To the Editor:
I have just concluded reading your interview with Chris Larsen of E-Loan ("E-Loan Confident About Survival," March 2001) and I feel the need to write. I have been a mortgage broker for 18 years and take exception to Larsen’s statement that mortgage brokers "don’t offer a good deal to the consumer, they just get in the way." Larsen goes on to say, "loan brokers are like used car salesmenthey are not out to get the best deal for the consumer."
I think it is Larsen who is not out to get the best deal for the consumer, nor is he out to get the best deal for the investors in his company. But Larsen has been able to get the best deal for himself and his partner, Janina Pawlowski, selling an interest in the company for tens of millions of dollars.
Larsen says, "Our competition is the loan broker." A loan broker is an entity that acts as an intermediary between a borrower and a lender. The fact is that E-Loan is itself a loan broker (albeit unusual in loan brokerage in that it doesn’t earn any profit).
One of the differences between E-Loan and my business is how we get loans. Of course we’ve all heard the ads on radio extolling the virtues of E-Loan (while disparaging and insulting traditional mortgage brokers). Do these ads pull in massive amounts of business? I don’t know. I do know that I don’t advertise and get 100% of my business from past clients and word of mouth. I find this especially ironic in that I am located on the San Francisco Peninsula where one would think E-Loan would have starved me out of business.
My business focuses on purchase businessin 2000 I closed 75 loans out of which 45 were purchases. The Realtors that I work with want the hands-on service that I provide and refuse to let their clients go to E-Loan. Of course, I do lose a few loans to E-Loanthose refinance borrowers that incessantly shop rates and have no loyalty. E-Loan, you are welcome to this business.
Larsen says that E-Loan will be profitable in the second quarter of 2002. Meanwhile, according to Larsen, "We estimate that we will have to burn through another $16 million in cash to get there." I think that "burn" is certainly an apt term for what is going to happen, as when they do "get there" ashes are all that’s going to be left of all that cash.
Again, Larsen says he offers a better deal to the consumer. Well, I looked at E-Loan’s site on March 20th and compared their rates to what I offer and here’s an example of the comparison: Comparing a 30-year full-document conforming no-cash-out refinance for $220,000, a 15-day lock with E-Loan @6.875% cost 0.882%. The same rate with me costs 0.25% for a 15-day lock and that’s with me making one point.
The difference of 0.632 is $1,390. I’m aware that E-Loan charges no extra fees, but my fees would not add up to $1,390. Also E-Loan’s rate presumes impounds; waiving those would cost more. My quote is without impounds.
Finally the stock price of E-Loan is less than $1.50. Good thing for Larsen and Pawlowski that they sold when the stock was trading in the seventies, otherwise they wouldn’t have the tens of millions of dollars that they have.
The stock price of my company? Everybody knows a mortgage brokerage isn’t worth anything.
Looking at the myths that Chris Larsen is trying to get us to believe reminds me of the story of the emperor who wasn’t wearing any clothes. It’s time for the industry to look at E-Loan and acknowledge what a farce it really is.
David J. Marx
Mortgage Center Corp.
To the Editor:
Your piece about MetLife’s purchase of Grand Bank N.A. ("Actuarial Banking," April 2001) misses the mark. You claim that "MetLife voices a lot of zeal about getting into the banking business, but its plans don’t seem very sharp." But seeing MetLife Bank and its chairman and CEO Judy Weiss in isolation fails to capture the full picture.
To appreciate our approach, it’s important to understand why MetLife is getting into banking. Our strategic plan is to offer a wide range of integrated financial services to our customers. By offering banking services as a complement to MetLife’s insurance and financial products, MetLife Bank will help us strengthen customer relationships and retain them long term.
Simply stated, our plan is to integrate the bank’s offerings to round out our menu of products and services and marry our customers’ long-term financial planning with their short-term financial needs.
Understanding how the MetLife organization works and identifying ways to cross-sell the bank’s products and services will be the key to the bank’s success. Who better to spearhead that effort than Judy Weiss, a 28-year MetLife veteran, who has run a number of businesses at MetLife (including our Small Business Center and our mid-size Pensions Business), has forged solid partnerships throughout MetLife, understands our distribution channels, recognizes our cross-selling opportunities, knows how to leverage the MetLife brand and, most importantly, understands the needs of our customers.
Backing her up is a team of seasoned banking professionalsrecruited from some of the most established banks in the country such as Citibank, JPMorganChase and First Unionwho are responsible for marketing, technology and operations.
MetLife is driven by a strong sense of purpose: to build financial freedom for everyone. By forging relationships built on trust and providing a holistic approach to achieving financial goals, MetLife will build relationships that will last a lifetime. MetLife Bank is an integral component to making that happen.
Kevin Foley Vice President