10 Nov Mortgagebot builds online sales even as housing declines
Mequon, Wis. – Despite a slump in housing markets nationwide, the leading application service provider for the online mortgage-lending industry continues to build additions.
In fact, the Mequon-based Mortgagebot – which specializes in online transactions for first mortgages, mortgage refinances, home equity lines of credit, and other mortgage-based products – is poised to reach $22 million in revenue for 2006, according to CEO Scott Happ.
Home sales have declined this year, but Mortgagebot’s prospects have not. “The company is still growing at a good clip, and frankly we’re investing in more resources that will allow us to grow the company even more quickly,” Happ said.
Mortgagebot reported an average three-year sales increase of 560 percent in August and currently serves more than 650 financial institutions nationwide, enabling over $4 billion in mortgage applications monthly.
In the coming year, Happ said the company is planning to invest in sales and marketing efforts and product development. “The fundamental game plan is not changing as we go into ’07,” Happ said. “We want to continue to maintain and expand our leadership position.”
Price to be paid?
The extent of Mortgagebot’s success remains to be seen as the residual affects of the housing decline spread through mortgage lending institutions.
In September, the U.S. Department of Commerce reported a 9.7 percent drop in the median price of a new home for the year and Federal Reserve Chairman Ben Bernanke estimated last month that a “substantial correction” in housing prices will impact the nation’s economic growth.
The national trend has been observed in Wisconsin as well. Building permits in metro Milwaukee’s new home market reached their lowest October volume in seven years, according to industry tracker, MTD Marketing Services. Permits in the first 10 months hit a seven-year low with 1,688 permits recorded, a 25 percent drop from the 2,228 reported a year earlier.
So far, these forces have not hurt Mortgagebot, which was named the 225th fastest growing private company in the country by Inc. Magazine in August and a “Future 50” company by the Milwaukee Metropolitan Association of Commerce in 2005 and 2006. Nor have they dented the demand from financial institutions for adoption of Mortgagebot’s Web-based lending tools.
With a monthly maintenance fee of $1,000 to $3,000, Mortgagebot provides its Web-enablement solution “PowerSite,” an online lending platform that integrates with client loan origination systems.
Mortgagebot’s clients, including 22 of the top 100 banks and 43 of the top 100 credit unions in the country, “are still doing a decent level of activity,” Happ said. “So the larger issue is not so much the housing market but just the need to open up this web channel for their clients.”
The company’s recent growth has enabled it to increase its total number of employees to over 70, with an expanded 25-person product development team now performing specifications, engineering, testing, and delivery on new product enhancements.
Credit union demand
Mortgagebot, which was founded in 1997 and spun off from Marshall & Ilsley Corp. in 2001, serves 50 clients in Wisconsin. Although some of the smallest financial institutions are not equipped for mortgage lending, Happ said he views all 289 credit unions and 310 banks in the state as prospective clients.
The Wisconsin Credit Union League, located in Pewaukee, serves these credit unions and their approximately two million members. Spokeswoman Chris Olson said the proliferation of online business functions early in the decade attracted the attention of state credit unions, and “it didn’t take much prodding from the league for them to recognize this was the future.”
About half of Mortgagebot’s clients are credit unions, and the company serves more than 35 credit unions with assets below $200 million. However, only 57.6 percent of Wisconsin credit unions offer computerized transactions.
Olson said it is not surprising that many of the league’s member institutions have been slow to adopt new technology because a majority are small, operating with approximately $20 million in assets or less, and do not require such services.
Data security wins customers
Rose Oswald Poels, senior VP of the Wisconsin Bankers Association, a group that represents 97 percent of all banks in Wisconsin, said most financial institutions make loan application forms available online, but in the foreseeable future electronic transactions will remain constrained by legal requirements.
For instance, she said it would be unlikely that a bank would close a loan completely by electronic means, while complying with regulatory standards for customer identification.
Happ, however, said his company thrives within the regulatory framework put in place to protect against fraud. “The regulators are very concerned about security, data privacy, and vendor financial strength,” Happ said. “For us, that’s a positive because… we’ve constructed our solution and all the services around it to address those needs.
“When financial institutions are evaluating vendors, that works to our advantage because we designed our company to meet those issues,” Happ added.
The chief contributor to Mortgagebot’s sales performance, however, is a growing customer demand for easier and faster access to loan-approval applications.
Online lending tools are “certainly a feature that more and more institutions do offer,” Oswald Poels said, “because the existing customer base is very interested in being able to conduct transactions with the bank however they choose.”
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