Leaders in the charge to harness the Internet for the mortgage industry disagreed vigorously this week on who will survive the current technology shakeout.
The panelists at a CIBC World Markets conference roundtable Tuesday were hardly short of confidence, but opinions varied sharply over which company had the best application or business model and over what the mortgage business' future will look like.
Though the panelists trampled on the grave of Mortgage.com, the online lender that went out of business two weeks ago, most agreed that, though people have not yet flocked to the Web to take out mortgages, they eventually will in significant numbers. The trick is to stay solvent until that happens, several said.
Chris Larsen, chief executive officer of E-Loan, the sole representative and defender of the online direct lending business model, said he believes that intermediaries, such as mortgage brokers, will be cut out of the process and that consumers will eventually embrace online lending.
Though not explicitly spurning direct-to-consumer lending, Mr. Larsen has shifted E-Loan's strategy considerably. The Dublin, Calif., lender is now promoting itself as a consumer advocate and debt manager in order to retain customers, a strategy it has been developing during the last year. It is modeling its strategy on Charles Schwab & Co.'s online efforts, he said.
Rick Soukoulis, CEO of LoanCity, scoffed at the notion that brokers are in trouble. In fact, he said, he has built a business that depends on their continued and growing dominance.
Seventy percent of all mortgage loans are originated by brokers, said Mr. Soukoulis, whose company sells lending technology to help brokers find products for their clients. He described his business as distribution and said that LoanCity will survive by working with existing participants in the business.
Doug W. Naidus, chief executive of MortgageIT.com, said he takes a more traditional approach. Despite the Internet and all the new technology, the mortgage business is still about funding loans, he said. "Most of the money that we earn in this business we earn because of our ability to generate qualified loan applicants and close them."
Mr. Naidus said the world is changing and so is his company but that he is not running his business to change the world. "Most of the companies that have are not with us today," he said. "Profits are really what should be the driver."
Michael W. 1Perry, chief executive officer of IndyMac, dismissed most of his fellow panelists' business plans, saying that the Pasadena, Calif., lender was the sole profitable company in attendance.
Being a depository is a key to success, Mr. Perry said. The financial services business and holding loan assets is all about leverage, and ultimately, "none of these companies here that are not depositories can survive as independent entities," he said.
Though some of the companies represented at the roundtable offer good technology and processes, the best they can hope for is to be acquired by someone else, he said.
"None of these guys are making money, and none has a successful business model," Mr. Perry said in an interview after the discussion. "This business has always been filled with pinky-ring entrepreneurs, and we've seen a lot of that today."