allow CHAPA to bring this technology to the non-profit sector.

Tim Pacilio, president of Silvermine Associates, a mortgage banking technology consultant based in Guilford, Connecticut, makes the following observations: "This is the first year that the kids who started college in the mid-eighties with their own PC in hand are starting to buy homes of their own. The first-time homebuyer between 25-30 is more proficient in computing skills than any other generation to enter the buyer's market. They represent a far more educated segment who will come to a realtor or mortgage lender's office already having done their homework. It's a shame that many of the realtors and mortgage lenders in the 40-plus age group don't have a clue about what's been 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 campuses in 1984 with the Apple McIntosh. They went to school with typewriter in hand and left the same way. This generation was then forced to learn computing skills 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 correspondence using 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 OFFERED A LINK - Phone Giant's Entry Is Seen as Big Step in Moving the Mainstream On-Line. Headline news of the Republican Primaries and Congressional Tax Cuts paled in comparison.

The article began, "AT&T said yesterday that it would offer its telephone customers five hours of free Internet access each month for a year, bringing computer network service a step closer to becoming a utility like electricity or water." In addition, residential customers will have the option to set up a personal electronic mail box and access the national phone directory for less than $20 per month. "The Internet is taking one step further to being a mass medium," said Eli M. Noam, director of the Institute for Tele-Information at Columbia University in New York.

AT&T estimates that 16-20 million phone customers have a personal computer with a modem. In March, the company will provide its residential customers free software for using the World Wide Web and offer 24 hour telephone technical support. Both MCI and Sprint, AT&T's rivals, will not be far behind.

"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 center in Menlo Park, California. "The race is on to use a phone line to connect you to more than other people, and to do more than voice. The phone line has 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 setting up their own website on the internet. These cyberspace pioneers are: Centerbank, People's Bank, Webster Bank, Lafayette American Bank & Trust and Bank of New Haven. According to an independent survey conducted by The Mortgage Almanac in February, the other 99% are "under construction." In addition, there are several New England-based banks, Banc Boston Mortgage, BayBank and Salem Five, who are now reaching borrowers with sophisticated homepage design, colorful graphics and financial tools such as pre-qualification calculators and ratio worksheets.

Today, homebuyers, lenders, realtors, government agencies and non-profit organizations are all rushing to get on-line faster than people rushed to San Francisco to find gold in 1849. And, technology experts predict growth as spectacular as that of the gold rush in internet use throughout the next millennium. The mortgage banking community as a whole must embrace this innovative marketing opportunity by first educating themselves, then passing knowledge onto customers. Indeed, those institutions who pioneer the internet technology will surely strike gold and ultimately reap great financial rewards. Those who are slow to adapt to the new technology will most certainly be left in the dust.

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