Borrowers Shop the Web for Mortgages
One business area that has been significantly affected by the Web is mortgage banking. Historically, borrowers went to local banks, savings and loans, and mortgage banking companies to obtain mortgage loans. These offices packaged the loans and resold them. In recent years, hundreds of new Web based mortgage banking companies have emerged. The mortgage market is well suited to providing online service for several reasons. First, it is information based and no products have to be shipped or inventoried. Second, the product (a loan) is homogeneous across providers. A borrower does not really care who provides the money as long as it is provided efficiently. Third, because home buyers tend not to obtain mortgage loans very often, they have little loyalty to any local lender. Finally, online lenders can often offer loans at lower cost because they can operate with lower overhead than firms that must greet the public. The online mortgage market makes it much easier for borrowers to shop interest rates and terms. By filling out one application, a borrower can obtain a number of alternative loan options from various Web service companies. Borrowers can then select the option that best suits their requirements. Online mortgage firms, such as Lending Tree, have made mortgage lending more competitive. This may lead to lower rates and better service. It has also led lenders to offer an often confusing array of loan alternatives that most borrowers have difficulty interpreting. This makes comparison shopping more difficult than simply comparing interest rates. Borrowers using online services to shop for loans must be aware that scam artists have found this an easy way to obtain personal information. They set up a bogus loan site and offer extremely attractive interest rates to draw in customers. Once they have collected all the information needed to wipe out your checking, savings, and credit card accounts, they close their site and open another.