Sizing the Web-based lending market is difficult:

•  The public pure Web-based lenders provide useful sales data, especially E-Loan, Mortgage.com, Finet (Table 4 to 6) and Lending Tree (Table 7 - 9); but they have relatively low share compared to traditional lenders who originate the majority of online loans but don’t usually report Internet volume separately.
•  Many loan applications are multi-channel; applicants may have surfed the Web for rates, then applied in person or by phone.
   

At year-end 1998, the total outstanding debt by U.S. households amounted to approximately $5.4 trillion (source: U.S. Federal Reserve). There were more than 21,000 financial institutions providing the credit (source: U.S. Census Bureau). Forrester Research projected that $1.9 trillion in new loans were originated during 1999, with $25.7 billion (1.3%) originated online. It expects the online share to grow to $168 billion (9.5% of total) by 2003 (Table 2), for a compounded annual growth rate of 60%.

Table 1

number in thousands, dollars in billions

OL %= percent of the dollar volume originated online            

¹Total originated on- and off-line

Table 2

billion $

Source: companies

Table 3

billions of dollars

Source: Piper Jaffray, 4/00

Table 4

billion $

Source: company reports and Piper Jaffray, 4/00

¹B2C share of total company volume

Table 5

Online Average Loan Size¹, 1999

Source: Piper Jaffray

¹Includes all types of consumer loans originated by the companies

²Average loan size fell due to acquisition of BofA’s Internet auto loan unit

Table 6

Online Acquisition Cost for Mortgages, Q1-Q3 1999

Source: Piper Jaffray

¹Includes home equity and sub-prime loans referred to other lenders

Lending Tree

Lending Tree first revealed its operating metrics in registration statements prior to going public Feb. 15. The company has continued to provide enough operating details to make it a good source for online lending trends.

In 1999 the company transmitted 186,000 loan applications (aka “qualification forms”) to its network of 104 lenders (Table 47). The total dollar volume transmitted was $16.2 billion. The average loan amount applied for was $88,000. More than 27,000 loans were closed amounting to $941 million in loans and lines. These results sound a little better than they really are because a substantial number of the loans (60% in Q1 2000) were credit cards cross-sold to applicants for other products (see Table 45 for a breakout in Q1 2000). Applicants earned rebates as high as $500 for taking the credit But even backing out credit cards, in Q1 2000, Lending Tree closed 7,500 loans for an annualized rate of 30,000 loans worth nearly $2 billion, a healthy amount of activity in a market sector barely two years old.

Lending Tree’s current tag line, “When banks compete you win,” strikes a chord with consumers.

Table 7

dollars in millions

Source: company, 5/00

¹Does not include 14,569 cards, $73 million in credit lines, and $232,000 in revenue cross-sold to other loan applicants

Table 8

Top Lending Tree Lenders* by Closed Loan $

Source: company, total lenders as of 3/31/00; top lenders for the month of Oct. 1999, based on loans closed

Table 9

¹Includes a large number of credit cards cross-sold to other loan applicants which earns the applicant a substantial rebate at closing; in Q1 2000 there were cross sales of 14,569 cards, $73 million in credit lines, and $232,000 in revenue (see Table 7); ²Excludes revenues from licensing its platform technology; ³ Does not include the cost of the sales staff

Table 10

unique monthly visitors (thousands)

Source:  PC Data Online www.pcdataonline.com ; Gomez Advisors Summer 2000 Mortgage Scorecard, rank of 26 total www.gomez.com ; 5/00          

 n.r.=not rated