It was less than three years ago that Jan Hoeffel, a former Navy pilot and founder of a candy company, and Dan Rawitch, a former real estate broker, plotted out a new game plan for their ailing firm.
From that brainstorming session blossomed a fresh idea: an Internet-based company that would open doors in cyberspace for buyers to find cheaper home loans without going through brokers and loan officers.
The result was Finet Holdings Corp., the Walnut Creek-based firm that has made it easier for a home loan to be pre-approved by the Federal National Mortgage Association, the biggest source of residential mortgage funds in the country.
By getting out of brokering loans and into developing new technology specifically for the home loan market, Finet officials hope to get on the right track to the growing home loan market.
“Brokers are in trouble if they don’t start adapting to technology quickly,” said Rawitch, Finet’s chief executive officer.
Rawitch has good reason to be sanguine about his company. Internet commerce is growing by leaps and bounds, and one of the biggest growth spurts is expected to be residential loans. Home buying, especially in the prosperous San Francisco Bay area, has exploded as interest rates have dropped, and more loan-shopping is being done online.
“Five percent of Web users have either looked at a home mortgage site or intend to. The potential is huge,” said Peter Krasilovsky, a vice president at Arlen Communications Inc. in Bethesda, Md. “It’s coming out of nowhere, and the growth rates are going to be in the hundreds of percentage points.”
Finet’s products are making waves in an industry that is already filled with banks and other online companies such as E-Loan and HomeShark Inc.
Finet recently joined high-profile technology companies like Richmond-based Pixar Inc. when it won a Smithsonian Institution award for developing iQualify, a new Web site that helps home buyers get loan approvals through the Internet.
Consumers using Finet’s iQualify Web site (www.iQualify.com) to get a Fannie Mae loan can bypass mortgage brokers and bring an approved loan directly to the lender.
It is no small recognition for a company that only three years ago closed 20 offices and fired two-thirds of its mortgage brokers during a companywide reorganization. It is still not out of the woods. Last year, Finet’s revenues declined 31 percent to $4.3 million, and it lost nearly $3.2 million.
Two years ago, Finet acquired Monument Mortgage Inc., a mortgage lender that operates in 17 states. Then in May, Finet announced the acquisition of Coastal Federal Mortgage Co. and MICAL Mortgage Inc. for a combined $7 million.
Analysts say Finet should appeal to consumers familiar with shopping for cars and computers on the Web. Banks and other companies allow consumers to complete an application on the Web, but merely tap into a conventional loan program that can take weeks to complete.
Finet’s site makes credit checks almost instantly online, and armed with Fannie Mae’s online approval, consumers can choose a lender and send their applications online.
“Finet says not only are you qualified, but here’s the money (from Fannie Mae). You’ve committed the funds,” said George Critchfield, senior vice president in charge of investments for Round Hill Securities Inc. in Alamo.
Finet’s application process can shave about $1,400 off the closing costs on a typical home loan. But, many consumers are skeptical about trusting the biggest investment of their lives to a completely automated process.
The applications, even though they include only 31 pieces of information, can be intimidating for buyers who have never shopped for a home loan, Rawitch said. For those leery buyers, there are human advisers available through the telephone.
“We think we have the best of both worlds,” Rawitch said. “But if they want a human, we’ll get a human.”
