Microsoft Throws Its Huge Hat Into The Home-Mortgage Ring
March 16, 2000
By Tom Kelly
REDMOND, Wash. -- Microsoft Corp. thought it was a big deal -- or it would not have trotted out Steve Ballmer.
The Big Fella, eagerly awaiting the major league baseball season so that he can take his front-row seat behind the Mariner dugout at Safeco Field, tossed the software giant into the major leagues of home loans today when he announced the formation of a new company that would "revolutionize mortgage and real estate transactions."
Ballmer, Microsoft president and CEO, was joined by his new, national mortgage partners when he announced HomeAdvisor Technologies Inc., which will supposedly save consumers up to $2,000 in costs on a $150,000, 30-year fixed-rate mortgage. Also on hand were executives from Freddie Mac, Chase Manhattan Corp., GMAC-Residential Funding Corp. and Norwest Mortgage, a Wells Fargo company.
The presence of Ballmer -- who, along with Microsoft co-founder Bill Gates -- never got close to a HomeAdvisor announcement in the past, was a huge indicator of how high Microsoft wants this particular venture to fly. Since the company launched its HomeAdvisor.com home-listing website nearly two years ago, the goal has always been mortgages - and lots of them. The crucial piece of the puzzle was Freddie Mac. In a capsule, Microsoft can now dovetail its technology into Freddie's underwriting and processing engines, cutting time and costs for loan reps and consumers.
"The mortgage market is undergoing revolutionary changes, driven largely by advances in technology," said Leland C. Brendsel, chairman & CEO of Freddie Mac. "Through HomeAdvisor Technologies, we are responding to these changes by making our suite of innovative tools available to our lending partners and enabling them to deliver a faster, more efficient and lower cost mortgage process to consumers."
Freddie Mac is the common name for the Federal Home Mortgage Corp., an organization that traditionally has purchased mortgage loans, mostly from financial institutions. Freddie Mac, along with Fannie Mae, the Federal National Mortgage Association (NYSE: FNM), is one of the top players in the country's "secondary mortgage market."
Freddie?s alignment with Microsoft is now clearly different than its normal role. Freddie has moved from purchaser to partner.
"HomeAdvisor Technologies makes buying a home easier and more affordable, thanks to groundbreaking new technology and some incredible partners," Ballmer said. "HomeAdvisor Technologies is dedicated to helping everyone -- consumers as well as real estate and mortgage professionals -- save countless hours and thousands of dollars with new products developed as a result of this partnership with Freddie Mac, Chase.com, GMAC-RFC and Norwest Mortgage."
Bryan Mistele, the highly regarded product unit manager of MSN HomeAdvisor and perhaps the best listener involved in high technology today, will oversee the new company. Given the number and complexity of his new partners, he will most likely need his listening skills often.
The new company also broadens the concept of "transaction management," the hot new niche that many online companies have been scampering to fill from a variety of angles. Last month, Microsoft announced Realty Desktop, designed to help real estate brokers create customers for life through the flexibility and power of the Web. It was patterned after DealerPoint, which has been available to car dealers nationwide for over a year. In that time, DealerPoint has helped car dealers increase customer service and sales, while providing an avenue to communicate with online car buyers. A component of HomeAdvisor Technologies does the same thing for loan reps.
HomeAdvisor.com has evolved from a home-listing center into an online guide that aids real estate agents and takes consumers through the home-buying process. It offers services such as neighborhood crime and school statistics with homes, loans, editorial content and expert advice. One of its initial tools - a buy-or-rent-calculator - was immediately popular with consumers attempting to weigh the financial benefits of homeownership.
"A mortgage may be the largest transaction a person ever makes, and people want to purchase them with the same ease and simplicity they currently enjoy with other goods and services," said Jonathan Gaw, a former tech reporter for The Los Angeles Times and now research manager of consumer e-commerce at International Data Corp. "Overcoming that barrier by marrying expertise in technology and mortgages to deliver up-front and binding mortgage quotes in real time significantly boosts the development of the online real estate and mortgage category."
Microsoft said the HomeAdvisor Technologies loan program will soon debut on its HomeAdvisor.com site. Reportedly, it will automate many of the steps required to approve and finance a mortgage - including credit checks, appraisals and underwriting decisions. As a result, the new process could save the average homebuyer more than $2,000 over the course of a loan, enable them to instantly lock a loan rate online, and cut the closing process from more than a month to just 10 days.
Will the new alliance save a ton of cash for everybody who wants a loan? Probably not. While this deal is significant in terms of streamlining and time-saving, it does not mean slam-dunk savings for folks with poor credit, bankruptcies or awful employment histories. Remember, the best quotable loan - online or offline - is not always the best closeable loan. While Microsoft's new program will consider all borrowers and most loan amounts, it will best benefit those who fit the norm and fall within "plain vanilla" loan qualifications.
However, this is only the next step in loan origination and processing. Do you really think the industry -- let alone Microsoft -- is going to stop here?
Tom Kelly, former real estate editor for The Seattle Times, is a syndicated columnist and talk-show host.
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