JIM JONES
Online applications growing

“Five or 10 years ago, did you ever use eBay or shop online for a book?” asks Dan Welbaum, a spokesman for online mortgage software provider Mortgagebot and its brand-new product, mortgage aggregator Web site Mortgage Marvel.

His point: Internet shopping is booming, and mortgage-seekers are no exception. Wisconsin-based Mortgagebot’s prediction: Mortgage Marvel, which allows mortgage shoppers to search multiple lenders’ rates and terms anonymously – unlike other lead-generation aggregators that discourage some seekers because they require personal information up-front – will help local lenders with an online presence to expand it.

Mortgage Marvel is being beta tested by several Massachusetts lenders.

The idea of online mortgage applications may take a while to catch on with Bay State lenders, however. While a recent Massachusetts Bankers Association-sponsored survey showed 62 percent of banks here already offer online applications and another 26 percent plan to within a year, not all local lenders seem convinced.

Danversbank Assistant Vice President for Mortgage and Consumer Lending Cheryl Preston, for example, said the “emotional” nature of mortgage shopping makes more people want to talk with a lender in person. Eighty percent of the bank’s applications come from walk-ins or people who call on the phone, she noted.

Alain Valles, founder and owner of Hanover broker-lender Direct Finance Corp., said he doesn’t offer online applications at all because he thinks the personal touch works better.

But national numbers also show a strong trend toward online mortgage business. Jim Jones, president of First Wellesley Consulting, a financial industry consulting firm in Wellesley that counts Mortgagebot among its clients, says only 8 percent of National Mortgage Bankers Association members he polled this year have no online application form. Forty-six percent have a “very basic” application the consumer must fill in and send in order to get a call back from the lender, and the remaining 46 percent have applications that underwrite online and can offer initial real-time decisions.

Enterprise Bank in Lowell introduced online mortgage applications with instant-decision capability in October, said Neila Arnold, a vice president and lending business analyst there. Customers – especially younger ones – like the convenience of the Web, she said, but the $982 million-asset Enterprise “wants to walk before we run.” In other words, the bank isn’t yet ready to put its information up on a national site, as is required with loan aggregators.

Danversbank, which has offered instant-decision online applications since 2004, is one of about 250 institutions nationwide that’s test-marketing Mortgage Marvel while the company works out the bugs.

The Danvers-based, 14-branch bank hasn’t gotten any applications yet through an aggregator, but Preston said it wanted to test the new product to see if it could help it expand its lending reach.

Mortgagebot says it eventually will make Mortgage Marvel available to all 750 of its online mortgage application software clients, including 65 bank, credit union and non-bank lenders in the Bay State.

Online Research

Preston said people still use the Internet more to find out what type of loan and rate they qualify for than actually apply for a mortgage. They’ll take the information they find and apply in person, she said.

“A mortgage loan is the biggest investment you will ever make, and for some people it’s an emotional experience too,” she said. “People still want to talk to somebody. There’s some comfort level with a person as opposed to punching in facts into a machine.”

She also noted that online applications are not available for reverse mortgages, a product that is of growing interest to both senior citizens and lenders, but is structured differently than a traditional mortgage.

Direct Finance Corp., which has a growing reverse mortgage business, doesn’t allow online applications, Valles said.

Mortgage rates and terms by necessity depend on a person’s recent job changes, assets and credit history, and Valles said he believes that kind of information should be gathered and considered in person.

Valles has never used an aggregator service because online lending simply isn’t a big enough segment of the market, he said, and because he finds the personal touch works better.

“I’ve been told only 5 [percent] to 15 percent of loans are done through the Internet,” he said. “If I only have one hour today to generate a lead, I want to go where the water is warm.”

According to Forrester Research, 20 percent of those who search for mortgage information online actually complete an application on the Web.

Four referrals Valles got in just two days last week were generated from personal notes he wrote to customers and friends, he said, and that keeps him busy enough.

“Why spend thousands to do business with someone I don’t know?”

Local lenders said they’ve heard major lead-aggregator sites such as Lending Tree, an 11-year-old Charlotte, N.C., company, charge $100,000 per year to lender participants, plus several hundred dollars per lead. Lending Tree, which counts major regional and national banks including Bank of America, Citibank, Sovereign and Capital One among its lender participants, won’t reveal its fees. Mortgage Marvel said it hasn’t yet determined its pricing structure.

Digital Federal Credit Union in Marlborough also is test-marketing Mortgage Marvel and has gotten one or two closed loans through the site, said Vice President for Mortgage Lending Eileen Galligan.

The 350,000-member credit union, which was founded in 1979 under sponsorship of the former Digital Equipment Corp., is unusual in that its tech-savvy membership does most of its mortgage banking online.

“I would say probably 80 percent of our [applicants] start online,” Galligan said, and 53 percent complete the process there. “That’s a pretty high percent.”

DCU members are mostly in Massachusetts but the federally chartered credit union also has branches in Georgia, Colorado and New Hampshire.

Jones, the Wellesley strategist, said while more of today’s mortgage customers are applying in person, the tide is turning.

“Any time I ask Massachusetts lenders to predict what channel will be dominant in several years, a large percent will pick the Internet as being most preferred by consumers,” he said.

Today, consumers may be doing research online before they go in and talk with someone, he said. But with the online entire application process becoming more widespread in availability and easier to usehe predicted, the balance is going to shift and more applications will actually be placed electronically.

Arnold, of Enterprise Bank, said there’s no question online applications were added as a means of better serving current customers, who can’t always get to the branch.

“If you can do as much online in your pajamas” as by applying in person, she said, and more people are going to start considering that option.