In what can perhaps be considered a preview of things to come in the commercial and residential real estate finance industry, a flurry of new Internet sites popped up on our radar screens last week, foreshadowing the streamlining effect that the Web might have on the mortgage and securitization markets.
After highly touting it at this month's Naples, Fla. commercial real estate forum, Cargan City LLC launched MortgageSelector.com on January 12, an online quoting system for commercial real estate players that is intended exclusively for brokers and bankers. The site was created specifically for the 500 lending institutions and 20,000 commercial mortgage agents participating in the commercial real estate finance industry.
"We did a little bit of homework and research, and what we built here is the only online quoting system built by industry professionals, exclusively for brokers and bankers, excluding borrowers," said Patti Unti, director of portfolio management at Cargan Investment Management. "When we spoke to brokers about other sites that are built for brokers and borrowers, they said, Why would we use those sites? They're cannibalizing our own sales. So what we wanted to do was build a site that was a community for brokers and a community for lenders. It is a portal where they can have all the tools and resources that they need on a day-to-day basis at their fingertips."
As a portal page, the new site gives users email, the ability to track stocks, a resource center, links to rating agencies, chat rooms, and a "mortgage center," where all the quoting takes place.
According to the Web site, MortgageSelector.com has been developed as a "secure, user-friendly Web site intended to cultivate an environment of speed, reliability and accuracy."
"What we've tried to do is take an inefficient process - that of the mortgage broker - and put it in an efficient process - that of the Internet," Unti said. "Everything is transmitted through the Internet, and the lender goes online and actually has online instruction capabilities."
In this way, the cashflows can be re-underwritten online, and the user has the ability to calculate the debt service coverage ratio and loan-to-value ratio. "A hard quote can be submitted to the broker within five minutes," Unti noted.
Moreover, market sources predict that it is just a matter of time before the bond-trading side of the industry is conducted online. "I would speculate that we would see the commercial mortgage-backed securities market - the bonds and the whole trading side - moving online, probably within six months. There will undoubtedly be sites that offer that soon."
Additionally, "in pretty short order the portfolios of the loans will be traded online," the source suggested. "I can see where these loans are going to be packaged up and bundled up and something like $200 million of loans will be sold on the Internet."
"This will also take a lot of the volatility out of the lending side of the equation," Unti added. The entire mortgage process will be compressed: "If you're securitizing that product, you need to get it on and off your books in a fast amount of time. Because of the market hiccups you can be under water within a day, so I think this mitigates a lot of the market volatility as well." Unti suggested that a loan that normally takes two weeks to get "will soon take two days to get."
Though the site has only been open for a little more than a week, Cargan has approximately 70 loans in the system right now, and 25 lenders should be using the site by the end of the month, Unti said.
"I think the brokers are going to like this site, because of the high quality of the deals and the fact that we will sit down with them and help them populate the templates," Unti said.
More Online Action
Also last week, Finantra Capital Inc. announced its mortgage subsidiary, Ameri-Cap Mortgage, will launch its online mortgage Web site on Feb. 15.
The site, americap-mortgage.com, is designed for ease of operation by the most novice computer users and is particularly helpful to individuals who are not familiar with the mortgage process. Users can calculate a potential mortgage payment and apply online for instantaneous credit approval.
Finantra recently launched a major e-commerce initiative designed to provide the companies and its subsidiaries with the capacity to process several billion dollars of e-commerce sales annually. Last week the company announced it has signed a contract with Gateway, Inc. to provide financing for Gateway's wide range of personal computer products.
"We are rapidly positioning Finantra as a major financing source for both commercial and retail e-commerce transactions," said Robert Press, chairman and chief executive officer of Finantra. "We believe americap-mortgage.com sill become the standard by which all Internet mortgage transactions are affected."
And the U.S. is not the only country to take the online plunge. Now Canada has gotten into the mix.
Hot on the trail of U.S. and European markets, Canada is working on its e-platform for asset-backed and mortgaged-backed securities.
Focusing on creating mortgage, consumer credit, securitization, and fixed income electronic marketplaces, Basis 100 provides Internet-based business-to-business e-commerce solutions for institutions. The company was created to build an electronic commerce marketplace for the mortgage industry to really transact mortgages.
"This is not the consumer to business part, this is the back-end of the mortgage process," explained Gary Bartholomew, chairman and CEO.
"The marketplace will link mortgage lenders to their service providers like appraisal networks, credit bureaus and their liquidity providers like Freddie Mac to their distribution channels. In this marketplace each participant will use our technology to define uniquely how they're are going to automate their processes using our business rules and workflow engines."
They are currently creating a securitization market and a fixed income trading market. Basis 100 actually links these markets together. An example of this would be on the fixed-income trading side.
"If a demand for ABS and MBS product occurs the securitizers and the primary issuers can actually watch the demand in real time and link.into the origination channels, basically turning the knobs on the systems, saying These are the types of mortgages we need to buy today,'explained Bartholomew.
Basis 100 will be providing the technology for the securitizations and offers it as a service to the principals in the industry. In Canada, Basis 100 is currently processing about 20% of the mortgage market and is working on establishing relationships in the U.S. The mortgage market there about $80 billion a year. Last year the company managed to captured $12 billion in the first four months.