With the Internet, Joe Borrower can shop around for the best mortgage deal in the privacy of his own home. Without having a pushy salesman breathing over his shoulder. At any time, even three o'clock in the morning when he is sitting in his pajamas. And because a layer of middleman is cut out, he may end up paying less than if he got the mortgage through a commissioned loan officer.

So why isn't the Internet bringing in many mortgage applications?

One problem is that the hardware available to consumers is not as sophisticated as that used by businesses. "We're finding a lot of people are filling out on-line applications in their offices during the day," said Seth Werner, chairman and chief executive of mortgage.com, a web-oriented mortgage banker based in Plantation, Fla.

"It's much faster using the connections in an office than in a home."

According to James Marks, a managing director at Deutsche Bank Securities, industrywide about $4 billion of mortgages were originated on- line last year-only 0.3% of total volume in a record $1.4 trillion year.

Surprisingly, Countrywide Credit Industries is still the only major mortgage lender taking applications on-line. "Mortgage lenders have not gotten up to speed like they should have already on the net," said Daniel Gilbert, chairman and chief executive officer of Rock Financial Corp., a Bingham Farms, Mich., lender that is trying to make a name for itself on the web.

But boosters of electronic commerce believe it is just a matter of time before the Internet transforms mortgage lending. "Everyone who graduates from high school today will get a mortgage on the Internet," said Kenneth A. Posner, an analyst at Morgan Stanley Dean Witter.

Internet originations are expected to grow exponentially in coming years. Cameron King, executive vice president of electronic commerce at Countrywide Credit Industries, believes this year will see about $8 billion to $10 billion of on-line volume-assuming the bond market stays where it has been. Mr. Marks projects that on-line market share will grow to more than 6%, or $60 billion, by 2000, and more than 20%, or $250 billion, by 2003.

In the meantime, the Internet is proving an effective marketing tool for some companies. Countrywide, for example, is doing extremely well in originating loans through personal follow-ups to people who first inquired on the Internet.

According to Mr. King, last November Countrywide funded $80 million, or about 650 loans, whose applications had been taken on the Internet. That is a drop in the bucket for a giant like Countrywide; that same month it funded a total of $8.3 billion.

However, Mr. King said, about 350,000 consumers visit Countrywide's site on the World Wide Web every month. Some 35% of them then "walk in to our branches and go through the traditional process," he said. "That, to us, is as big a win as doing the deal on-line."

Who are these customers shopping around for home loans by the light of the computer monitor? The assumption that they are well-to-do consumers is a myth, Mr. King said. "The more affluent buyer is not using the Internet. The Internet's more work," he said.

The typical Internet customer, Mr. King said, is comfortable using computers, perhaps married with kids and looking to move up to his or her next home-but not filthy rich. "They look at this as being a way to shop, but control the transaction and maybe get a better price."

The wealthy borrower, on the other hand, is more likely to call his or her loan broker, Mr. King said. "The rich guy doesn't have time to type in an application."

Internet mortgage customers tend not to be first-time homebuyers, who are overwhelmed by the process he added.

Mr. King also doubts that on-line aggregators like Microsoft's HomeAdvisor and Intuit's QuickenMortgage will make mortgage brokers extinct. "The on-line transaction is not an easier transaction for the consumer," he says.

Brokers, Mr. King predicts, will figure out how to use the Internet to improve the service they provide consumers. "They will have to provide that smiling, friendly face and less work for the consumer," he said.

Mortgage.com, formerly First Mortgage Network, is originating $200 million a month, $50 million to $60 million of it on the net, Mr. Werner said.

The company also has a joint venture with Fannie Mae to create a Web site, openclose.com, that will give brokers direct access to Desktop Underwriter, Fannie's automated underwriting system.

If a loan is approved by Desktop Underwriter, it is certain to be purchased by Fannie, so the broker can get better pricing for the customer.

Previously, if a broker obtained a Desktop Underwriter finding from a lender, he had to sell the loan to that lender. The new site lets the broker get a decision using mortgage.com's seller-servicer number and then offer the loan to up to three different lenders to "work the marketplace for the consumer," Mr. Werner said.

If this Web site becomes popular with brokers, banks "may find themselves suddenly dependent on Fannie Mae for access to the most- efficient broker distribution channel," Morgan Stanley's Mr. Posner said.

Rock Financial began taking applications on-line in January. Internet volume has already surpassed that of the company's biggest branch, which originates $30 million per month, Mr. Gilbert said.

Rock is building a "web center" that it hopes will eventually be able to process from homeowners in all 50 states; by the summer, Mr. Gilbert expects it to be operational in 22 states.

Building the back-room processing infrastructure will be key for Rock to attain its goal of becoming a national cyber-lender. "It's difficult to process and close loans in 50 states. Each city has different customs," Mr. Gilbert said.

For this reason, big established national players have an advantage over smaller upstarts in the on-line mortgage market, Countrywide's Mr. King said.

Even borrowers that punch in their applications on their PCs must come in to a Countrywide retail branch to sign the closing documents, so if there is something wrong with the documents, the branch staff can redraw them.

"If there is no local availability to redraw the documents quickly, that's a problem for the consumer," Mr. King said. "To be a player, you need to be able to handle the geographic differences of closing loans throughout the country, and it's taken Countrywide 30 years to create the infrastructure to do that."

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