NEW YORK (
) -- The fallout from the mortgage mess and the resulting foreclosure crisis has not stopped banks from figuring out new ways to make applying for loan easier and cheaper. For many, the answers is to take the mortgage application process out of the branch and onto the Internet.
Banks for the most part, with the exception of some of the largest institutions like
Bank of America
, have been slow to adopt measures that bring their businesses up to speed online.
With new financial reform measures calling for increasing transparency and disclosure - and the resulting increased costs to banks - online expansion may be the easiest and cheapest way for banks to go.
It seems that customers are also looking move away from the branch to the computer when applying for a mortgage.
"The traditional branch as being a source of deposits and loans -- that's changed a lot," says Ken Thomas, a Miami based banking consultant and economist. "Deposit
services are very much convenience related, but on the lending side they've become much more of a commodity that is suitable to the Web."
"We don't mind what bank we deal with online, but when it comes to deposits, we want a bank we know," Thomas adds. "On the loan side we're looking for rates."
There's no doubt that the new financial reform measures under the Dodd-Frank Act and the Consumer Financial Protection Act of 2010 will force financial institutions to curb risky lending practices. Banks will also need to clearly explain fees and other charges for banking services going forward, including loans.
That hopefully means less legalities, fewer pages of confusing information in small type and overall better disclosure statements on loan documents, Thomas says.
At the same time, the online channel is becoming more prominent.
Online only lenders, such as Detroit-based
, a subsidiary of the Dutch powerhouse
, are aggressively competing with larger lenders on loan pricing and by adding other extra perks.
Inside Mortgage Finance
, ING Direct, the 18th largest originator, has seen the biggest increase year over-year in origination volume of 40% so far, compared to the industry's 25% decline year over year.
"There is a growing group of people that are saying 'I'm busy. As long as you can keep me in the loop, I'd like to do this using a more virtual channel," says David Lo, director of JD Power & Associates' mortgage practice.
Institutions that have embraced the online channel, for the most part, do a good job at offering automatic updates and offering customers the ability to check the status of their loan application, experts say.
assistant vice president of home solutions, says the San Antonio, Texas-based institution, which primarily serves the military community online, has seen its market share double over the last couple of years.
Rich Novak, USAA's assistant vice president of Home Solutions
"We're not looking so much at product design as focusing on the experience and what is it that members are trying to accomplish? If we can put the right pieces around that, make it easy and simple and transparent so that they can make the best decisions possible, with the right set of core products then it's going to an experience that's delightful," Novak says. "It's not something
customers expect from a financial services company."
USAA's primary focus is to offer customers convenience by expanding its capabilities and user-experience online.
Novak cited one program that USAA offers to customers called Home Circle.
Since a key budget expenses for customers is their housing expenses, USAA has put together a program that helps customers find a home, whether rental or purchased property. The Home Circle program includes other tools and products that may be needed, such as mortgage insurance, homeowners insurance and home security.
"We're bringing all of those pieces together into sort of one unified experience for the member," Novak says. "It's convenient and easy for the customer because we're bringing together a lot of these things they were already doing, into one place. We're trying to bring not only the transparency but do it in a way that the provider they can trust."
--Written by Laurie Kulikowski in New York.
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