American Home Mortgage Holdings wants to become a major Internet lender, but it doesn't want to be a household name.
"We don't believe branding makes sense for a transaction that people do only every five to seven years," said Ron Taylor, senior vice president for electronic commerce at MortgageSelect, the Internet division of New York-based American Home Mortgage.
Instead, MortgageSelect's strategy is to work in partnership with real estate brokers who can help lenders "amortize across the cost of bringing in the customers," Mr. Taylor said.
For example, MortgageSelect provides mortgages to homebuyers who shop on the 8,000 Web sites that San Diego-based Real Estate Village maintains for real estate agents. The arrangement is exclusive, as is one recently announced for MortgageSelect to make home loans to customers of nbank, the Internet division of Atlanta-based First National Bank of Commerce.
Traditional loan offices spend only about $250 a loan on marketing, but some "dot com" mortgage spend $2,000 to $3,000, Mr. Taylor said. Such costs are dictated by transactions that occur more frequently in a consumer's life, he said. "You're up against the Wal-Marts, who have a brand name and do a lot of transactions across multiple sets of products."
Marketing costs MortgageSelect about $450 a loan, Mr. Taylor said. "It's O.K. to pay a little more for acquisition of the customer," he said, "but not 10 times more."
Another benefit of advertising on real estate Web sites is that it tends to generate purchase rather than refi loans, Mr. Taylor said. Eighty-three percent of MortgageSelect's volume is purchase loans, he said - and that helps, now that higher rates have slammed the refi market.
Application volume has grown from $2.7 million in January to $63 million last month, Mr. Taylor said. MortgageSelect closes 60% to 70% of the loans in its pipeline, he said, compared with 30% for its Internet peers.
Call centers, which MortgageSelect calls "e-branches," backstop its Internet operation. Getting a mortgage on-line "is not like buying a book," Mr. Taylor said. "If you're going to get purchase business, people will want to talk to you." Like in-person retail loan officers, the customer service representatives in MortgageSelect's call centers in Kingston, N.Y., and Melville, N.Y., work on commission.
MortgageSelect is trying to preserve the good things that branches offer "and get rid of the bad things," Mr. Taylor said.
The strategy seems to be working. Unlike many e-commerce companies, MortgageSelect is turning a profit, and has been doing so since July, Mr. Taylor said. He declined to say how much.
American Home Mortgage earned $585 million in the third quarter. MortgageSelect accounts for almost a quarter of the loans it closes, and 37% of applications.