With its new e-commerce unit, Mortgage Guaranty Insurance Corp. may be going head to head with systems developed by Fannie Mae and Freddie Mac.
On Monday the Milwaukee mortgage insurer announced the creation of eMagic.com LLC, which is building a "communications hub" for the mortgage industry. The subsidiary will initially provide the same services that MGIC has offered on its Magic Carpet Web site, which originators use to order mortgage insurance from MGIC or to submit loans to Fannie's Desktop Underwriter or Freddie Mac's Loan Prospector.
But the goal is for the site to provide access to a host of other services from wholesalers and vendors, such as title insurance, flood insurance, credit reports, and property appraisals.
In that sense it would serve a purpose for mortgage brokers and loan officers similar to that of Fannie's MornetPlus network and Freddie's GoldWorks system, which are intended to be one-stop shops for most if not all of the necessities to get a loan closed.
A spokesman for MGIC said he could not comment on whether eMagic is a competitor of Freddie's Goldworks or Fannie's Mornetplus, but said it is a competitor for Lion, Loantrader.com, and Mortgage.com's Openclose site. Executives from Fannie and Freddie were not available to comment by press time.
MGIC created a subsidiary and brand name for the site to show that it is not merely a tool to attract mortgage insurance business. In fact, on Monday MGIC mailed letters to the other six mortgage insurers, inviting them to offer their insurance products on eMagic.com.
"There will be no disadvantage to an originator who orders mortgage insurance from another company," said Mike Meade, the executive vice president in charge of eMagic. "MGIC will be just another vendor on eMagic."
If its competitors were to launch ventures similar to eMagic, he added, "MGIC would be on theirs."
With these words and gestures, MGIC is embracing the idea of "open architecture" - that vendors should design their systems to be compatible with other vendors' services, to give users maximum choice.
eMagic.com, therefore, is a separate source of revenue for MGIC, not a marketing scheme for its core business of insuring low-down-payment loans.
This year the site will add a search engine for brokers to find participating lenders that offer the rate and term that an applicant wants.
However, MGIC officials stressed that eMagic.com is not an auction. Wholesalers will not be asked to bid for loans as they do on the IMX Exchange system.
Rather, eMagic.com will electronically duplicate the relationships brokers have historically had with wholesalers. Instead of looking at rate sheets taped to the walls of his or her cubicle, a broker would use the site to find a lender that offers the desired rate. But the lender just posts its rates; it doesn't compete to win a deal.
An executive at one of MGIC's competitors, who did not want to be identified, said that eMagic appears to be an alternative to Fannie's MornetPlus and Freddie's Goldworks. MGIC would have to present a "compelling reason" for an originator already using one of the two secondary marketing giant's portals to switch over, he said.
Because MGIC is not a government-sponsored enterprise, he said, it might have a leg up because it could offer services on its portal that the Fannie and Freddie, for political reasons, could not. Last year the two GSEs came under fire for expanding outside their role of buying loans.