Many Still Wary of Using Net for Mortgage Loans

Consumers are using the Internet to learn about mortgage loans and borrowing costs in buying a home, but they are not readily closing mortgage loans in cyberspace.

A recent survey found that only 7.8% of consumers shopping for a mortgage loan use the Internet to close the deal, said Brian Murphy, a senior product manager at Fannie Mae.

“Consumers are not comfortable closing” on the Internet, Murphy said.

Members of the mortgage lending industry said the Internet has served as a marketing tool for traditional bricks-and-mortar mortgage firms by allowing them to show off loan products and guide consumers to their physical sales locations.

The Internet is a channel to use for lending and it can be used as a supplement to a company’s physical presence in a market, said Geoffrey Oliver, a managing director at KPMG Consulting’s consumer financial services group.

“A segment of the population will be comfortable working only on the Net, while some will not,” Oliver said, adding that some consumers are not closing loans on the Internet because there is no cost savings.

Many consumers prefer personal interaction because the purchase of a home is one of the most important financial decisions in a consumer’s life, said Reginald Bowser, vice president of marketing at Lending Tree, an Internet company that matches consumers with lenders.

The success of online mortgage lending hinges on cutting costs for consumers and speeding up the process of mortgage finance, said Fannie Mae’s Murphy.

Indeed, the mortgage lending process needs to be simplified, said David Espenschied, chief executive of the eBusiness Division at Countrywide. He is optimistic about the industry’s future, citing the increased comfort among consumers who use the Internet for stock trades.

But Espenschied warned that mortgage lenders that do not have a presence on the Internet likely will lose market share as a higher percentage of consumers shop online.

“The Web will account for 25% to 30% of total loan applications in five years or less,” Oliver said.

In the current marketplace, consumers often are more interested in closing a loan than the interest rate they get, mortgage banking industry executives said,

“In actuality, rates are second, third or fourth as a priority,” said Espenschied. “The consumer wants the loan closed.”

Oliver expects the Internet to allow customers to design their own mortgage products.