In 1999 a bevy of Web originators and technology providers entered the mortgage business and claimed they would revolutionize the industry by taking it online.

But a little over a year later many of the first movers, such as and, have crashed, and their assets have been sold like scrap metal.

The current landscape shows an industry in transition; after an initial surge to capture the promise of technology and the Internet, start-ups and traditional lenders are cautiously waiting to see how the business evolves.

Ron Litt, chief information officer at Allied Mortgage Capital Corp. in Houston, said the initial tech boom resulted from excitement about technology, not its practical uses or the value it brought to the consumer. A lot of the business plans were flawed because the companies seemed to forget their purpose was to make money, he said.

“What’s happening now is that, because there’s an apparent lull, people are rethinking that whole paradigm and trying to come up with something that’s a little less ambitious and a little more focused on delivering value to somebody,” Mr. Litt said. “You have to look at every model and say at the end of the day, ‘Do I make money on it?’ That’s where it’s going.”

The survivors also face several other challenges: cooling interest from the equity markets, evaporating capital funds, reluctance by venture capital firms to pour more money into their emerging niche, and tradition-minded lenders and brokers that have yet to warm to their products.

Many observers are now questioning whether independent mortgage technology companies can afford to continue trying to revolutionize the rest of the mortgage industry on their own, and some analysts and dot-com executives are saying they cannot.

In the business-to-business technology sector, partnerships and individually tailored business strategies that more specifically address lenders’ needs are what will keep companies afloat, several observers said.

Richard Beidl, a director at TowerGroup of Needham, Mass., said technology companies’ best option may be to consolidate with two or more lenders and to change their business models to offer private-label products.

Dot-coms often “develop their solution in isolation, and they go off and try to sell it to somebody,” he said. The problem with this tack is that each lender is unique and wants different technology, so not consulting with them reduces a dot-com’s ability to sell to them, he said.

“A lot of the dot-coms we talked to are really trying hard as they develop their solution to get two or three lead lender partners in the door to work with them so that they don’t build a solution in a vacuum,” Mr. Beidl said.

Richard Lewis, chief information officer at the New York-based, said partnerships with other dot-coms that offer complementary services is another way to go.

“What you’ll see among service providers is joint ventures where we will partner contractually with company x and y and z and then go out into the market space as a unified front,” he said. “That’s how we’re going to maintain our independence and yet bring in the revenue stream that’s going to get us more money.”

Mr. Beidl said dot-coms will probably offer tailor-made products for larger lenders., a whole loan marketplace operated by Ultraprise Corp., is providing private-label versions of its correspondent-wholesale lender loan sales and data transfer interface to major lenders.

“It’s a very logical and worth trying — given the challenge they’ve had trying to get their efficiencies to map to the needs of the target market they’re going after,” Mr. Beidl said.

However, the dot-com mortgage world is still a tough game to bet on.

“We’ll definitely continue to see a shakeout,” Mr. Beidl said.

Many companies that have gone a year or two since their last cash infusion have to prove the viability of their business models, he said. “Unless the venture capital or their investors believe there is a strong possibility they will return a profit at some point,” he said, “a lot of them are saying, ‘We’re not going to continue to throw good money after bad.’ ”

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