USF MBA 659 Internet Business & Marketing

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USF MBA 659 Internet Business & Marketing

    Online Mortgage

    Presented by:

    Group # 1

    Abbas Merchant

    Asnee Wipatawate

    Suppasri Changariyavong

    Internet Business MBA 659

    Business: Finance

    March 24, 1999

    Abbas Merchant

    Asnee Wipatawate

    Suppasri Changariyavong


    Consumers can now save hundreds of dollars and speed up the mortgage process by comparison

    shopping and applying for a loan on line. The Internet is changing the way mortgages are bought and sold,

    and online mortgage lending is growing at a rate of 200% annually. According to a recent study

    conducted by Forrester Research, online mortgage originations totaled about $265 million in 1997, and

    are projected to reach $725 million in 1998. Forrester also predicts that by 2005, online mortgage

    originations will constitute about 10 percent of the entire mortgage market.

    According to a July 1998 report by Robertson Stephens, the Internet, combined with a fresh

    technological approach to the transaction process, will allow for "an abnormally high mortgage

    concentration" among fewer players in the future. To be one of those players will require broad

    distribution, competitive product offerings, cost-effective and innovative technology, and superior

    customer service.

    This paper analyzes three mortgage service providers:, and E-, which act as middlemen in the supply chain as shown in the diagram below. The comparison

    table (see Appendix A) compares and contrast these three web sites.

    Online Mortgage Service Providers Mortgage lenders Homebuyers real-time mortgage (Charter Lenders)

    information provided by

    the lenders

    QuickenMortgage Company Overview

    QuickenMortgage is one of the trademarks of Intuit Inc., #1 in personal finance software, including

    Quicken personal finance and TurboTax tax programs, QuickBooks small-business accounting software.

    Intuit's strategy has shifted from PC (software) to the Internet as a potential pipeline for financial

    transactions. Intuit's Internet offers financial news site, payroll processing services,

    insurance marketing, and mortgage lending. Intuit is successfully transitioning its products and culture

    toward the Web. Currently, enjoys more than 44 million page views per month. IDG's

    WebMaster Magazine honored for business excellence on the Web.

    The Money Making Machine

    QuickenMortgage derives revenues from Advertising, Sponsorship, Transaction-based fees from

    mortgage lenders. In 1998, the business closed $600 million in loans and had more than 800,000 visits to

    the site in January 1999. While the Internet presents many opportunities for Intuit, the Internet

    Commerce revenue was less than 10% of overall revenue in 1998.

    Marketing and Brand Strategies

    QuickenMortgage uses a co-branded strategy to market and distribute its products and services via many

    other famous web sites such as Excite Business & Investing (, ImproveNet (a

    Web site helping homeowners find reliable contractors, architects and designers),, CNNfn


    Abbas Merchant

    Asnee Wipatawate

    Suppasri Changariyavong

(, etc. This strategy will increase traffic coming to QuickenMortgage site

    from its other related web sites, thus creating more chances of acquiring new customers. The company

    also operates in an online profiling market, in which profiling technology is used to target messages and market to the Web surfers the company wants to reach. Moreover, QuickenMortgage’s strategy to

    expand its international market presence, which includes the U.K. and Australia, is to partner with local mortgage lenders in those countries.

    Strategic Alliances and Acquisitions

    To fully take advantage of the Internet and increase traffic to its QuickenMortgage Web site, Intuit has formed many strategic alliances in the areas of mortgage lending. Some of the most important alliances and partnerships are listed below:

    ? Intuit and Excite created a new channel, called Excite Business & Investing by, which covers all the other major areas of their financial lives, including banking, mortgages, taxes, planning, insurance. Excite leverages the expertise Intuit has gained making Quicken (financial software) the

    trusted choice of 10 million people to help them manage their personal finances and delivering it via the Excite Network (

    ? QuickenMortgage teams with ImproveNet. QuickenMortgage users will have direct access to the extensive home improvement resources at ImproveNet and ImproveNet customers can also directly

    access to co-branded elements of QuickenMortgage.

    ? Intuit announced a joint effort with TCI, Bank of America, and @Home to develop personal financial management tools for cable subscribers and expanded its professional tax business with the acquisition of Lacerte Software Corp., which produces software for professional tax preparers.

    ? Partnering with AOL, Excite, and CNNfn gives QuickenMortgage the potential to reach millions of consumers.

    ? Partnering with 17 mortgage lenders (i.e. Countrywide Home Loans, PNC Mortgage, Principal Residential Mortgage, etc.), and GHR Systems (the developer of the MARS mortgage software), to

    provide real-time mortgage information, personalized mortgage rate quotations, and online mortgage

    applications on Intuit's QuickenMortgage Web site. Through the combination of easy-to-use interactive

    tools developed by Intuit and GHR, and real-time mortgage information provided by the lenders,

    consumers are able to obtain mortgage advice and current rates, pre-qualify for loans, and apply for

    mortgage loans on-line. These lenders offer a wide range of loans with fixed or adjustable rates, or

    balloon payment loans, directly to customers visiting the QuickenMortgage site.

    ? Intuit strategically allies with Moore Corporation to link the two Web sites, QuickenMortgage and CyberHomes (a top on-line property listing service), to create a one-stop home shopping.

    Use of the Internet

    Intuit uses the Internet to create a new channel for mortgage lenders to communicate electronically with prospective mortgage applicants, and to acquire new customers at a lower cost. The Internet business

    covers all the markets Intuit addresses and provides both an efficient distribution channel, as well as means to offer new products and services., launched in November 1997, allows

    consumers to search through thousands of loans, pre-qualify (to give an estimate of how much a

    consumer is able to borrow and can actually afford) for a loan online at no cost, and submit an online


    Abbas Merchant

    Asnee Wipatawate

    Suppasri Changariyavong

    mortgage application for a specific loan via the QuickenMortgage web site. Users can make comparisons of loans, which can be selected based on their preferences. For loans offered by the participating lenders, users can drill down and get detailed information including an itemized list of closing costs. The online mortgage application shortens the loan process because QuickenMortgage applications are electronically transmitted to participating lenders at a consumer's request. Intuit uses the Internet to expand its existing markets, open new markets, manage information, and maintain cost-effective interactions. The Internet improves Intuit's ability to reach and help its customers and prospects. QuickenMortgage enables lenders to reach millions of consumers, who access QuickenMortgage from the Internet. Consumers can save time and shop for a mortgage conveniently from their homes by completing a simple form step-by-step online interview.

    HomeShark Inc.,

    Company Overview

    HomeShark allows consumers to shop online for a low-cost mortgage and a new home. HomeShark's core services are low-cost mortgages from national lenders and the HomeScout search engine that delivers a large selection of online home listings.

    The Money Making Machine

    As the HomeShark act as an intermediary for lenders and consumers on the net, their major source of revenue is from margin. HomeShark gets wholesale rates from lenders and offers a lower fee. While most brokers charge loan origination fees up to 2.5 points (2.5% of the loan amount), HomeShark charges only a 1/2 point. Plus, the company generates revenue from membership fees from the participating lenders.

    From the HomeScout, although the company offers some information such as basic neighborhood information for free, they generally charged for more details and contact information. Marketing and Brand Strategy

    HomeShark specializes in discount rates. Hence, the most obvious strategy we see here is "Pricing" statergy. And, since the company core business is online, we see that HomeShark promote much of their brand on the web. HomeShark site can be reach by major portals including Excite, NetCenter, Webcrawler, HotBot, Infoseek, InfoSpace, Snap, Lycos and Metacrawler and through company's advertising banners.

    Strategic Alliances

    HomeShark partners with well-established local, regional and national lenders who are committed to customer service and provide the most competitive rates. Some of the participating lenders are Bank United, Chase Manhattan, Merrill Lynch, Countrywide, North American Mortgage, First Franklin, etc. Other Strategic partners includes portal sites such as to launch a new co-branded real-estate service on and to provide a friendly mortgage services that will benefit both buyers and sellers.


    Abbas Merchant

    Asnee Wipatawate

    Suppasri Changariyavong

Use of the Internet

    HomeShark integrated almost all advantages of the Internet into their web-site. The company allows customers to compare rates, fill out applications, and figure out how much home they can afford. Unfortunately, there some points that can not be completed by using the Internet, which are legally binding milestones such as getting approval letter. The Internet can still not replace a professional who helps clients with paper work and answers questions.


    Company Overview

    E-Loan brings together the best lenders and their products to provide the lowest rates for customer’s lending needs along with unbiased information on the best loan for their personal objectives. Chris Larsen and Janina Pawlowski founded E-Loan in Palo Alto in 1992. They focused their business and technical skills on the typically cumbersome loan transaction riddled with inefficiencies and "garbage fees." They envisioned a process that gave customers more choices among lenders, better service, and control over information so they could make the best decisions, while enjoying better rates than loan agents offered.

    The Money Making Machine

    E-loan generates revenue in a similar fashion as QuickenMortgage and HomeShark. It includes Transaction-based fee from lenders and ad banners.

    Marketing and Brand Strategy

    E-Loan is positioned as the leading online mortgage originator -- not merely a lead source for lenders -- as well as a mortgage banker, allowing the company to automate even more of the process flow in the loan transaction, pass savings to customers, and achieve maximum profitability. As a multi-lender and mortgage banker, E-Loan is unique among all online brokers. E-Loan's roots in the offline mortgage industry, along with its status as an Internet pioneer, loan originator, mortgage banker and customer-oriented innovator make it the clear leader in the online mortgage arena.

Strategic Alliances and Acquisitions

    E-Loan has alliances with Yahoo! Finance. Customers can check their stock portfolio, follow all the latest financial news and shop for loan and insurance rates, all in one place. For their investing needs, Yahoo! Finance allows them to track stock performance, gain access to company and mutual fund profiles, and read news from Reuters, Standard and Poor’s, Zacks and many others.

    Their alliances with E-Trade provides financial services and features that include the ability to invest online in stocks, options, and mutual funds; free real-time quotes, stock alerts, breaking news, charts, and analysis; free checking and daily interest; and high-powered research, portfolio management, and screening tools.

    Its alliance with Telebank allows customers to use the phone and the Internet for all banking transactions, When you bank online with Telebank, you'll be able to perform transactions with your account from anywhere you have Internet. Customers can pay bills online, have more control over their finances, get more timely account information and automatically reconcile their accounts.


    Abbas Merchant

    Asnee Wipatawate

    Suppasri Changariyavong

    Use of the Internet

    E-loan uses the Internet to reach customers, take applications and refer them to lenders. They slashes

    transaction costs by replacing the commissioned loan agent with powerful, easy-to-use decision support

    tools, and a combination of 24-hour online tracking and personal customer service. In addition, they

    redesigned almost every element of data capture, transmission and customer service to provide a fully-

    integrated, highly-efficient and cost-effective transaction that reduces customer costs up to 75% while

    providing superior levels of service.

    Management Issues:

    Each of the mortgage company operates in a similar environment and face similar Issues. Some of these


    ? Intense Competition

    ? Pricing Pressures. Due to the availability of online mortgages, consumers can now compare different

    lenders’ rates and choose among the lowest available.

    ? The cost of implementing the company's Internet strategy.

    ? The uncertainty as to timing and amount of future Internet-related revenue and profits.

    ? Future growth of the online mortgage business.

    ? Risk associated with regulated mortgage lending.

    ? The timing and consumer acceptance of new products and services

    ? The success of the company's business relationships with portals in continuing to increase traffic

    Recommendations for Mortgage Companies

    Some of the common recommendations for Mortgage companies are listed below:

    ? Increase the number of participating lenders to provide more lender choices.

    ? Provide consistently low rates to compete and be the choice number one in this highly competitive


    ? Provide personalized customer services such as having their own loan consultants and the option of

    viewing the account summary online, etc.

    ? Form more alliances with other famous web sites and portals to increase the amount of traffic coming

    to their sites

    ? Increase brand recognition by placing ad banners on other famous sites and advertising their brand

    names on other channels such as radio, magazine, newspaper and TV.



    Abbas Merchant

    Asnee Wipatawate

    Suppasri Changariyavong


    "Intuit Fincl Chief -2:CMGI's Engage Tech CEO Also Speaks", March 3, 1999,

    Computerworld, Online Mortgage, January 11, 1999

    Newsweek, Dial Up a Mortgage, October 26, 1998

    The New York Time, Web Mortgage Brokers Benefit From Low Rates, October 11, 1998

    Appendix A

    Comparison Table

     QuickenMortgage HomeShark E-Loan Mortgage Refinance Yes Yes Yes Center

    Sources of Revenue Transaction-based fees, Transaction-based fees, Transaction-based,

    Ads Ads Ad Banners Expert advice Yes Yes Yes with their own

    loan consultants Detailed checklist of all Yes Yes Yes the documentation

    needed to close a loan

    Credit Center, helping Yes Yes Yes consumers find out how

    their credit affects the

    loan process, where to go

    for help and providing

    access to order credit

    reports online.

    Yes Yes Yes Multi-lender web site (17 participating lenders) (21 participating lenders) (40+ participating

    lenders) State Broker License to 50 States throughout the 50 States throughout the 42 states throughout offer loans in the U.S. U.S. U.S. US

    Yes (the U.K. and No No International presence Australia)

    High (part of that is High High Brand Recognition because Intuit has gained

    reputation from its

    financial software)

    Transformation of the From financial software to From Palo Alto business online financial service Funding Group to E-



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