Bank of Montreal has launched a service that lets consumers apply for home mortgages via the Internet.

Developed for the Toronto-based banking company's virtual banking division, the service uses a combination of home-grown technology and software developed by American Management Systems in Fairfax, Va.

The system can receive mortgage applications electronically and grant approvals in seconds to on-line applicants who fall within predetermined credit guidelines.

By placing an easy-to-understand customer interface on what is essentially a mainframe-based processing system, Bank of Montreal may be breaking new ground, consultants said.

"It's a very good innovation," said Ira Morrow, consultant at the Gartner Group in Stamford, Conn. "They have taken something old, something new, and something borrowed that still runs on Big Blue."

Bank of Montreal already offers instant approvals for home mortgages by telephone.

But the Internet service boasts educational features not available to phone customers, said bank executives.

"First-time homebuyers, especially, lack knowledge about the mortgage market," said Thomas R. Alton, president of Bank of Montreal Mortgage Corp., a wholly owned subsidiary. "This service doesn't just take their applications, it provides them with information."

The service prompts a potential mortgage applicant through screens of information about Bank of Montreal's 14 mortgage products.

It provides a calculator to assess loan options, and it explains the impact of different rates on payment schedules.

Once an application is submitted, the system pulls credit bureau reports and sends all the application data through a decision-making software system from American Management Systems.

Applications not automatically approved typically are referred to a Bank of Montreal lending officer.

To limit fraud, the bank requires applicants to meet with a loan officer before closing on the mortgage. And the loans, although approved, must withstand the scrutiny of a review panel before the closing.

"It's not going to be for everyone," said Mr. Alton. But the company has been increasing its "market share in the branch and over the phone, and this is another channel for us."

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