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

Projected Online Loan Originationsns

number in thousands, dollars in billions

Source: Forrester, 1999             

OL %= percent of the dollar volume originated online            

¹Total originated on- and off-line

 

Table 2

Projected Online Mortgage Originations

billion $

Source	1999	2000	2001	2002	<2003	CAGR
Forresterer	$19	$32			$91	48%
Piper Jaffray	$20	$35	$50	$80	$100	50%
Deutsche Bank		$60			$250	61%
Jupiter (high)					$155	n/a
Jupiter (low)					$101	n/a
eMarketer	$7.2	$26	$49	$74	$102	70%
Average	$15	$38	$50	$77	$133	71%

Source: companies

Table 3

Online Mortgage Originations by Quarter, 1999

billions of dollars

	Q1	Q2	Q3	Q4	Total
Total residential mortgage volume	$351	$381	$309	$247	$1,288
Internet enabled (retail B2C)	$2.0	$2.3	$2.0	$2.1	$8.4
% on Net	0.58%	0.61%	0.63%	0.83%	0.65%

Source: Piper Jaffray, 4/00

Table 4

Online Mortgage Originations, Q3 & Q4 1999

billion $

Lender	$ Volume		Change		% of Tot
	Q3	Q4	$	%
E-Loan	$301	$300	($1)	0%	17%
Mortgage.com1	$149	$186	$37	25%	8%
MortgageBot (M&I)	$64	$51	($13)	(20%)	3%
Finet1	$40	$59	$19	48%	2%
American Home Mtg	$40	$79	$39	98%	2%
Mult--lender sites	$511	$615	$104	20%	25%
Others	$852	$764	($88)	(10%)	40%
Total	$1,958	$2,054	$96	5%	100%

Source: company reports and Piper Jaffray, 4/00

¹B2C share of total company volume

 

Table 5

Online Average Loan Size¹, 1999

Lender	Q1	Q2	Q3	Q4
Mortgage.com	$189,000	$190,000	$193,000	$189,000
E-Loan2	$194,000	$187,000	$102,000	$55,000
Finet	$193,000	$188,000	$173,000	$155,000
Lending Tree	$65,000	$42,000	$28,000	$35,000

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

Lender	Num. Booked	Q1-Q3 Spending	Acquisi-tion Cost	Cost per Thousand Dollars Booked
Mortgage.com	12,057	$13.2 mil	$1,092	$5.73
E-Loan1	6,693	$20.6 mil	$3,077	$17.23
Finet	3,512	$3.9 mil	$1,113	$6.71
Lending Tree	14,743	$12.1 mil	$821	$24.16
Total	37,005	$49.8	$1,346	n/a

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

Lending Tree Revenue by Loan Product¹, Q1 2000

dollars in millions

Loan Type	Applications		Closed Loans		Rev-enue
	Num.	$	Num	$
Mortgages	58,521	$9,939	1,737	$277	$1,936
% of total	44%	85%	18%	56%	47%
Home equity	30,817	$1,238	4,060	$166	$1,551
% of total	23%	11%	43%	18%	37%
Credit card	15,672	$78	1,7861	$91	$701
% of total	12%	1%	19%	2%	2%
Auto loans	24,707	$452	1,620	$35	$462
% of total	18%	4%	17%	7%	11%
Personal loans	4,343	$40	269	$3.6	$46
% of total	3%	0.3%	3%	1%	1%
Total1	134,060	$11,747	9,452	$491	$4,141
less cards	118,388	$11,669	7,666	$482	$4,071

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 $

Mortgages	Home Equity
CMP Mortgage	Bank One
iOwn.com	Citibank
mortgage.com	PNC Bank, FSB
MortgageSelect.com	Provident Bank
New Century	Sovereign Bank
Total lenders: 74	Total lenders: 49
Auto Loans	Personal Loans
Auto Refinance Source	Chase
Giggo.com	The Dime Savings Bank
SmartFinance.com	Sovereign Bank
Sovereign Bank	Synergy FSB
Synergy FSB
Total lenders: 13	Total lenders: 6
Credit Cards
Aspire Card Services
First USA
Merrick Bank
Total lenders: 7
Grand Total	104 lenders

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

 

Table 9

Lending Tree Metrics

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

Web Traffic at Top Mortgage and Loan Sites

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