4.2. Business Problem

Until recently, the online mortgage process was anything but quick and seamless. Getting information on loan availability and rates was fairly straightforward. However, the next part of the process—qualifying applicants for mortgages—proved to be the big stumbling block. This step requires credit reports, verifications of employment and bank deposits, property appraisals, and other information.

Traditionally, the banks handled this legwork. However, on the Web, the process had to be simple enough so that the customer could complete all the steps online during the same session.

In 1997, HomeSide entered into partnerships with Microsoft and Intuit to provide home mortgages online. Although the system could easily generate rates, the rest of the process was not automated. “It was a great shopping vehicle for consumers, but it couldn't easily take customers through the last steps toward approval,” recalls Davis. Most customers ended up using the service for comparison shopping, printing out the prices and taking them to their local bank or mortgage broker to match. “Getting an online mortgage approval was far more difficult than trading a stock or buying a book online,” Davis says. “The process required interaction with several third parties and was far too complicated.”

Following that experience, HomeSide conducted focus groups over a four-month period to learn what information consumers would be willing to share with a mortgage lender, and under what conditions they would be willing to complete the mortgage transaction online.

Not surprisingly, the chief findings showed the process had to be fast and simple. Davis referred to data indicating that more than 80 percent of Web shopping carts were abandoned because the merchant never told the buyer how long it would take to complete the transaction, or because the process was too complicated. In addition, their research demonstrated that customers had to feel in control of the transaction and trust the merchant. The latter condition was a challenge since, not being a retail lender, HomeSide had relatively modest brand awareness.

For HomeSide, the research pointed to the need to reengineer the mortgage qualification process. As a result of detailed analysis, HomeSide was able to eliminate about half the normal questions by identifying information overlaps. “We created a brand new line of business,” notes Davis. For instance, the analysis determined that the consumer's track record of making his or her house payment was a better determinant of credit worthiness than credit card payment history. The research also concluded that it was no longer necessary to require credit reports from three credit bureaus for every prospective customer. Instead, a single credit agency report would suffice, a major step that saved time and money in the mortgage process. Furthermore, the reengineered process eliminated the need for the consumer to furnish current employer, employment history, and automobile ownership information.

By working to streamline the process, HomeSide was able to develop a more friendly Web site that enables the customer to get an online mortgage approval decision in one sitting, with very little “data gathering” on his or her part.

4.2.1. Challenges

HomeSide's recent growth was made possible in large part due to its unique technology platform, which was already in use at its call center prior to the development of the Web application. Based on a custom-developed C++ application, as well as a rules-based engine from BrightWare, the company could grant approvals to loan applications in real time, although with considerable human hand-holding.

However, the Web application had to be designed so that prospective customers could have the choice of completing the process without human assistance. In large part, this requirement was due to the growing perception that self-service e-commerce is quicker, more convenient, and often more precise than ordering/applying by phone or mail, or buying at a store. Obviously, the site had to allow customers to request live customer assistance if necessary. Toward that end, the system had to permit concurrent access to the same record for Web customers whose actions would be guided by call-center assistance. And HomeSide's solution also had to leverage the existing back-office application, which generates terms and conditions, and handles offline functions, such as document printing. It also had to leverage the existing Oracle database.

Therefore, the Web application had to be designed with a logical navigational flow. In addition, it had to integrate with several existing systems, including HomeSide's mortgage workflow application, which includes the core business logic, and the underwriting system powered by Fannie Mae technology, which guides HomeSide's loan acceptance decisions.

Furthermore, the integration had to be flexible. The existing approach—using socket-based interfaces that allow the different application “engines” (or components) to communicate with each other—was custom developed, and therefore not supported by any vendors. The proprietary design presented a long-term maintenance burden. When the application was modified or redeployed, the protocols used for passing messages through the socket interfaces would often have to be modified because of the point-to-point nature of the socket interfaces. The team required a standard, vendor-supported alternative to separate the application logic from the deployment and integration mechanism.

Although the new Web application involved the replacement of custom socket interfaces, one of the interfaces was kept in place for use with an existing, Windows NT-based third-party product for calculating annual percentage rates, or APRs. Because the government regulates this calculation, HomeSide chose to utilize the services of an outside vendor rather than develop its own calculation engine. The custom socket interface remained necessary because the vendor does not offer a version of its product for UNIX or Java technology.

Other major challenges included designing for scalability. The architecture of the application and the technology base had to support growth, without the need to rewrite the application each time a new server was added. Furthermore, because the Internet rewards companies that are quickest to market, the application had to be designed using a highly productive platform that would enable HomeSide to add or modify functionality rapidly as necessary. The result was that the application had to have a multitier architecture that would keep HomeSide's deployment options as open as possible.