First Mortgage Network of Plantation, Ga., has hired a trailblazer in Internet subprime lending to help it get into the business.
Gene Devine, a former direct marketer, built such an operation for Eastern Mortgage Services of Trevose, Pa.
The one at First Mortgage Network would handle applicants rejected by the company's regular Web site, loanshop.com. The wholesale lender lets consumers apply for mortgages through that site.
First Mortgage started funding Internet loans three years ago and expects the 1998 total to come to $1 billion.
Chief executive officer Seth Werner estimated that 30% of the people who apply for a mortgage through his site do not qualify as conforming loan borrowers.
There will be a big market for loans originated over the Internet, "particularly for people who know they are subprime borrowers," Mr. Werner said. The Internet's anonymity will attract subprime borrowers reluctant to divulge personal financial information in more traditional loan-application settings, he said.
Mr. Werner founded First Mortgage and is also its president.
At Eastern Mortgage Services, Mr. Devine was a senior vice president. He helped build monthly fundings through its subprime site to $35 million in two years.
First Maryland Bancorp, which bought the company last year, recently decided to scale back subprime operations. Rising competition was the reason given.
Mr. Devine estimated that 40% of potential Internet applicants fall into the nonconforming category.
"It's a huge market," he said, and few lenders are in it.
Killen & Associates, a research firm in Palo Alto, Calif., said in a recent study that 1% of 1998 mortgages will be obtained through the Internet. The figure will hit 30% within seven years, the firm said.
First Mortgage, with 400 employees and $75 million in revenues, participates in several areas of the mortgage-lending business. For example, it processes Internet-based applications for real estate and mortgage brokers.
Recently, First Mortgage received a $6 million investment from Intuit Inc.
Intuit, a licensed mortgage broker, aggregates loan products from a number of lenders on its Web site. So far, 11 lenders are participating, including Chase Manhattan Corp. and Countrywide Credit Industries.
Intuit's investment would let First Mortgage build a back-office system to process loan applications submitted through Intuit's Quickenmortgage.com Web site.