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Mortgages

A New Take on Refinancing

Credit...The New York Times

SEARCHING for home mortgage rates online often means submitting information to a Web site, then withstanding a flurry of calls and e-mail messages from brokers and lenders trying to sell a loan.

Refinance.com, which made its debut this month, aims to simplify the process for those looking to refinance their mortgages, by connecting a borrower with just one lender. In seeking would-be borrowers, it maintains that they would most likely receive a lower interest rate.

The claim has merit, according to at least one participating lender. Industry analysts, meanwhile, said the site was worth trying.

“It’s a great place to go, even if you don’t end up going through with the loan,” said Jim Bruene, the publisher of the Online Banking Report. He noted, for example, that the site offers a free look at one’s credit report.

The site, which is owned by Home-Account.com, a mortgage advisory service that started in San Francisco last year, uses a different approach in matching borrowers with lenders.

Borrowers first submit their Social Security numbers, and the site completes a “soft pull,” or borrower’s inquiry, of their credit report and score, thereby sparing them any of the damage that often results from a more formal inquiry from creditors.

Borrowers then provide an estimated value of their home, along with the size of the loan they are seeking and other basic financial information. The site also requires them to complete a brief questionnaire — to determine, for instance, whether they would be comfortable with a fixed-rate or an adjustable-rate loan.

Refinance.com then ranks a user’s creditworthiness; if it is below an “A,” the site suggests ways to improve the credit profile. Next it suggests loan packages that would best suit the borrower’s financial circumstances and risk preference.

Finally, the borrower is offered a page of loan quotations from lenders, along with the option to confirm a deal with one tentatively. Closing costs are included, and assuming the borrower’s information is generally accurate, the lender is required to honor those loan terms. The terms include a “True Cost,” which gives the entire cost of each loan for the length of time the borrower expects to stay in a home.

Other online services require less information, but share it with many lenders.

Keith Luedeman, the chief executive of Goodmortgage.com in Charlotte, N.C., and one of 18 participating lenders, says the terms he offers on Refinance.com are lower than those he would offer on other multilender mortgage sites. Mr. Luedeman said that Refinance.com’s application process increases the chances that he will close a loan with a borrower. Also, he said, the site charges him less than other Web sites for delivering to him each prospective borrower. Marketing costs drop as a result, allowing him to make cheaper loans, he said.

Mr. Bruene of the Online Banking Report says one of Refinance.com’s chief assets is Jack M. Guttentag, a professor of finance emeritus at the University of Pennsylvania and an authority on mortgages. Home-Account.com hired Mr. Guttentag, an advocate for more transparent lending practices, to oversee the application process.

In a telephone interview, Mr. Guttentag says one weakness in Refinance.com’s approach is that it relies on borrowers to estimate their home’s value, even though such estimates are frequently inflated. In the coming months, he said, Refinance.com will devise another method.

While Refinance.com is free, subscribers to the site’s parent, Home-Account.com, pay $10 a month, for advice on finding all types of home mortgages and improving their credit scores.

Mark Goldstein, the chief executive of Home-Account.com, says he will most likely eliminate the subscription fee soon, if Refinance.com generates enough income. That would essentially make Refinance.com’s services available to all mortgage borrowers, not just current owners.

A version of this article appears in print on  , Section RE, Page 6 of the New York edition with the headline: A New Take on Refinancing. Order Reprints | Today’s Paper | Subscribe

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