Realizing success with an early entry to e-business

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Some folks thrive – even when faced with a roller-coaster economy. Take Warren and Christine Meacham, for example. As owners of Colorado Online Mortgage (formerly Auer Mortgage), Christine, a mortgage broker since the mid-1980s and Warren, a former commercial banker, have survived sky-high 11 to 14 percent home loan interest rates and skimpy realtor referrals during Colorado Springs’ chapter as “foreclosure capital of the country.” The owners’ perseverance and progressive business strategies over the years have paid impressive dividends. By December 2001, Colorado Online Mortgage was processing more than $170 million in home loans – and with interest rates at a forty-year low in third quarter 2002, the future looks brighter than ever.

But then, the Meachams have never believed in waiting to follow someone else’s lead. In fact, in 1998, driven by the realization that slow-moving traditional banks and mortgage companies would soon be left behind by the Internet, the company initiated planning for its entry into e-commerce. The result: Since 1999, Colorado Online Mortgage’s online applications have grown from five or ten percent of all applicants to approximately fifty percent of the company’s total business.

Realtors and homebuilding clients like Keller Homes, for example, have embraced the concept. “I saw Pam Keller at a National Housing and Building Association meeting,” recalls Warren. “When she saw our new online concept and realized how much time and hassle we could save a busy builder like Keller, she said, ‘I want this.’” Today, Colorado Online Mortgage is the only lender listed on the Keller Homes website, connected by a direct link. Other fans of the online firm are local realtors who find the pre-qualification process quick and easy, and worldwide access to information over the Internet a real boon to local, national and international relocation clients. Mary Lynch, a ReMAX broker, recently brought a U.S. Air Force commander to the Meachams for home loan approval. Thanks to the company’s swift action, the officer was able to get loan approval and funding within ten days – just as he was leaving for an overseas assignment.

Several features of the Colorado Online Mortgage business model set it apart from imitators, says Christine (Auer) Meacham. “First of all, we are a Colorado company and more than 90 percent of our loans finance local and regional properties,” she points out. “Many of our competitors have an office in Colorado but are not dedicated to serving local residents like we are.” Most new loan applicants receive same-day pre-qualification approval – and refinance applicants can expect a two or three day approval process.

Secondly, the Meachams chose to eliminate an origination fee from the borrower’s expense sheet. “We decided that we could afford to drop that cost because the Internet allowed us to streamline our operation,” said Warren. “Loan processing and administration is much less complicated now, and thanks to our increased volume, we can pass that savings (typically from $1,000 to $1,500) on to our customer – like Wal-Mart.” Each applicant does pay a set processing fee of $250, along with pre-paids (taxes, insurance, etc.) insurance, points, title policy and appraisal.

Finally, Colorado Online Mortgage is no longer just a broker, representing mega-companies like Citibank and Chase. In the mid-1990s, Warren Meacham, with more than twenty years experience in commercial asset-based lending for large banks, and Christine, with more than fifteen years in residential lending, decided to become full-service mortgage bankers. “The difference is that we fund our own loans instead of shopping to find a bank or institution to underwrite it. That means our customers get a quicker response, and we service our own loans. On the flip side, we also have liability if the customer defaults,” Wayne said.

The Meachams also wanted to separate themselves from upstart mortgage brokers who do not have to be licensed to operate in the state of Colorado. “Some of the bottom-feeders give the industry a bad name – and reputable realtors will stipulate in their contracts that certain firms may not be used by the borrower,” he said. “In contrast, we’re members of the Mortgage Banker’s Association and have earned an impeccable reputation.”

Christine, who prefers operations to behind-the-scenes finance and accounting, credits her marketing efforts in the early 1990s for the company’s rather affluent customer base. “Back then with Auer Mortgage, I marketed specifically to the higher-end realtors and their clients who wanted conventional rather than FHA or VA loans,” she said. With fifty percent of the firm’s new business coming from referrals, many of those former customers keep coming back – and the company’s customer profiles continue to be well-qualified borrowers.

The average Colorado Online Mortgage loan ranges from a low of $100,000 to one million dollars – and “non-traditional” borrowers are considered. Christine recalls that recently one of her long-time clients, a couple planning retirement in the next two or three years, decided to purchase an out-of-state residence for $500,000 and wanted to rent it out for $2,700 a month for the time being. “Typically, institutional borrowers don’t like to approve loans on non-owner-occupied properties, but we really didn’t care,” she said.

The company’s multi-functional website, www.coloradoonlinemortgage.com, features a step-by-step process for both new home purchasers and refinancing prospects (for realtors, builders and clients) to estimate approximate monthly principal and interest payments as well as to look at options, based on the customer’s desired down payment, points and other factors.

In order to receive pre-qualification or to actually apply for a loan, the applicant is required to supply basic information, including estimated income and expense figures. “Once we receive the initial inquiry,” Christine said, “we then call back in person and ask more questions such as ‘What is your education level?’; ‘How long have you been at your job?’; “How many children do you have?’ or other inquiries that help us profile our customer.” Finally, she says, the applicant is asked whether he or she would like to go ahead with the application process – in which case a $28 payment is required to cover the cost of a credit report.

When asked about their tremendous growth, the couple points to the historically volatile Colorado Springs real estate market. “I first opened Auer Mortgage [which became Colorado Online Mortgage] in 1988 – just as the federal government was closing down the S & Ls. Business had screeched to a halt. Warren and I teamed up when the economy was at its lowest point and just rode it through. When the market began to return in the mid-1990s, we had relationships with institutional lenders, realtors and customers in place. We toughed it out and made friends in the process,” she said.

Today, even in a “normal year,” Warren estimates that the company will do $70 to $120 million in loan volume. At Colorado Online Mortgage, economic roller-coasters may come and go, but this is one business designed to adapt to and roll with the ups and the downs.