Fleet Mortgage Group is getting into the technology business - and offering its expertise to nonbanks.
The FleetBoston Financial unit said Thursday that it had created a subsidiary that will license out tools for originating home loans on the Internet. Clients would include other banks, lenders, and mortgage brokers, but also "trusted advisers" such as real estate agents and financial planners.
The unit, Celeris Financial Services, will face competition from other B-to-B enterprises that say they can make getting a mortgage as easy as buying a book from Amazon.com.
But Fleet expects the venture to boost its production volume - because, at least initially, it will aggregate all the mortgages originated using the technology and sell them to Fannie Mae or an unnamed jumbo investor. The venture is also expected to diversify Fleet Mortgage's earnings stream and make the mortgage company less reliant on regular mortgage banking activities.
"It's going to bring in new volume and new fees," said William B. Naryka, chief financial officer of Fleet Mortgage.
Celeris is based in Columbia, S.C., where Fleet Mortgage is headquartered, and is headed by Mr. Naryka and Joseph T. McCartin, Fleet Mortgage's chief information officer.
Mr. Naryka, chief executive of Celeris, said he expects to relinquish his job at the mortgage company by yearend to deputy CFO Steve Hozie. Mr. McCartin, president of the new company, has retained a consulting role at the mortgage company; his old duties have been taken over by his deputy, John DeSantis.
Like many other business-to-business dot-com ventures that have sprouted up this year, Celeris promises to revolutionize the mortgage process, which can be unpleasant - sometimes humiliating - for consumers, even those with the best credit and qualifications.
"The mortgage industry probably hasn't been reengineered since it was initially conceived," Mr. Naryka said in an interview Thursday. "We're going to be able to dramatically change the customer experience for getting a mortgage."
By doing so, the venture will help Fleet Mortgage capture a greater share of the originations market and at the same time make it less reliant on mortgage banking activities for earnings, he said. "It's going to bring in new volume and new fees."
Celeris' service is an automated underwriting engine that executives said enables a lender to approve a mortgage application instantaneously, based just on information that applicants would know off the top of their heads - their name, Social Security number, how big a loan they want, and how much money they intend to put down.
Mr. McCartin said the service can do this because it is wired into a "federation of databases" that contain much of the information needed to approve an application, such as credit reports.
And once approved by Celeris' engine, the borrower has a "binding commitment," Mr. McCartin said. In that sense, he said, Celeris goes further than the automated underwriting systems made widely available by Fannie Mae and Freddie Mac, whose approvals are subject to verification of information provided by the borrower, such as income and debt.
Mr. Naryka said that 31% of the borrowers in the mortgage market could qualify for the eXtremeline mortgage that Fleet Mortgage offers through Celeris. For now, all of these will be funded or purchased by Fleet. The lender will sell all the loans that qualify to Fannie Mae and the jumbo loans to an investor which executives would not identify.
He said his venture stands out because "we don't think anybody else has simultaneously addressed product, process and technology."
Linking the three together "is probably the only way you're gonna create a positive mortgage experience," he said.
He added that Celeris is different from the rest because it can serve all different production channels - brokers, bank branches, correspondents, and nontraditional channels like Realtors and financial planners.
One competitor Celeris will face is HomeSide Lending of Jacksonville, Fla., which said last month it would license online lending technology it had developed to others. HomeSide, a unit of National Australia Bank, was the seventh-largest originator last year, just behind Fleet.
Like Celeris, HomeSide developed its tools with help from Fannie Mae, the largest buyer of mortgages. Both companies' platforms tap into Fannie's database of property information instead of using traditional home appraisals, which helps them speed approvals.
Fleet Mortgage has close ties to Fannie; last year it agreed to sell a large chunk of its production to Fannie, cutting out Fannie's competitor, Freddie Mac. But Mr. McCartin said Fannie will not get a cut of Celeris' technology fees. "The relationship with Fannie Mae is at Fleet Mortgage and not Celeris," he said.
Mr. Naryka said it is not inconceivable that another aggregator of Fleet's size could license the technology one day.
Celeris has already signed up Quicken Loans, a unit of Intuit, as a client. Ellie Mae, a Dublin, Calif., technology company, is incorporating Celeris' tools into the Web sites it designs for mortgage brokers.
FleetBoston has equipped its bank branches with Celeris' technology. Mr. Naryka said the underwriting engine will alert a loan officer if an applicant might be ripe for cross-selling a home equity loan or credit card.
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