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News > Deals
Microsoft sells mortgages
March 16, 2000: 5:17 p.m. ET

Spins off home-buying site, draws heavy criticism from competitors
By Staff Writer John Chartier
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NEW YORK (CNNfn) - Microsoft's new mortgage and home-buying Web site promises faster approval and cost savings for consumers shopping for a home online.
    HomeAdvisor Technologies Inc. will be a new company that that shaves weeks off the mortgage closing process and is expected to save home- buyers more than $2,000 over the life of a loan through lower rates and reduced closing costs, Microsoft said in a prepared statement Thursday. Bryan Mistele, who served as HomeAdvisor's general manager while it was a unit of Microsoft, will continue in that capacity.
    Microsoft CEO Steve Ballmer announced the new company Thursday along with Chase.com Executive Vice President Denis O'Leary in an address to the nation's leading real estate brokers.
    The pair also discussed the announcement on CNNfn Thursday morning. (337K WAV or 337K AIFF) (317K WAV or 337K AIFF)
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    The company called the company's formation the "latest step in fulfilling the MSN vision of the everyday Web, which includes building strategic partnerships to deliver the strongest services, information and marketplaces for all MSN customers."
    The new company, in which Microsoft will retain a majority stake, has the backing of such industry heavyweights as Freddie Mac, Chase.com, GMAC-Residential Funding Corp., Wells Fargo's Norwest Mortgage Inc. and Bank of America. The combination could offer serious competition to Fannie Mae, another mortgage heavyweight and other well established online home buying sites such as Homestore.com (HOMS: Research, Estimates).
    But after the company's announcement that it was spinning off HomeAdvisors.com Thursday, established home-buying sites expressed skepticism at the Redmond, Wash.-based software giant's ability to form the varied and complex relationships with brokers and realtors necessary to run a competitive site in the $1 trillion a year home mortgage business.
    "I'm sure you're going to be hearing and seeing a lot more of these announcements. More and more people are teaming up in e-commerce in a lot of industries," said Raschelle Burton, a spokeswoman for Fannie Mae (FNM: Research, Estimates), which buys one-in-five of all U.S. mortgages. "Fannie Mae has its own partnerships that it's working on, and we have long embraced e-commerce in that it calls for consumers to have access to the lowest cost mortgage rate."
    In an interview on CNNfn's Street Sweep program Thursday, Fannie Mae CEO Franklin Raines said his company's was an Internet leader in the mortgage business last year recording more than $200 billion in e-commerce business.
    "We are working on a wide variety of ways to bring to the mortgage finance system cost savings for consumers as well as lenders in the mortgage market," Raines said.
    Raines also talked about the company's announcement Thursday that it would invest $2 trillion over the next decade to help minorities and women become homeowners.
    Burton said Fannie Mae has online partnerships with e-Loan (EELN: Research, Estimates), Priceline.com (PCLN: Research, Estimates), I-Own and mortgage.com (MDCM: Research, Estimates).
    "We believe we have the right combination of partners, and that we will continue to be the secondary site for all U.S. mortgages," Burton said.
    On Tuesday, Homestore.com announced an agreement with the National Association of Realtors to launch an electronic transaction Web site that provides a one-stop real estate portal. Mistele called the move a "pathetic response," to HomeAdvisor's lead.
    But Homestore.com CEO Stuart Wolff, said Wednesday that his company, which is the largest online home and real estate network, has been competing with Microsoft for nearly two years and has consistently come out on top of HomeAdvisor in online ratings.
    "What can I say? For Microsoft to be using that strong a language is pretty unusual. Clearly they see us as the front runner," Wolff said. "We've won the first set of battles, which is to build a transactional network." Wolff said it would be difficult for Microsoft to catch up with its already expansive network of brokers and listings.
    Dennis Cronk, president of the National Association of Realtors, said he was surprised it took Microsoft two years to spin off the company.
    "They've been working on the electronic platform for well over a year as we have, as well as several major companies," Cronk said. "...It's going to be a competitive field. We have twice as much content as Microsoft, our traffic is larger than our five closest competitors...we're determined to be No. 1."
    But don't shrug off Microsoft, the developer of the Windows operating system, as out of the game. The company may not have all the relationships with realtors that its competitors enjoy right now, but that doesn't matter, said Jaime Punishill, a senior analyst with Forrester Research, a Boston Internet tracking company.
    "I think HomeAdvisor itself wants to drive mortgage traffic. They're about collecting transaction fees, giving everything away on the front end and generating fees," Punishill said. "So whatever they can do to drive traffic, that's what they can do to get into the transaction process."
    Punishill said Microsoft is looking for ways to woo realtors over to its side.
    "They're not wedded to realtors...Today's announcement is huge, they've got some real heavyweights in there and they've given it a strong financial commitment to make this beast work...They don't have the National Association of Realtors putting their rubber stamp on the things they do, but anecdotally, not all realtors are thrilled with the NAR. Microsoft is trying to figure out ways to bend over backwards to please the realtors. Homestore's got all these deals, but they don't' last forever, and as they come due consumers will take good stock of the situation."
    HomeAdvisor.com currently ranks No. 2 on e-commerce research company gomezadvisors.com's list of the top 15 online home-buying sites. Only Realtor.com, ranked ahead of the new company for ease of use and comprehensiveness.
    "If they (HomeAdvisor) can deliver the applications, the rate locks, the approvals, that's a very significant benefit to the consumer because right now, very, very few traditional banks offer a fully-automated Internet experience," said Nick Karris, an Internet mortgage analyst for GomezAdvisors in Lincoln, Mass. "What consumers want is the advantages of the Internet, speed of response time and lower costs. And also the local branch network. So if the HomeAdvisor technology does what it says it can do, it's definitely an advantage to the consumer."
    Karris said that for 40 percent of all the homes expected to be purchased in the next year, buyers will go to the Internet first to get information.
    Ballmer said HomeAdvisor cuts costs by automating many of the steps required to approve and finance a mortgage, including credit checks, appraisals, and underwriting decisions. The process also cuts the closing process down to 10 days from the usual month or more, Ballmer said.
    HomeAdvisor.com will consist of three divisions, a transaction platform division, which includes loan processing tools, a productivity tools division, that provides realtors the ability to join the site, and the HomeAdvisor.com division, which helps consumers with all aspects of buying a home.
    In addition to the HomeAdvisor.com announcement, Microsoft said it had acquired Tuttle Decision Systems Inc., a mortgage technology company with links to more than 800 mortgage banks nationwide.
    Shares of Microsoft (MSFT: Research, Estimates) remained unchanged on the day at 95-3/8. Back to top

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Most stock quote data provided by BATS. Market indices are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer. Morningstar: © 2018 Morningstar, Inc. All Rights Reserved. Factset: FactSet Research Systems Inc. 2018. All rights reserved. Chicago Mercantile Association: Certain market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. Dow Jones: The Dow Jones branded indices are proprietary to and are calculated, distributed and marketed by DJI Opco, a subsidiary of S&P Dow Jones Indices LLC and have been licensed for use to S&P Opco, LLC and CNN. Standard & Poor's and S&P are registered trademarks of Standard & Poor's Financial Services LLC and Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC. All content of the Dow Jones branded indices © S&P Dow Jones Indices LLC 2018 and/or its affiliates.