A year ago the tentative pace at which many of the nation’s largest mortgage companies moved toward online lending appeared to be a grave strategic error.

Today it is turning out to be a feather in their caps. High-flying dot-coms such as Mortgage.com and iOwn.com, whose emergence two years ago threatened to take business away from traditional lenders, have since come crashing to earth.

As a result, the large banking companies that initially embraced the Internet only tepidly remain in the best position to profit from Web lending, industry observers say, as fledgling technology companies begin selling their brands — and their experience — for scrap-metal prices.

“They’re ripe pickings for bricks-and-mortar players” that want to establish or upgrade an Internet presence, said Nick Karris, an analyst at Gomez Advisors.

Just a week ago CitiMortgage, the St. Louis mortgage unit of New York-based Citigroup Inc., scooped up the Web site and technology of iOwn.com, a defunct online originator in San Francisco. Though terms of the deal were not disclosed, analysts say Citi probably paid a lot less for iOwn’s assets than the dot-com has spent in its short lifetime.

And in mid-December, ABN Amro Mortgage Group Inc., an Ann Arbor, Mich., subsidiary of the Dutch financial services giant, acquired the domain names Mortgage.com and Hipoteca.com — hipoteca is Spanish for “mortgage” — from the failed online lender Mortgage.com for $1.8 million. Mortgage.com spent a staggering $100 million over two years marketing its Web site and developing lending technology.

“These are great opportunities to acquire an Internet presence and to learn what does and doesn’t work at a very discounted price,” said Richard A. Beidl, a director at TowerGroup Inc., a Needham, Mass., financial services consulting firm. “Traditional lenders can buy somebody else’s experience dirt cheap.”

Brick-and-mortar lenders have been reluctant to invest heavily in online originations, Mr. Beidl said. Unlike venture capitalists, which can throw money at dot-coms to get a pop, banks can’t afford to put tens of millions of dollars into something that is completely untested, he said.

“They have to be a lot more cautious,” he said. “They have a fiduciary responsibility to stockholders.”

Many traditional lenders simply sat back and watched as somebody else’s money set up dot-com outposts in the uncharted market. Contrary to their grand predictions, they may have been years ahead of their time. Only 2% of all originations were processed over the Internet last year.

Nonetheless, said Gomez Advisors’ Mr. Karris, some of the surviving start-ups have developed superior technology and have pushed the creative and technological envelope in ways that traditional lenders have not.

He pointed to IndyMac of Pasadena, Calif., MortgageBot of Milwaukee, and LoansDirect Inc. of Huntington Beach, Calif. — recently bought by E-Trade Group Inc. — as examples of companies that have helped automate mortgage lending.

Indeed, in the business-to-business side of the industry, a pileup of technology companies are battling to develop fully electronic mortgages. However, it’s only a matter of time before the big mortgage companies meet this challenge, either through internal development or by simply picking up the scraps of failed technology companies, Mr. Karris said.

And given the current business environment, they may not have to wait very long.

Observers said they are already preparing the obituaries for FiNet Inc., a San Ramon, Calif., mortgage technology provider. “They’re on the brink of failing,” Mr. Karris said.

After losing more than $35 million in 1999 as a direct-to-consumer lender, FiNet shifted its focus last February to business-to-business technology.

Rick Cossano, president and chief executive of FiNet.com and its wholesale channel, Monument Mortgage, said the company is still going strong, with $13 million of cash and no debt.

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