MIAMI - The hallways at a recent mortgage technology conference here were abuzz with talk of Internet initiatives that may create competition for issuers of private-label, mortgage-backed securities and for Fannie Mae and Freddie Mac.

"People are building those sites now" as a way to "bypass the government-sponsored enterprises," or GSEs, said Patrick Mahaffey, executive vice president for sales at Brightware Inc. of Novato, Calif.

The new companies, which are being financed by venture capital firms, would originate and underwrite A-quality loans and sell directly to Wall Street, executives at the American Banker conference said.

Joseph Hausauer, chief executive officer of Keystroke.com of Seattle, said the Internet already allows "large institutions, especially portfolio lenders, to compete toe to toe with" Fannie and Freddie. Companies will be "less mated" to the GSEs now, he said, because technological innovations have leveled the playing field.

Richard Beidl of the Tower Group in Needham, Mass., said the start-up companies would use models similar to those already being used by Pedestal Inc. of Washington and Ultraprise Corp. of Dulles, Va. The two Internet companies function as conduits by "matching" buyers and sellers of mortgage-backed paper who "don't want to take risk on balance sheet," he said.

A spokesman for Fannie said the new Internet companies would not necessarily compete on Fannie's turf. "They're not in the guarantee business, and we're not in the origination business," he said.

But Mr. Beidl said Pedestal's and Ultraprise's model "will for the first time allow smaller lenders to gain a cost-of-funds advantage by going directly" to Wall Street firms that are comfortable with managing risk.

Big mortgage units like Countrywide Home Loans, Norwest Mortgage, and Chase Manhattan Mortgage already go directly to the capital markets by issuing their own private-label, mortgage-backed securities with their own guarantee, Mr. Beidl said. Small companies until now gained access by using big lenders as conduits, or by selling to Fannie and Freddie. But both paths add costs, he said.

One area on which on-line companies may focus is specialized loans that don't conform to Fannie or Freddie's guidelines, Mr. Beidl said. But their businesses may veer into conforming loans, and that amounts to a "whole new competitor entering the fray," he said.

Pedestal and Ultraprise said their exchanges are developing the ability to distribute their loans to the capital markets and to supply information about loans on a flow basis - that is, as they are originated.

Pedestal is a "closed loan-trading exchange," said Terry Rowland, its managing director for sales and marketing. Investors use their own risk models, not Fannie's or Freddie's, to establish decision criteria, he said. Pedestal is also developing a product with daily pricing of loans to create a "flow delivery program," he said.

David Levine, chairman and chief executive officer of Ultraprise, said his company offers an "open secondary market mortgage exchange" that already has a flow system in place. The system allows "the buyer and seller to work out a deal on-line," he said, adding that Ultraprise is "integrating some of the automated underwriting pricing and scoring engines into the flow system."

Ultraprise's exchange focuses on nonconforming loans and lets buyers and sellers know each other's identity. It also charges investors a transaction fee; Pedestal charges lenders or third-party originators.

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