A group of Internet real estate and mortgage lending companies have formed an association to improve performance, address regulatory issues, and increase customer traffic.

The Online Real Estate Association, which for now will be based in the San Francisco area, is to help the companies work together and pool resources to reach each objective, a spokesman said.

The group is the brainchild of Bradley Inman, CEO of Homegain of Emeryville, Calif., and founder of Inman News, and it includes members such as Microsoft, Quicken Loans, and ImproveNet.

Though it boasts a broad mission, for now the primary goal of the group, which was announced last week at the Real Estate Connect 2000 Summit in San Francisco, will be to improve service to customers, who have thus far given subpar grades to many realty-related sites.

Though many see huge potential for Web-based home lending, on-line lending accounts for less than 1% of all mortgage activity. Though many consumers will research real estate and loans on-line, few are completing the homebuying process over the Internet.

"We as an industry need to collaborate to improve the process," Mr. Inman said.

When first conceived by many on-line lenders and real estate brokers, he explained, full automation of the homebuying process was believed to be within easy reach. But he said buying a home remains a "highly complex and emotional" experience, one that requires a much larger infrastructure of service and attention to customers than many on-line lenders had planned for.

"We were naïve to believe that by simply offering some compelling customer propositions, such as real-time loan rates, we would effectively serve the consumer," he said. "That's a long way from closing the loan."

Mr. Inman said that many agents have become cynical because on-line lenders have not delivered on the promise of closing loans as well as off-line lenders do. In the final analysis, he said, closing the loan is what the customer wants. "Closing the loan is the Holy Grail of the process," he said.

In addition to improved service, the association will address regulatory issues and red tape that are impeding performance.

"We need to really work together on public policy issues to clear a path for automated systems - such as credit checks and appraisal processes - to improve the on-line experience for consumers," an association spokesman said.

Allison Mnookin, group product manager for Quicken Loans, said she expects the association to be very active in removing regulatory roadblocks and in addressing security and privacy issues, which remain crucial to the success of on-line transactions.

"If we expect consumers to trust us with the largest and most important investment of their lives," said Ms. Mnookin, "we all must be committed to making on-line real estate and mortgage transactions easier, safer, and more convenient."

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