Yes, we've heard that it is going to be "big, really big," but the question for those in the market for a home mortgage is whether going the Priceline.com route will be better.
Priceline.com, the Internet site where "you name your own price" for such items as airline tickets and hotel rooms, has expanded its offerings to mortgages, home equity loans and refinancings. The company has joined with LendingTree, an online mortgage broker in Charlotte, N.C., to provide the means for applicants to name their own mortgage terms -- such as an interest rate -- and to have a network of lenders bid for their business.
This is Priceline's first venture into the personal finance arena of the Internet, but even its vice chairman and founder, Jay Walker, admits that bidding on mortgages is not the same as bidding for the cheapest airline ticket to Tucson, Ariz.
"We have always said that the customer who comes to Priceline for a mortgage really should have shopped and have done a fair amount of homework before they get to us, and we say so on our [Web] site. This is not a starting place for a mortgage process," Walker said.
Essentially, the Priceline process works this way:
A consumer goes to Priceline.com on the Internet and pulls up the mortgage page. The applicant fills out a form that asks many of the normal lender questions: type of property, amount requested, purchase price, down payment, length of mortgage, closing date, e-mail address, Social Security number, employment, salary, debt and assets.
After you are asked to fill out specific terms -- such as whether you are willing to pay discount points on the loan -- then you "name your own rate."
LendingTree, which has some of the nation's largest lenders -- including AccuBank, Bank One and Citicorp -- as part of its network, says an applicant's loan request will be viewed by up to four of its participating lenders.
Card number sought
Priceline will also ask for a credit-card number, because if a lender agrees to your terms, you will be charged a $200 "good faith" deposit that will go toward closing costs. If after two days, no lender has picked up on your request there will be no charge, and a borrower can resubmit an application after seven days. But if an applicant is approved, Priceline will forward the lender's telephone number via e-mail, and the process will continue on a more personal basis.
The bottom-line question is whether consumers are best served by using Priceline's system. What happens if a borrower requests -- and is granted -- a rate higher than what is being offered in the marketplace? Will consumers with credit problems be able to find a program that will get them the best possible mortgage?
"For an airline, it's your credit-card number," said Jim Horne, director of technology initiatives for the Mortgage Bankers Association in Washington. "For mortgages, there is a great deal more information required than to purchase an airline ticket."
Horne said there are no concrete statistics on the number of mortgage loans being originated on the Internet. The companies doing well keep quiet so as not to invite competition, he says, and the ones that are struggling remain mum out of embarrassment.
Priceline happens to be in its "quiet period" with the Securities and Exchange Commission, preventing Walker from commenting on the number of mortgage applications being filed. He did say that Priceline earns a fee for every successful mortgage LendingTree completes.
"We're not against items like Priceline.com per se; we caution people that everything is new on the Internet," Horne said. "Some things will work. Some things will not work. And again we are confident that the quality of service that people can get -- and that people need -- through normal business channels should suffice."
'Give us 48 hours'
Walker doesn't dispute that. What he wants borrowers to do is go to local lenders, pick their brains, get qualified, get educated, and get their best deal.
And just before you sign on the dotted line
"You might want to give a try to a service that doesn't cost you a thing," Walker said. "Give us 48 hours. Let us see if we can find the price you want to pay, which is an interest rate/points combination that you choose. If we can, congratulations, you are going to take it, because you know you are ready to buy at that point. If we can't, congratulations, it didn't cost you anything, you might as well take what you can get from somebody else.
"We are not the place that you can shop around for the lowest available rate. What we are is the place to go when you have your lowest available rate to see if we can beat it."
But Neil Sweren, president of American Home Loan Inc. in Pikesville and past president of the Maryland Association of Mortgage Brokers, warns that the Priceline method may not be in consumers' best interest.
"They want you to use me to get the information and then get the rate from them," Sweren said. "But I'm telling you that you are not necessarily going to get a better rate.
"Advertising on the Internet does not make their rates lower. It just makes you a mortgage company that advertises on the Internet. A lot of those companies that are doing huge volume on the Internet are doing strictly vanilla. If you have credit problems, it kicks you out of their system, they don't deal with that. They operate on a small margin, they only want cream of the crop; anything unusual, they don't handle that."
Added Horne: "When you are going on a site like that, you are not getting every option either, or every potential lender. Every lender is not up there [on the Web]. It's just whoever has bought in or has subscribed to that service."
"We are simplifying the process," Walker said, "by saying if you know exactly what you want, and you don't care who the lender is, then we are a good place to go to have us find you that lender."
But all agree that Priceline just gives the consumer another way to shop.
"It's a marketing tool," Horne said. "And for some people, doing it electronically may be a huge attraction. They like the anonymity, they don't like telling people they owe 'X' amount of dollars on credit cards. For other people, it will scare the heck out of them."
Said Walker: "It's no different than the oldest retail story in the book. Shop around for your best price, and we will beat it. If we beat it, you're a hero. If we don't beat it, you haven't lost anything, plus you probably know you've gotten a pretty good price. That's really our role in the process."
Pub Date: 2/21/99