Home 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 February of 1996. A subsequent article, Homebuyer's Surf The 'net, appeared in our Spring 1996 issue. One year later, we have gone back to the New England institutions interviewed for the first article for a progress report. Now, we hear the industry buzz directly from mortgage banking technology specialists from 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 information technology pay off?" A recent New York Times article quotes techno-optimist Erik Brynjolfsson, a professor at M. I. T.'s Sloan School of Management, who believes that "If used properly, networked computers can help improve product 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 corporate America is just beginning-and just starting to be measured. Many companies have already seen direct benefits, and early studies seem encouraging." Sales professionals in the mortgage banking and real estate industry are using the Internet to inform their prospective home buyers and home owners who are refinancing about their products and services, which in turn generates leads. Gains can come from saving time and costs through basic, unglamorous steps like processing application forms and credit reports electronically and putting pre-qualification forms on-line.

But as much as people are still talking about "the 'net," do home buyers really understand how to use the technology to search for a mortgage? When will access via the computer ultimately replace a potential home buyer walking into the mortgage department of the local bank and completing a loan application in person? Last year, statistics showed that one in eight consumers gained access to the Internet by becoming an on-line subscriber to services such as America On-Line, Prodigy and Compuserve. In 1997, that number has increased to one in four. Users can utilize programs such as Web-crawler to access the World Wide Web, where they can use search engines such as Yahoo, Lycos, and Alta Vista to locate key words (such as mortgage) appearing in documents, worksheets and databases. One problem identified by this publication last year was that while many of the major commercial banks 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 to directly e-mail the institution for information. Since many home buyers are searching the 'net for information at home, during non-working hours, they are most likely using their household telephone line and will not have access to another line for a telephone inquiry. Other sites were so complex that 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 found at the bottom of the Web page as well as contact the institution directly to 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 toward a more even 50/50 male/female breakdown, which is even more evenly split one year later. The user profile remains upper-middle class, highly educated, proficient in computing skills, with an average household income of $75,000 or higher. As far as preferred lifestyle, this group is likely to own a personal computer, vacation at least twice a year, own two cars, already own 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, "We started to look at the technology in 1995, and spoke to our 30 banking groups worldwide. We viewed the medium as a unique, personalized distribution channel. We measured a 10% worldwide increase in Internet usage and realized that this new medium is a great way to reach our customers."

In a follow-up interview, Ray Graber's comments were encouraging: "We've done quite a lot in the past year. In mid-1996, Bank of Boston took over BayBanks 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, will also point to the new site. In March 1997, we had 734,000 hits on all of our Web sites. We hired a graphic design firm to come up with a revised logo for the bank itself; they have combined the eagle from Bank of Boston and the green and blue colors from BayBanks. As a final indication that we are totally committed to the 'net, we are hiring a webmaster who will oversee all of our Internet activity."

While mortgage activity on the Web site may not have tangible results as of yet, Ray Graber enthusiastically reported the following: "In the past year, we actually closed a couple of big deals entirely over the Web; one in particular involved an equipment leasing deal for $1.4 million in 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 the development."

On the mortgage side, Bank of Boston has a calculator which offers a direct link to www.boston.com, the Boston Globe's real estate section. As far as format and content, the pages looks just like a newspaper. The program takes the total amount a home buyer can pay for a mortgage and plugs into the real estate section for available properties in that price range. Our review did not turn up a similar approach at any other bank or mortgage web 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 opportunity in the Internet. As more potential home buyers and home owners 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 market for a mortgage, you need to either embrace technology or get run over by it."

One year later, PNC Mortgage is in development on a test site which will experiment with on-line pre-approval. At present, on-line access will only be available to Connecticut homebuyers, but beginning this summer all of PNC's branches across the country will be in development on their own individual Web sites. Since PNC Mortgage is a subsidiary of PNC Bank, interested surfers can access their site at www.pncbank.com. For the time being, the Connecticut test site can be reached at www.re1.com/pncmortgagect.html. Once a long-term site address is established, pointers at the old address will lead to the new domain.

Boston Federal Savings Bank, who was still in the development stages last year, is now on-line at www.bfsb.com. Here, potential borrowers can not only complete a pre-qualification worksheet, but also have the ability to investigate programs available at the bank which can be tailored to an individual's needs. A mortgage calculator instantly gives the borrower their bottom line monthly mortgage payment, for each program selected, based on income to debt ratios.

On the flip side, some lenders we checked with had made little progress over the past year. Dan Casey, New England regional computer specialist for Norwest Mortgage, is still in the process of putting his company on-line in all fifty states. Casey explains that "We are ignoring the technology at our own peril. In one sense we believe that the customer talking to a loan officer will never go away, but we haven't done much development in the past year. The problem is a conceptual one and we haven't quite figured out 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 address is: www.chapa.org. Foreclosed property listings are updated every two weeks and homebuyer workshop dates across New England are posted. CHAPA's focus is homebuyer training and education. Last Spring, CHAPA put up a site which integrated non-profit associations across the state of Massachusetts and New England. Seminars were offered targeting low- to moderate-income first-time condominium and homebuyers. Funding from Fannie Mae and Freddie Mac allows CHAPA to bring their services to the non-profit sector. This year, the site has been expanded to cover the whole organization, offering a calendar section for members.

Andrea Shapiro speaks about response to the Internet: "The feedback from our members has been positive; since information changes so quickly it is a challenge to keep the site updated." Andrea told us about one new CHAPA program which is being promoted on the Web known as HOYO, which stands for Home of Your Own. This is a very small pilot program which puts people with cross-disabilities into home ownership programs. Only 25 households in Massachusetts can be served with this program We just closed our first loan out in Holyoke for a woman who bought a two bedroom condo for $27,500 with a $5,000 downpayment from the Federal Home Loan Bank of Boston through the alliance. Many people with disabilities can not work full fime thus are in the low-income category.

Across the nation, there are a multitude of non-profit mortgage banking trade associations, including California, Colorado and several other states, who have developed duel-prong sites which target both their membership base and consumers who seek mortgage information or referrals to members of the association. Brian Hedge, Assistant Administrator of AVP at Liberty Bank in Middletown, worked with the Connecticut Mortgage Bankers Association on developing their Web site located at www.cmba.org. Mr. Hedge states, "We are a non-profit trade association offering their monthly calender of events on-line, along with a listing of committees which is updated periodically and a mission statement for the association. We would like to offer consumers the opportunity to access association members who are mortgage bankers for direct information. We are currently offering links to many of the bank sites, so that potential homebuyers can have access to a wealth of information at their fingertips."

On the real estate side, most state realty boards and many of the smaller local boards have established sites which also speak to their membership as well as to the consumer seeking real estate guidance. Consumers can check out the Connecticut Association of Realtor's site at: www.ctrealtor.com for an example of a state board's site and www.RE1.com/ffldhome.html for an 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-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 technology allows homebuyers to educate themselves and ultimately reap great financial rewards. Those who are slow to adapt to the new technology will most certainly be left behind while those who embrace it have the opportunity to strike gold.

Stephanie A. Chisholm is publisher of The Mortgage Almanac.

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