January 2, 2004
By July of 2002, when Atlanta-based Amerisave turned on the lights and the Web servers and started making loans online,
the power of the Internet was well known in the mortgage business. Far from the first on the field, Amerisave joined a host of lenders -
both established brick and mortar players who were taking their business onto the Web, and new pure-play online firms - who were already
experimenting, searching for the right combination of automation and customer service required to win in cyberspace. Today Amerisave serves
customers in all 50 states and DC via its website. The firm originated $1.7 billion in its first full year of business. It currently processes about
1,000 applications per month with a book-to-close ratio of 70%. Loans range from $50,000 to $2,500,000, with the average loan at $220,000
and the average property value at $340,000.
But back in 2002, all it had was a bunch of information and an idea for an online mortgage business. By this time, some big mistakes had
already been made. The first mortgage.com had been rolled into a heap and the vast majority of the online mortgage marketplaces had died
of attrition. Some key lessons had already been learned. People like free, anonymous information, but they need help from a real human to
close the deal, for instance. Another: putting the old, paper-based mortgage business up on webpages wasn't the same thing as having an
online mortgage business. The brief history of the Internet gave Amerisave executives a key advantage, if they could take advantage of it.
Namely, they were able to look at what had already been done and ask themselves a very important question before they spent dollar one:
if we could build it any way we wanted, how would we do it?
Part of the answer was pretty simple. The company wasn't interested in jumping into the business as a full-fledged mortgage banker.
That meant being a broker, originating loans for wholesale lenders across the country. From there, it was pretty easy to take the next
step, which has since become part of the company's mission statement. Amerisave had to find a way to provide borrowers with the best
rates from the top banks for a variety of home financing needs, and it had to do it without sacrificing customer service.
The real question was how to do it. Fortunately for company founder and CEO Patrick Markert, he had the right background.
Prior to starting Amerisave in December 2001, Mr. Markert built and ran an IT consulting company called IT Force. Established in 1995,
IT Force had, at its peak, a staff of over 200 information technology consultants who were all providing technology solutions to the
financial services industry. His experience had convinced him that he could build a team capable of leveraging technology and the
Internet to deliver mortgage loans to consumers nationwide in a streamlined, automated fashion.
As chief architect, he pulled together a company and within about eight months had the beginnings of a completely automated, Web-based
point-of-sale loan origination system. "We developed the technology exclusively for the mortgage industry," Mr. Markert told Mortgage
Technology. "The opportunity for the business was very good. A lot of lenders were advertising that they were online, but there were
very few online systems. There wasn't a whole lot of competition in that area."
From the beginning, Mr. Markert knew that the goal was to start from scratch, to build a system that would give his company a competitive
advantage. But what would such a system have to do? For one thing, it would have to give customers what they wanted from the moment they
hit the site, or the company could not hope to hold them long enough to get the business.
"From day one, we wanted to be an online lender," says David Herpers, Amerisave's chief marketing officer. "So we looked and tried to
determine what was missing from the business. What was really missing was the ability for the consumer to search for rates effortlessly
on a website and not only get the rates but also detailed fees and closing costs for every product that the lender offers. So that's
kind of the first piece of our system."
When it comes to figuring out what customers want, Mr. Herpers has an edge. Part of his 12 years of banking experience was earned as
director of marketing and product development for DeepGreen Bank, Cleveland. Mr. Herpers managed the Home Equity Line Of Credit product
and played a key role in building a wholesale delivery channel for DeepGreen's internet-based mortgage loan program that got it national
attention last year. He has an MBA from the University Of Minnesota Carlson School Of Management.
He knew that when borrowers logged onto the Amerisave site, they wanted to know exactly what they could get and pretty close to exactly
what it was going to cost them to get it. The HELOC program at DeepGreen was built for lenders who knew enough to purchase the line
completely online. The automated delivery system handled the processing, all the way through to the post closing. DeepGreen personnel
were notified of the deal when they received the request to wire funds. It worked there, but could Amerisave build something that would
provide similar functionality to borrowers of purchase money mortgages?
What Mr. Markert needed was a product and pricing engine, with a difference. Instead of keeping track of all of the loan programs the
company offered and matching them up with loan applicants, the Amerisave system had to track all the products and pricing of the 50 or
so various wholesale lenders the company was working with at any given time. He asked his people to search the industry and find the
solution. They couldn't find it.
"I don't know of any software that can load in all the fees and rate adjustments of these different lenders," says Mr. Herpers.
"Keep in mind, there are hundreds of wholesale lenders. We couldn't find anything."
What they did find was that large, direct lenders had these systems, and many of them were available on their wholesale websites.
But they didn't want to have to surf to 50 website to find the right product. After all, the online customer doesn't expect to wait.
Amerisave would have to build it internally.
"The development was done in-house," says Jeff Gombala, director of IT for Amerisave. "Basically, we worked closely with the wholesale
lenders. We developed input engines to take the rates from these wholesale lenders and we wrote a proprietary pricing engine around it."
Today, Amerisave's rate searching technology allows customers to search rates and loan programs from multiple lenders instantly from
its website. The company says this allows customers to find the best loan program for their needs at the absolute lowest rate.
Customers have constant access to his information, through the company's site or from its call center.
"Our technology allows us to put the rates, underwriting guidelines, and pricing into our system," says Mr. Markert. "The technology
goes through all of the pricing from the various companies that we're working with and comes back to the borrower with the absolute
lowest rate that we have from all of those companies."
The system can accommodate a new lender's programs easily; the setup takes about a day. The system searches about 50 today, but is
scalable into the hundreds.
"Every morning, we load in the rates for every lender we do business with. In the system, we've got programmed in all the rate
adjustments from all of those lenders," says Mr. Herpers. "So someone can come to our website, answer seven to nine questions and
get a detailed price quote and this will be the exact price quote that they can lock. And they're able to lock that rate right on
our website."
At this point, Amerisave could have taken the information from the online rate search and fed it into an online LOS system. But the
company thought it could do one better.
"It all comes back to the fact that our model is Internet based, we're an online lender," says Mr. Herpers. "So we really needed
seamless integration with our website. As we looked at some of the off-the-shelf LOS products, they really didn't have the ability to
seamlessly integrate with our website. The other thing is, we automate a lot of our internal processes, which would have been a much
more difficult thing to do with an off-the-shelf product."
Once a visitor to the Amerisave site finds the product that suits their needs, the company allows them to lock the rate and begin the
application process.
"They'll pick a product and then they're going to lock the rate," says Mr. Herpers. "Then, we're going to ask them to fill out an
online application. We developed that in-house as well."
He admitted that there were some off-the-shelf products the company investigated that included online credit applications.
"The drawback that we saw in those off-the-shelf products," he says, "is that they are taking the 1003 and putting that on a website.
The problem with the 1003 is you don't have to answer every question, depending upon your specific product request and your specific
credit profile. So we were able to shorten the application process significantly by building a smart application."
Borrowers who use the Amerisave website are provided a multi-page online application. The responses to the questions on the first page
will determine the questions that appear on the pages that follow.
"We save the application at every step in the process," Mr. Herpers said. "So, if at any time the customer wants to stop, log off, go
home, do some research, pull some tax records and start the process again, they haven't lost anything."
After the application is complete, the company asks for a credit card number. Amerisave gets a pre-approval for $500, which is charged
to the account after the customer gets credit approval.
Once the application is completed, Amerisave has all of the information required to begin the paperwork.
"Because they have chosen the product and we know the closing costs of all of those products, we can now create all of the front-end
disclosures, which by law have to be sent out within three days of application," Mr. Herpers said. "What we do here is create all of
the disclosures in real time, based on the state, product, and credit profile of the customer."
Once those are created, an automated e-mail is sent to the customer that gives them a login and password for a secure section of the
Amerisave website where they can download their disclosures in PDF format.
A corporate FedEx number is provided to allow the borrower to send the completed forms back to Amerisave.
Because Mr. Markert came from a technology background, it seemed natural to him to use the tools available to him to speed up the process.
"We implemented lots of information systems," he says. "We saw an opportunity to automate a lot of what was being done in mortgage companies."
A lot of that work was being done in parallel at other firms throughout the industry, but since Amerisave had already gone to the
trouble to build it's own online product and pricing engine and application, it seemed reasonable to continue the work in the same vein.
The next logical step was to create a vendor management system.
"This was another thing that we saw lacking in the industry," says Mr. Herpers. "The mortgage process is fairly complex. You've got
to order title insurance; you have to pull credit reports.
If it's a conforming product, you've got to send information to Desktop Underwriter or Loan Prospector. You have to order appraisals."
But since Amerisave already has all the information from the consumer in digital format, it seemed logical to use that data to order
settlement services products.
"We have the information we need to send to an appraisal company. We have the information we need to automatically pull the credit
report. We have the information to order the title insurance and the flood certification," he said.
XML requests are made through the company's proprietary vendor management system. The orders are sent as soon as the application is
completed. By the time the processors get the job, much of the information has already been returned digitally and made part of the loan file.
"From a technology standpoint, especially on the vendor network side, we're rapidly working to become MISMO compliant," says Mr. Gombala.
"I'd say three-fourths of all of our work is now compliant."
Increasingly, customers are interested in knowing as much as possible about what it will cost to close the loan. Mr. Herpers anticipated
that. "They can click a button and see detailed closing cost fees," he says. It's an estimate, of course, because the lender can't control
all of the fees involved in the transaction.
To do that, Mr. Markert now knows his firm has to do a good job of reducing costs on the processing and streamlining the ordering of
third-party settlement services. Today, the firm's proprietary vendor POS and vendor management systems hand the completed application
off to Byte, where processors and closers finish up the work. It's working, but it's not perfect.
The company is currently working on its own, Web-based loan processing system, which it says will replace Byte next year. Advantages to
the new system will include the ability to manage remote offices and call centers and a tighter integration with the company's existing systems.
When that's finished, the company will have a pretty well-rounded suite of online lending tools. Will Mr. Markert fall back into his
old ways and become a technology provider to the mortgage industry?
"We've thought about that," he says. "As soon as the technology becomes more mature, we'll think about that even more."
Copyright 2004 Thomson Media Inc. All Rights Reserved.
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