NetBanker 2.0

Mortgagebot offers custom rates widget

Mortgagebot LLC, the online mortgage spinoff from M&I, has introduced an online widget for its clients (see Fairwinds CU version inset). The widget allows users to keep current mortgage rates visible on their desktop.

Typically, it would appeal primarily to someone currently in the market for a mortgage or refi where an 1/8 difference in rate can add up to thousands over the life of the loan. 

So far, seven of Mortgagebot's 600 clients have posted the widget at Yahoo's widget center; however, many more offer the service through their websites.

The first widget posted on Yahoo was uploaded Aug. 28 for Northwest Savings Bank and has been downloaded 711 times. In total, the Mortgagebot widget has been downloaded 2,200 times.

• Northwest Savings Bank (national), 711 downloads since Aug. 28
• Fairwinds Credit Union (Florida), 215 downloads since Sept. 27
• Vista Federal Credit Union (California), 330 downloads since Sept. 27
• Gateway Community Bank (Iowa, Nebraska), 275 downloads since Oct. 2
• Northwest Bank (national), 351 downloads
  since Oct. 3 
• Macon Bank (North Carolina), 216 downloads
  since Oct. 12
• Riverside Bank of Florida, 127 downloads
  since Oct. 12

For more information on creating a desktop presence, read Online Banking Report #85, Grabbing Desktop Mindshare. Also see our previous coverage here.

Bank of America's multimedia no-fee mortgage promo omits key search term

When Bank of America launches a new product, you might as well try to ride on their coattails rather than fight it. One obscure loan-referral website is doing just that.

Bank of America's product-du-jour, at least in our Seattle market (UPDATE 10 Jan 2007: Confirmed as a market test in this article here), is a unique no-fee mortgage that comes with a built-in "refi" option. The refi feature allows users to lower their underlying mortgage annually if rates drop. It's a product that makes a ton of sense for today's savvy mortgage holders, who know when to hold 'em and also when to fold 'em into lower-rate loans.

The bank has been blitzing the market with branch, Web (see End Notes), and radio advertising for the product. Today's mid-day radio spot included a URL in the call to action, <bankofamerica.com/nofeemortgage>. Typing that URL directly into the browser leads to the correct Bank of America landing page (see screenshot in End Notes).

However, for a good portion of listeners that navigate with Google, typing "bank of america no fee mortgage" brought search results that did NOT include the bank as an advertiser although they were the second organic result listed (see screenshot below).

Google search results for "bank of america no fee mortgage"

Surprisingly, the top advertiser, YourQuoteOnline, was running an ad that was rather deceptive (see screenshot above). It fooled me into thinking it was a BofA ad.

A similar search for "Bank of America mortgage no fee" did bring up the bank's Google ad (see below), although it linked to a "$2,000 savings" landing page (see End Notes) instead of the no-fee promotional page. Evidently, Bank of America has not properly coded their search-word criteria to include the more obvious search term or to send searchers to the current no-fee campaign page. The bank is leaving money on the table by allowing some of the traffic generated by its advertising to be funneled off to other companies.

Google search results for "bank of america mortgage no fee"

End Notes (click continuation link for footnotes)

Zillow opens "financing" area; lands $25 million

Seattle-based Zillow (see FMW Feb. 8) announced a $25 million second-round investment led by Boston's PAR Capital Management. The home-value and real estate-listing service, founded by Expedia's Rich Barton, received 2.1 million unique visitors in June according to comScore.

With a total of $57 million raised, the 118-person company can create interesting new products from its database of 67 million homes. The latest twist: residential real estate "heat maps" that show home values, measured in sales price per square feet, across 18 metro areas (click on the inset to see Seattle's heat map, with red being the higher prices).

Zillow also launched a "financing" section last month, complete with its own tab on the homepage (see screenshot below). It's clearly a first effort with a cluttered design. An unattractive LoanWeb banner dominates the page with Google ads running along the right side and LendingTree and Bankrate.com providing interactive tools along the bottom.

Financial institution opportunities
Financial institutions can use Zillow and its competitors (RedFin, HouseValues, HomeGain, PropertyShark, RealEstate.com, Trulia) in several ways:

1. Advertising medium: With millions of potential home buyers using the sites, it's an ideal place to market mortgage and other bank products, especially with a "new mover" package (see FMW April 5).
2. Prospecting tool: Branch loan officers could use the service to map potential untapped home equity in their neighborhood. Although this information is already available in other prospecting databases, the ease of use and mapping capabilities of the Web-based services could help loan officers hone their pitch.
3. Consumer education: Although Zillow is well known among the early adopter crowd, it's not exactly a household name. Introducing your customers to Web-based home-value services would make an interesting addition to your consumer education area or monthly newsletter.

ING Direct's "unmortgage"

When  everyone is swimming upstream, sometimes the best strategy is to head down. In the soft drink world, 7-Up's "uncola" campaign is legendary. The J Walter Thompson campaign launched in 1967 ranked 61st on Advertising Age's Top-100 All-Time Advertising Campaigns (compiled in 1999). In that spirit, ING Direct Canada's "unmortgage" campaign is bound to grab attention <ingdirect.ca>, even without the fizzy water.

How often have you seen "the best mortgage is no mortgage" at a lending site? The direct banking pioneer doesn't even use the word mortgage on its homepage, instead posting an "unmortgage toolkit" along the bottom navigation (click on inset for a closeup). To further reinforce the unmarketing strategy, an unmortgage sweepstakes promises $20,000 to two customers to assist in paying down their mortgage balance (see screenshot below).

Analysis
Unfortunately, the bank does not make good on its homepage promise. Clicking on the Unmortgage Tool Kit, simply drops users into a relatively standard mortgage page with information on new mortgages, refis, and home equity (see screenshot below). Where's the "help me unmortgage my home" button, or the "five steps to eliminating your mortgage" worksheet, or even a "talk to one of our unmortgage officers today" graphic.

After a great tease, the company leaves users hanging. Hopefully, they'll remodel their mortgage page with ways for prospective customers to follow through on the unmortgage promise. Since ING trademarked it, you may not be able to use that clever name. But anyone can follow the powerful strategy of working to get your customers out of debt and back into the savings habit.

In the United States, as baby boomers head into retirement often loaded with mortgage debt, "mortgage retirement" is likely to become a major focus in the personal-finance press for decades. Now is a good time to make your mark as the unmortgage expert in your area. While it may not land you on Ad Age's Top-100 list, it could keep your mortgage officers busy for years to come.

--JB

Popular Direct coming May 1

The new website for previously announced U.S. direct banking effort from Puerto Rico-based Popular Inc. <bancopopular.com> is just five weeks away from launch. According to its website <populardirect.com>, "A whole new Popular Mortgage Online coming May 1st 2006." The company is also using <pmexpress.com> to direct traffic to the new site.

The current website for Popular Mortgage is <popularmortgage.com>. There is no hint whether high-yield savings accounts will be offered at the outset.

--JB

April 6 update: An article in today's American Banker outlines Popular Inc.'s overall goals for its U.S. expansion, including an expected $3 billion in deposits through its upcoming direct banking initiative. The timetable for the $3 billion isn't spelled out, but it sounds like a 2008 year-end goal.

Catering to do-it-yourself homebuyers

In many urban markets, new tools aimed at homebuyers are about to alter the purchasing paradigm. These tools, which make it much easier to scour home listings, determine market value, and make legally binding purchase offers, are slowly diminishing the role of the real estate agent, especially on the buy side (sellers still need access to the multiple listings). Already, 24 percent of recent homebuyers first learned of the home they eventually bought through their own Internet research (see Note 1 below).

What does this have to do with online finance? Plenty. With 77 percent of home buyers already using the Internet in their home search (see Note 1, below), the online real estate venues will begin to play a much larger role in the process. Financial institutions that get their name in front of homebuyers early in the process have a much higher likelihood of being chosen as the mortgage lender. And with buyers less likely to contact a real estate agent early in the process, traditional agent referrals will become less of a factor in the mortgage-purchase decision.

The Latest Homebuying Resources

Zillow <zillow.com>, the Seattle-based company launched Feb. 8 to much fanfare (so much that it crashed the site) including favorable articles in Walt Mossberg's Wednesday WSJ column, Seattle Times business section, The New York Times, and many others. Zillow, started by former Expedia founder and CEO, Rich Barton, allows users to research comparable housing market values, both current and historic. Similar services have been around for almost a decade, but none match Zillow's depth of information and ease of use (click on screenshot right for a closeup). Note: Zillow is using an advertising business model. Currently, it displays Google AdSense ads on the right, banner ads across the top, and other ads scattered throughout the site. Real estate brokers and lenders are expected to be major advertisers. ZipRealty, a buyer's agent that rebates 20 percent of the commission, is a major sponsor at launch. Other similar services: HouseValues.com, HomeSmartReports.com, and HomePriceCheck.com (from LendingTree).

-

Redfin <redfin.com> another Seattle-based startup, provides not only home-value data, but also overlays home-for-sale listings and recent sales on a satellite image of the neighborhood (click on inset for closeup; red boxes are homes currently for sale, blue-green indicates a recent sale). And with a business model that includes pocketing 1/3 of the home-sale commission, while rebating 2/3 to the buyer, it offers a potentially disruptive business model to the real estate industry which generated more than $60 billion in commissions in 2005 (reference: Seattle Times, Feb. 5, 2006). Although the site covers only the Seattle metro area at this time (which generated $1 billion in commissions in 2005), its primarily California-bred executive team is planning a San Francisco area launch later this year.

Action Items

1. Keep abreast of homebuying venues in your market areas. Consider advertising or sponsorship opportunities to drive new buyers to your financing options.
2. Improve the visibility and benefits of your mortgage preapproval program. Look at what Third Federal has done with its Mortgage Passport, a lifetime mortgage preapproval service (FMW Jan. 23, 2006).
3. Develop a robust real estate marketplace for your website. Use your impartiality as a drawing card, e.g., "Looking for a home? Check out yourbank.com's Real Estate center, where we show you how to find ALL the homes in the market, not just the ones your agent wants you to see."
4. For those not currently receiving referrals from real estate agents, consider adopting the Redfin discount real estate agent model, helping buyers earn large commission rebates. You could even take it one step further, allowing the rebate (which could be as high as 3 percent of the purchase price) to pay for all or part of the down payment at closing.
   
   Run this scenario by your legal department: The bank refers customers to a flat-fee real estate attorney who handles the purchase offer and subsequent negotiations for a pre-set fee; let's call it $500 (see Note 1). The remainder of the buying agent's commission is used as down payment for a mortgage from your bank. On a $400,000 home, that potentially makes more than $10,000 available for the down payment.

Big Caution: Anyone helping cut real estate agents out of their full commissions will be extremely unpopular, and will face backlash from the local real estate industry. This strategy (#4) works only for financial institutions with relatively few ties to the existing homebuying power structure.

-- JB

Looking for ARM conversions

The Wall Street Journal's Ruth Simon writes today about how lenders are using the rise in short-term mortgage rates to convince borrowers to swap their adjustable-rate mortgage (ARM) for a fixed-rate one. She told how CitiMortgage, Wells Fargo, and others are targeting borrowers through direct mail, statement inserts, and telemarketing campaigns.

To see if these tactics had spilled over to the online world, we tried a few Google searches to see who was advertising "ARM to fixed-rate conversions." The only highly targeted ad was by DiTech, <ditech.com> the online lending unit of GMAC.

Under our search, "trade ARM for fixed mortgage," their AdWords promotion used the headline, "Dump Your Adjustable & Get a Fixed Rate Loan from Ditech.com" (click on screenshot above for a closer look), exactly what we were looking for. Unfortunately, DiTech has not created a landing page that speaks to this niche. We were dumped on their busy homepage (click on screenshot below for a closer look) and left to our own devices to figure out how to accomplish this intricate task.

Analysis
It's simple to see what went wrong here:

   Great search engine marketing
+ horrible website execution
= wasted $$$$$

The old advertising cliche about the fastest way to kill a bad product is with great advertising is doubly true with search engine marketing. Great search engine marketing increases click-throughs, driving costs through the roof, while poor website execution pulls conversions down, making the whole effort appear terribly cost ineffective.

So before launching any clever search engine campaigns, make sure you are able to cash in on the traffic.

--JB

Lifetime mortgage approval

Ohio's Third Federal Savings & Loan <thirdfederal.com> Mortgage Passport program might be the best relationship program we've ever seen. The free program promises a lifetime of preapproved mortgages and/or refinances, subject to a few simple rules:

-- Owner-occupied housing within the bank's lending area (all of Ohio and parts of Kentucky and Florida)
-- Maximum LTV of 85 percent for loans less than $650,000; 60 percent for loans higher than $650,000
-- Have never declared bankruptcy or been foreclosed on

Features

• Mortgage is preapproved: Members are guaranteed a mortgage loan provided they meet down payment/equity requirements (15 percent for up to $650,000, 40 percent for higher) and have not filed for bankruptcy or been foreclosed on.
• Lifetime membership: The preapproval is good for the lifetime of the member provided the above criteria are met; future credit score and income does not matter.
• Reward programs: Members are automatically enrolled in Passport Rewards which promises prizes and "special gifts" throughout the year.
• No program application required: Membership in the Mortgage Passport is by invitation only (preapproved) based on credit history; users receive an ID in their preapproval package that is entered into the bank's website (application is still required for a new mortgage/refinance); mortgage site powered by privately held Mortgagebot LLC.
• No maximum debt-to-income ratio: Provided the above equity measures are met, the bank lets the home buyer determine the house payment they can afford.
• Downloadable, preapproval letter: Members can download and print a mortgage preapproval letter at any time to use when house shopping; no preplanning is required before hitting the open houses; and members can choose the loan amount to be cited in the letter.

Analysis
In the age of identity theft, layoffs, and mysterious entries on your credit report, it is reassuring to know that once you've joined Third Federal's Mortgage Passport program, you'll never have to worry about being approved for a mortgage again. This prevents the sad cases where consumers who've lost their jobs are stuck in their oversized house or mortgage because they can't qualify for new, lower-priced financing.

And talk about engendering loyalty. Would you ever move your banking business away from a company that gives you a preapproved mortgage for the rest of your life! That's better than free bill payment by just about every measure.

Assuming the underwriting is sound, the only downsides are:

1. Limitations of "by invitation only": While it creates exclusivity and ensures the highest credit quality, what about prime prospects just moving into Ohio or Florida that have not received the bank's preapproval offer? There should be some application process to receive the coveted "invitation."
2. Undermarketed on its website: Again, because of the by-invitation-only nature, the program's promotional material is low-key so as not to disappoint the majority of visitors not previously qualified for the program. The bank provides a homepage link (click on the inset for a closeup), but the tiny, almost unreadable copy says only, "Click here if you've received an invitation to participate in our passport program."

--JB

Mortgage OneAccount

Speaking of combined accounts (see Higher One), why isn't anyone in the United States offering a combined mortgage/deposit account, a product that's been quite popular in the UK ever since Virgin pioneered the concept in 1997.

The OneAccount, now wholly owned by The Royal Bank of Scotland, has grown to 160,000 accounts with US$20 billion in loan commitments ($125,000 per account).

Analysis
While a combined mortgage/deposit account probably won't appeal initially to mainstream consumers, it's a potential PR and marketing gold mine. Using deposit totals to offset mortgage principal balance creates significant savings when compounded 30 years.

For example, a $1000 average "deposit" balance used instead to offset the mortgage balance, returns 5-to-1 in interest savings over the life of the loan (using 6% rate), e.g., a $5000 savings. The savings are more if interest rates increase.

Deposits used to offset the mortgage balance provide a rate-of-return equal to the mortgage rate. For example, your customers with 6% mortgages, earn 6% by using their deposit totals to offset the mortgage balance.

The Business Case
At first glance, the combined account seems to have a challenging business case. Every dollar used to offset the mortgage balance is one less dollar earning the spread between deposits and loans.

If you already have the majority of your customer's deposits AND loans, forget about this offering. Enjoy your success!

But if you are looking for ways to increase your home-secured lending business, this product has real potential to bring in new outstandings. 

-- JB

Online home equity lending to heat up

Capital One Financial's purchase of online home-equity lender eSmartLoan for $155 million on December 14 (press release), should increase the level of innovation in this market in the coming years.

eSmartLoan originated about 12,000 home equity loans in 2004, totaling more than $1 billion, just two-tenths of 1% of the national total of $431 billion according to SMR Research Corp. The 2004 total was up more than $100 billion (35%) from the $320 billion in home-equity loans were originated. 

Under its previous owner, National Bank of Kansas City, the online lender was willing to lend up to 125% of the home equity (LTV).

-- JB