A Modem, A Mouse, A Mortgage

When Hugh McIsaac decided to refinance his house in Manzenita, Ore., he didn't go to the bank or visit a mortgage broker. He went online. "It was very efficient, very convenient, and hassle-free," says the director of family-court services in Multnomah County. "I'd definitely do it again."

So would many others. McIsaac is one of a growing number of folks finding that the quickest and easiest way to get a mortgage is over the Internet. Because of its rates, McIsaac chose Inland Mortgage, a nationwide lender based in Indianapolis. Traffic at the Inland site is indicative of how quickly Internet use is growing among mortgage hunters: It rocketed from 8,005 hits in October to 54,292 in January. Online applications jumped from 3.63% of Inland's consumer loans to 10.51% in the same period.

"People who are time-starved" are using the Net, observes Calvin Watts, vice-president and manager of Inland's Internet marketing division. Many users, says Watts, are borrowers in rural areas who want to avoid traveling long distances to branch offices in metropolitan areas. Another lure is anonymity. People with "tarnished" credit histories, as banks describe them, don't have to face a skeptical loan officer. Even some folks with pristine records feel more comfortable with impersonal vending machine-like devices than with face-to-face encounters. Finally, lots of borrowers like the potential bargains: Online loans can also cut mortgage costs. Lender American Finance & Investment of Fairfax, Va., claims it can save you $1,500 in fees on a $135,000 loan, mainly because it doesn't have much overhead.

Despite all these conveniences, getting a loan is not exactly like getting cash from an ATM. You'll have to wait the same time period before finding out if your loan has been approved. And in most cases, you'll have to pay the same interest rate and many of the same fees whether you're in a bank or cyberspace.

One downside of cyberspace, though, is that you don't have a real person to talk you through your financial needs. Fortunately, there are well over 100 mortgage-related Web sites online. The best ones, such as Countrywide's Home Loan Wizard and Homebuyer's Fair's Intelligent Mortgage Agent, provide interactive financial calculators that let you experiment with various financial scenarios. Much like working a spreadsheet, you can figure the impact of a 15-year or 30-year loan at a variety of interest rates while taking into account factors such as bank fees. You can also determine if you should rent or buy, just how much home you can really afford, and how tax breaks play out.

Other Web sites are for your edification only, offering basic tutorials, glossaries, and links to more regional sites. One strong site, R-Net: Real Estate and the Net (www.clark.net/pub/rothman/ re.htm#calculators), will give you the big picture on buying and selling homes as well as provide terrific links to other sites. The Mortgage Mart (www.mortgagemart.com) concentrates more specifically on financing issues. But many sites are nothing more than uninformative billboards for individual brokers.

FOLKSY. National lenders are fewer in number but tend to boast better graphics and are the most interactive. Surprisingly, some are downright folksy in the way they communicate information. Nobody keeps it simpler than Consolidated Mortgage & Financial Services Corp.--they call their site Mr. Cash (www. mrcash.com). And Waterfield Mortgage lets you click on a picture of a loan officer for a full-screen blow-up.

The worst sites are those that want information about you before they tell you something about themselves. Like real life, the Internet has its share of shady operators, so it's best to deal with recognizable institutions. Which brings up the issue of security. Among the sites sampled, Countrywide was the only one that let you choose between an encrypted or unencrypted transmission. Companies such as Inland say they will incorporate encryption software on their servers in the future, but just how secure they are from hackers may be a matter of faith.

In the end, you may be better off following the lead of our online pioneer from Oregon, Hugh McIsaac. To send truly confidential information to Inland's loan officer, McIsaac used a fax machine. Perhaps he remembered the old adage that pioneers can wind up with arrows in their back--even in cyberspace.

Before it's here, it's on the Bloomberg Terminal.