Opportunities for New/ Improved Electronic Intermediaries
In the mortgage industry there are many intermediaries, both traditional and new electronic intermediaries, that serve specific market, either primary or secondary. For example, IMX services lenders and brokers in the primary market of the mortgage industry. Ultraprise and Pedestal service the financial institutions in the secondary market. What all this means is that in the mortgage industry there is not a single intermediary that service both the primary and secondary markets.
The report demonstrated that electronic intermediaries such as IMX, Ultraprise, and Pedestal add value to brokers, lenders, and account executives. They shorten the cycle time of the business process. This reduces costs (both transaction costs as well as costs for maintaining multiple client relationships) for all parties involve. Despite the fact that these intermediaries reduce the cycle time and costs, financial institutions still must sign up for memberships to different intermediaries for the specified services. If a single intermediary were to exist that could integrate the services of the intermediaries in the primary market and those in the secondary market, then it would provide the ultimate value to its members. That is to say, this intermediary has to develop a system that would allow its members to engage in both the primary and secondary in one place. The new intermediary would provide members with a "one-stop" shopping environment. This "one-stop" shopping concept could be the next revolution in the mortgage industry.
Another area that there is not currently an intermediary for is mortgage servicing. According to Tom Blanco, Director of Performance Measurement Group of Fannie Mae, mortgage servicing is a robust and strong sector of the mortgage industry. Mortgage servicing is the contractual right to receive mortgage payments from borrowers for a fee and to remit pieces of those payments --- principal, interests, taxes, and insurance --- to the appropriate recipients. In today's market, prices remain strong for mortgage servicing rights and trading of these rights is healthy. Despite the strong potential for growth in this niche, there are not any apparent intermediaries to service this untapped and strong segment. If an electronic intermediary were to enter this market then it would have first mover advantage. This electronic intermediary would have the similar function as Ultraprise or Pedestal. The intermediary would provide flow of data between sellers (usually banks originating the mortgage loans) and buyers (agencies specializing in mortgage servicing such as 1st Associate Mortgage Corp). The sellers would post the pools of mortgage servicing they wish to sell and they buyers would post the criteria. The intermediary would then match the criteria to the available pools and notify the parties involved when there is a match.