FRAMINGHAM (03/16/2000) - Microsoft Corp. announced today the creation of HomeAdvisor Technologies Inc., a new company which will release software to streamline the home buying and selling process. It also announced partnerships with several large lending institutions.
In a statement, HomeAdvisor.com CEO Bryan Mistele said, "We're tying together underwriting engines, credit reporting engines and title information as well as consumer and pricing information." He said such streamlining will result in faster, less-expensive mortgages with lower interest rates. The software is expected to debut next month.
While online commerce has changed the way people shop, the venture is one of the first to actually reinvent a process, said Forrester Research Inc. analyst Jamie Punishill. "Microsoft is fundamentally changing the mortgage process, which hasn't changed in about 50 years - it's about damned time," said Punishill.
Currently, it takes about 65 different people to buy or sell a single home, said Punishill. Microsoft's software aims to automate as much of the mortgage process as possible, such as providing real-time approval and loan rates to customers.
The other partners in HomeAdvisor.com are Freddie Mac (formerly the Federal Home Loan Mortgage Corp.), The Chase Manhattan Corp., GMAC-Residential Funding Corp., Wells Fargo & Co. subsidiary Northwest Mortgage and Bank of America Corp. Loan Prospector, an automated underwriting software from Freddie Mac, will be part of the core HomeAdvisor technology. All companies hold equity stakes; additional financial information wasn't released.
In a related move to bolster its technology, Microsoft announced the acquisition of Mill Valley, Calif.-based Tuttle Decision Systems Inc., a maker of electronic pricing and productivity software for the mortgage banking industry. Tuttle brings online real-time rate distribution, loan pricing and rate locks to HomeAdvisor.
Last year, Tuttle coordinated more than $110 billion in mortgage loans. Tuttle also electronically connects over 800 U.S. mortgage-issuing banks to mortgage information conduits. Microsoft made a minority investment in the company in August last year.
HomeAdvisor's initial customers will be lenders, not consumers. "Microsoft is going to give the ability to take software, implement it and offer real-time risk-based approval of mortgages. That's not happening for most lenders today," said Punishill.
In addition, HomeAdvisor will streamline the mortgage buying process in several ways. An appraisal agent will no longer be needed if the house has been sold in the past 10 to 20 years because its value is on record. Microsoft also convinced its partners to remove some questions from the loan application in order to speed the process, though the company hasn't yet released what those changes are.
Analysts said Microsoft is entering an area where there is little competition.
Rather than being a direct business-to-consumer venture, Microsoft is trying to redefine how mortgages are handled, establish a network and sell software to the companies that "touch" the consumer during the home buying process.
"This is all about selling more Microsoft stuff. This is not about turning HomeAdvisor into the No. 1 lender or real estate site," said Punishill. "It's about Microsoft trying to find another way to penetrate financial services, where it has struggled in the past."
Punishill said HomeAdvisor won't compete against existing online mortgage sites such as QuickenLoans.com and eLoan.com. In fact, he said, Microsoft will probably try to involve those sites in the HomeAdvisor network.
Punishill said he expects Fannie Mae (the Federal National Mortgage Association), which was left out of the deal, to respond with software of its own.