After its first quarter with the LoansDirect online mortgage origination platform, E-Trade Group Inc. said Thursday that it will aggressively expand services to capitalize on the refinance boom.

E-Trade reported Thursday that LoansDirect more than tripled its volume of loans (an increase of more than $600 million) compared to the same quarter one year ago.

E-Trade bought LoansDirect, a Huntington Beach, Calif.-based online mortgage lender, on Feb. 1. E-Trade executives said they wanted to capitalize on their company’s growing deposit base, offer a wider variety of products, and draw more customers to its Web site.

Before buying LoansDirect, E-Trade originated mortgages through a deal with E-Loan of Dublin, Calif.

E-Trade said it plans to start home equity lines of credit before the end of the second quarter, with pledged-asset loans to follow. (Pledged-asset loans allow brokerage customers to buy mortgages with their equity portfolios as collateral without liquidating them.)

“Mortgage rates are at their lowest point in two years, and the refinance market is booming, as consumers are looking to save on interest expenses and build equity faster,” said Mitchell H. Caplan, E-Trade’s chief global banking and asset gathering officer.

But a refinance boom is not the test of whether a company can make money by doing mortgage originations online, warned Richard X. Bove, director of financial services research at Raymond James & Associates.

Most of the paperwork for a refinance loan was taken care of when the borrower applied for the original mortgage, Mr. Bove said. That makes it easier to use the Internet. “With a straightforward refinance, doing it over the Internet is a superior way to go,” he said.

The real test will come during a housing boom, when there are more borrowers shopping for first mortgages or loans for new housing, Mr. Bove said. “The first-time mortgage buyer is unlikely to use an online mortgage system because the process is confusing,” he said.

Michael Vinciquerra, also with Raymond James, estimated that “it is going to take a few years” before mortgage shoppers will become comfortable enough with the Internet to start seeking their first loans online.


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