CompuFund Sorts Out Loan Packages for House Buyers
For Sigmund Anderman, the inspiration came as he was buying a new car.
Anderman, an attorney and then-president of a home warranty company in Northern California, was about to pay 12.5% interest on a new Jeep in 1983 when a friend told him that a bank in a nearby town was offering auto loans at 10.5%.
The two-point savings made sense, and Anderman reasoned that there would be a considerable market for quickly obtainable comparative information on all kinds of loans, particularly for home mortgages
“There was nothing out there that would give me a picture of the (loan) market fast,” he said.
Using his own resources and funds from family and friends, Anderman set up CompuFund National Mortgage Network Inc., a computerized service to provide home mortgage rate information. He moved the company to Santa Ana from Northern California in 1984.
Because of the huge number of loan variations available at any given time--there are more than 18,000 mortgage lenders in the country and most offer dozens of combinations of loan packages--hunting for a home loan can be a nightmare without some sort of centralized loan information bank, said Anderman, who is CompuFund’s chairman and chief executive officer.
The company has at least two competitors--Shelternet, a unit of New York-based First Boston Corp., and LoanExpress, a unit of Washington-based Planning Research Corp. Industry officials say they believe that more will crop up as lenders and real estate agents come to realize that computerizing mortgage loan information is a service that can benefit the entire industry.
Doesn’t Add Much Speed
Computerized listing doesn’t really add much speed to the entire home-buying process right now--Anderman said this is because most of the rest of the credit processing system is still in the what he calls the “Lazy Susan” era, a reference to the manual filing and transmittal of information from office to office--but CompuFund and its competitors appear to have gotten in on the ground floor of a growth industry.
Mortgage Banking, an industry trade journal, said in a recent article that the use of computerized loan origination systems will increase as real estate agents realize the need for “new and more efficient ways of conducting business.”
The California Assn. of Savings Institutions is a bit more cautious in its assessment of the business.
“The question is: Does it favor a particular lender?” said Kirk Hallahan, a spokesman for the Los Angeles-based group. “That is the big issue.”
Two of the lenders listed in CompuFund’s system--Great American First Savings Bank of San Diego and Union Bank of Los Angeles--are part owners of the company. A third lender, Network Funding Corp., is CompuFund’s own mortgage lending subsidiary. Union and Great American First each own 30% of CompuFund--for a total investment of $11 million--and each supplies funds for loans made by Network Funding. Anderman and 20 other partners own the remaining 40% of the company.
Company officials say the CompuFund system does not favor loans from Network, Union or Great American First. Customers are told, however, that loans made by Network Funding come with a guarantee that the money will be available when the buyer completes the approval process.
Has Lending Subsidiary
Both Hallahan and a spokesman for the U.S. League of Savings Institutions said that their groups have not had any complaints about CompuFund favoring one lender over any other, even though the company has its own mortgage lending subsidiary and is 60% owned by a major bank and a large savings and loan.
Hallahan said he believes that computerized loan systems offer “clear advantages in speeding up loan processing” and thus could reduce the cost of loan originations.
He said he believes such systems eventually will change the role of the real estate agents, who will “become like a travel agent,” helping the consumer choose among the various fares and terms for his flight to home ownership.
Anderman reckons it is only a matter of time before the entire house-buying procedure--employment verification, credit checking, title searching and mortgage loan processing--is handled through interactive computers, thus shaving time and expense off the house-buying process. He said he believes his system already trims some time off the arduous house-buying marathon.
For now, Anderman’s company dominates the computerized mortgage information business in California.
Most home buyers actually do very little shopping for mortgages, Anderman says, typically allowing the real estate agent to steer them to a loan through a mortgage banker allied with the agent. Such a process rarely lands the most favorable rate for the consumer, Anderman said.
Realtors Pay for Service
“You can’t be an informed shopper when you only buy something (a mortgage) every eight or 10 years,”’ he explains. “No buyer gets good at it.”
Anderman’s system consists of a network of terminals at member real estate offices and mortgage bankers. Realtors pay to subscribe to the service, and mortgage brokers pay the company a percentage of every loan application taken through CompuFund.
Of the estimated 5,400 mortgage lenders in California alone, CompuFund so far has agreements to list only 75. Anderman said he would never list all of them, however, because many are only regional lenders or cannot offer rates that are competitive. And by holding even 75 lenders’ rates up for all to see, Anderman said, CompuFund has made the mortgage-lending industry more competitive.
Nationally, in addition to the approximately 14,000 banks and 3,500 savings and loans in the mortgage lending business, there are about 1,000 mortgage banking companies that write and service loans and then sell them to other institutions and to investors. It is this secondary market that has made mortgage lending a nationwide endeavor, thus giving rise to CompuFund and its competitors.
CompuFund currently is offered through approximately 300 real estate offices and 20 mortgage-processing centers in California and Texas. Realtors typically pay $75 a month to be linked to the service; mortgage brokers pay fees generally amounting to about 1.5% of the loans they write for CompuFund customers.
Last year, Network financed about $258 million in loans, and the company expects to finance about $500 million in loans this year, making the unit one of the top 10 mortgage bankers in the country, a CompuFund spokeswoman said.
For 1985, CompuFund had revenue of about $3.25 million and this year, Anderman said, the company should have at least $7 million in revenue.
Anderman divides his time between his Santa Ana headquarters office, which has 45 employees, his Dublin, Calif., office, which has 25 employees, and the company’s Dallas office, which has 20 employees.
He says that California and Texas provide the company all the business it can handle in the immediate future--California has 20% of the nation’s real estate market and Texas accounts for about 9%--but that tentative plans call for several more offices to be opened in the Southwest and Southeast in coming years.
The CompuFund system goes to work when a potential home buyer sits down with a real estate agent who uses Anderman’s service. The buyer’s monthly income, monthly debts, disposable income and savings are entered into a computer and the system calculates the maximum loan amount obtainable. It then searches among the 40,000 different loan combinations available from the lenders in the CompuFund data base and prints out the best fixed and variable packages the company can find.
Because a non-member local bank may be able to beat the best mortgage in the CompuFund system, what appears on the company’s computer screen may not be the best mortgage a particular home buyer could find. But Anderman maintains that it does present a detailed comparison of dozens of mortgages, “gets very close to the very best deal around,” and does it in an extremely efficient manner.
Jeff Rowe is a free-lance writer.
