The Internet has cut the cost of mortgage lending-and savings will eventually be passed on to consumers, an executive of mortgage.com told the Housing Roundtable in Washington last week.

Gene Devine, senior vice president at the Plantation, Fla., online lender, told the annual forum of industry leaders that mortgage lending would be transformed by the Internet but that this transformation is in its early stages.

"I see exponential growth on the Internet; it's phenomenal. Predictions are that almost 20% of all mortgages will be originated on the Web by 2003. I think it will be closer to 35%," he said. "The question is to know how to play the Net effectively."

The cost of acquiring a loan through a loan officer ranges from $2,300 to $3,000, according to Mr. Devine. He said telemarketing had brought the expense down to between $1,000 and $2,000 and the Internet has pushed the cost lower still, to between $1,000 and $1,200.

Despite these cost reductions to lenders, for borrowers, "loan pricing on the Net is the same as if you went to a loan officer," Mr. Devine said. "But the medium is still in its infancy, and the savings will reach the customers in time."

Mr. Devine said lenders should keep the basics of Internet banking in mind when setting up a Web shop. These include reaching new customers as well as offering competitive pricing and a streamlined Web-page experience.

Bankers and brokers who do not operate on-line, Mr. Devine said, will retain a share of the business.

"You will always have consumers who feel more comfortable doing business in brick-and-mortar" branches, he said. "It will never change, but technology is compressing the transaction period. The high-touch environment still has to be there, even on the Internet."

Mr. Devine predicted that market share for on-line lenders would be as fragmented as it is for traditional lenders.

"The two largest (traditional) lenders each represent only about 7% or 8% of the market," he said, "and I think nobody will win out on the Internet either. The Internet is just a snapshot of its traditional form."

He also predicted some consolidation soon among Web lenders, mirroring the alliances being made in the traditional market.

Mr. Devine announced the addition of on-line automated underwriting for nonconforming loans to mortgage.com's originations capability. This feature is expected to be available in six weeks.

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