HomeHome Buyers Surf the Net Part II
by Stephanie A. Chisholm
Last year, the Mortgage Almanac introduced our magazine format on-line,with the debut of its Internet site, www.mortgagealmanac.com in Februaryof 1996. A subsequent article, Homebuyer's Surf The 'net, appeared in ourSpring 1996 issue. One year later, we have gone back to the New Englandinstitutions interviewed for the first article for a progress report. Now,we hear the industry buzz directly from mortgage banking technology specialistsfrom Bank of Boston, Boston Federal Savings Bank, and PNC Mortgage.
In 1997, the mortgage banking industry is still abuzz with Internet technology.The corporate rush onto the Internet raises the question, "Does informationtechnology pay off?" A recent New York Times article quotes techno-optimistErik Brynjolfsson, a professor at M. I. T.'s Sloan School of Management,who believes that "If used properly, networked computers can help improveproduct quality, speed production development and enhance customer service,all of which create value added for customers."
The article goes on to conclude that "the Internet's effect on corporateAmerica is just beginning-and just starting to be measured. Many companieshave already seen direct benefits, and early studies seem encouraging."Sales professionals in the mortgage banking and real estate industry areusing the Internet to inform their prospective home buyers and home ownerswho are refinancing about their products and services, which in turn generatesleads. Gains can come from saving time and costs through basic, unglamoroussteps like processing application forms and credit reports electronicallyand putting pre-qualification forms on-line.
But as much as people are still talking about "the 'net," dohome buyers really understand how to use the technology to search for amortgage? When will access via the computer ultimately replace a potentialhome buyer walking into the mortgage department of the local bank and completinga loan application in person? Last year, statistics showed that one in eightconsumers gained access to the Internet by becoming an on-line subscriberto services such as America On-Line, Prodigy and Compuserve. In 1997, thatnumber has increased to one in four. Users can utilize programs such asWeb-crawler to access the World Wide Web, where they can use search enginessuch as Yahoo, Lycos, and Alta Vista to locate key words (such as mortgage)appearing in documents, worksheets and databases. One problem identifiedby this publication last year was that while many of the major commercialbanks had posted websites, few actually contained any real mortgage information,citing that the topic was "under construction."
Those that offered basic information often did not allow a consumer todirectly e-mail the institution for information. Since many home buyersare searching the 'net for information at home, during non-working hours,they are most likely using their household telephone line and will not haveaccess to another line for a telephone inquiry. Other sites were so complexthat it took users a long time to navigate through page after page of information.We saw many lenders posting rates that were as much as three weeks outdated,which is misleading to consumers.
We recommend that buyers carefully read disclaimers which may be foundat the bottom of the Web page as well as contact the institution directlyto confirm current rates.
Demographic Profiles
Preliminary Internet demographics revealed that roughly 2/3 of those"surfing the 'net" were male. In 1996, we observed a trend towarda more even 50/50 male/female breakdown, which is even more evenly splitone year later. The user profile remains upper-middle class, highly educated,proficient in computing skills, with an average household income of $75,000or higher. As far as preferred lifestyle, this group is likely to own apersonal computer, vacation at least twice a year, own two cars, alreadyown their first home and may well possess a second one.
Who's Surfing The 'Net in 1997?
New England Leaders Speak Out:
Bank of Boston, a worldwide $64.8 billion dollar (as of March 31, 1997)banking giant, is an Internet leader in the banking industry. Last year,Ray Graber, applied technology systems group director, stated, "Westarted to look at the technology in 1995, and spoke to our 30 banking groupsworldwide. We viewed the medium as a unique, personalized distribution channel.We measured a 10% worldwide increase in Internet usage and realized thatthis new medium is a great way to reach our customers."
In a follow-up interview, Ray Graber's comments were encouraging: "We'vedone quite a lot in the past year. In mid-1996, Bank of Boston took overBayBanks in one of banking's largest corporate mergers of the year. Now,we plan to bring the two sites together by the end of May uner one new site,www.bankboston.com. Both old sites, www.bkb.com and www.baybank. com, willalso point to the new site. In March 1997, we had 734,000 hits on all ofour Web sites. We hired a graphic design firm to come up with a revisedlogo for the bank itself; they have combined the eagle from Bank of Bostonand the green and blue colors from BayBanks. As a final indication thatwe are totally committed to the 'net, we are hiring a webmaster who willoversee all of our Internet activity."
While mortgage activity on the Web site may not have tangible resultsas of yet, Ray Graber enthusiastically reported the following: "Inthe past year, we actually closed a couple of big deals entirely over theWeb; one in particular involved an equipment leasing deal for $1.4 millionin Rhode Island. We also got a consulting engagement through our Frankfurt,Germany office for a Danish company valued at a quarter of a million dollars.Between those two deals, we have pretty much covered our expenses for thedevelopment."
On the mortgage side, Bank of Boston has a calculator which offers adirect link to www.boston.com, the Boston Globe's real estate section. Asfar as format and content, the pages looks just like a newspaper. The programtakes the total amount a home buyer can pay for a mortgage and plugs intothe real estate section for available properties in that price range. Ourreview did not turn up a similar approach at any other bank or mortgageweb sites.
John Schleck, manager of PNC Mortgage's Hartford-based Connecticut region,began last year by asking managers to use E-mail for daily communication.At that time, Mr. Schleck said, "PNC recognizes a great opportunityin the Internet. As more potential home buyers and home owners who are refinancingor seeking any type of residential mortgage go on-line, absent lenders willmiss a unique opportunity. We're planning to be up in all fifty states withinthe year. We'd be crazy not to. Technology is here to stay. If you're inthe market for a mortgage, you need to either embrace technology or getrun over by it."
One year later, PNC Mortgage is in development on a test site which willexperiment with on-line pre-approval. At present, on-line access will onlybe available to Connecticut homebuyers, but beginning this summer all ofPNC's branches across the country will be in development on their own individualWeb sites. Since PNC Mortgage is a subsidiary of PNC Bank, interested surferscan access their site at www.pncbank.com. For the time being, the Connecticuttest site can be reached at www.re1.com/pncmortgagect.html. Once a long-termsite address is established, pointers at the old address will lead to thenew domain.
Boston Federal Savings Bank, who was still in the development stageslast year, is now on-line at www.bfsb.com. Here, potential borrowers cannot only complete a pre-qualification worksheet, but also have the abilityto investigate programs available at the bank which can be tailored to anindividual's needs. A mortgage calculator instantly gives the borrower theirbottom line monthly mortgage payment, for each program selected, based onincome to debt ratios.
On the flip side, some lenders we checked with had made little progressover the past year. Dan Casey, New England regional computer specialistfor Norwest Mortgage, is still in the process of putting his company on-linein all fifty states. Casey explains that "We are ignoring the technologyat our own peril. In one sense we believe that the customer talking to aloan officer will never go away, but we haven't done much development inthe past year. The problem is a conceptual one and we haven't quite figuredout how to solve it yet."
Beyond the Banking Community: The Non-Profit Sector
CHAPA is an acronym for the Citizen's Housing & Planning Association,a non-profit homebuyer based in Boston, Massachusetts. The site addressis: www.chapa.org. Foreclosed property listings are updated every two weeksand homebuyer workshop dates across New England are posted. CHAPA's focusis homebuyer training and education. Last Spring, CHAPA put up a site whichintegrated non-profit associations across the state of Massachusetts andNew England. Seminars were offered targeting low- to moderate-income first-timecondominium and homebuyers. Funding from Fannie Mae and Freddie Mac allowsCHAPA to bring their services to the non-profit sector. This year, the sitehas been expanded to cover the whole organization, offering a calendar sectionfor members.
Andrea Shapiro speaks about response to the Internet: "The feedbackfrom our members has been positive; since information changes so quicklyit is a challenge to keep the site updated." Andrea told us about onenew CHAPA program which is being promoted on the Web known as HOYO, whichstands for Home of Your Own. This is a very small pilot program which putspeople with cross-disabilities into home ownership programs. Only 25 householdsin Massachusetts can be served with this program We just closed our firstloan out in Holyoke for a woman who bought a two bedroom condo for $27,500with a $5,000 downpayment from the Federal Home Loan Bank of Boston throughthe alliance. Many people with disabilities can not work full fime thusare in the low-income category.
Across the nation, there are a multitude of non-profit mortgage bankingtrade associations, including California, Colorado and several other states,who have developed duel-prong sites which target both their membership baseand consumers who seek mortgage information or referrals to members of theassociation. Brian Hedge, Assistant Administrator of AVP at Liberty Bankin Middletown, worked with the Connecticut Mortgage Bankers Associationon developing their Web site located at www.cmba.org. Mr. Hedge states,"We are a non-profit trade association offering their monthly calenderof events on-line, along with a listing of committees which is updated periodicallyand a mission statement for the association. We would like to offer consumersthe opportunity to access association members who are mortgage bankers fordirect information. We are currently offering links to many of the banksites, so that potential homebuyers can have access to a wealth of informationat their fingertips."
On the real estate side, most state realty boards and many of the smallerlocal boards have established sites which also speak to their membershipas well as to the consumer seeking real estate guidance. Consumers can checkout the Connecticut Association of Realtor's site at: www.ctrealtor.comfor an example of a state board's site and www.RE1.com/ffldhome.html foran example of the Greater Fairfield Board of Realtor's site.
Where do we go from here?
The Future
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 technology allows homebuyers to educate themselves and ultimatelyreap great financial rewards. Those who are slow to adapt to the new technologywill most certainly be left behind while those who embrace it have the opportunityto strike gold.
Stephanie A. Chisholm is publisher of The Mortgage Almanac.