HFCI:OTC :BB FULLY REPORTING
TOTAL SHARES IN PUBLIC FLOAT:4,000,000
Corporate Profile for Home Financing Centers, Inc.
Our Market Opportunity
Mortgage originations in the United States averaged
more than $960 billion annually from 1993 to 1998,
and are expected to total $1.2 trillion in
1999. Forrester Research estimates that the online
mortgage market will grow from approximately $18.7
billion in 1999, or approximately 1.5% of
the total U.S. mortgage market, to over $91.2 billion
in 2003, or approximately 10% of the total U.S.
mortgage market. According to the Mortgage Bankers
Association of America (MBA), the purchase mortgage
market has grown at an average annual rate of 15% from
1993 to 1998.
Approximately 66.3% of households in the United States
own homes, and as a result there is a substantial
market for ancillary services, such as title
insurance, appraisals and home insurance.
Our Strategy
Our objective is to be the leading provider of online
content and e-commerce services for homeowners and
prospective homeowners. We intend to achieve this
objective by growing our customer base aggressively
and
capitalizing on the full range of market opportunities
through the following strategic initiatives:
* Developing a leading brand as a provider of online
content and e-commerce services for homeowners and
home buyers through advertising, co- branding
partnerships and promotions using both the Internet
and traditional offline media.
* Expanding third-party channels to grow our revenues
and purchase (as opposed to refinance) mortgage
originations by extending our technology
infrastructure to all parties who traditionally
participate in the home purchase process, including
real estate agents, home builders, relocation
companies and mortgage brokers.
* Enhancing our core mortgage service and expanding
our mortgage offerings by more efficiently accessing
and interfacing with the capital markets and
adding product lines such as sub-prime mortgages, home
equity credit lines and construction loans.
* Maintaining our commitment to customer service by
offering value-added self-service tools such as
online loan status updates that empower our
customers to make informed decisions and by
continually improving our customer service both
online and offline through our state-of-the-art
contact management center.
* Delivering a more integrated homeownership
experience by extending and monetizing our customer
relationships by providing related products and
services, such as title insurance, appraisal, home
insurance, moving and home improvement services.
Mortgage Revenues
HFCI's mortgage revenues are derived from the
brokering of loans and the origination and sale of
loans. Brokered loans are funded through lending
partners and HFCI never takes title to the mortgage.
Brokerage revenues are comprised of the mark-up to
the lending partner's loan price, and
processing and credit reporting fees. These revenues
are recognized at the time a loan is closed.
Originated and sold loans are loans that are funded
through HFCI's own warehouse lines of credit and sold
to mortgage loan purchasers. Loan origination and sale
revenues consist of proceeds in excess of the
carrying value of the loan, origination fees less
certain direct origination costs, and processing
fees. HFCI earns additional revenue from its loan
origination and sale operations as compared to
brokered loan operations because the sale of loans
includes a service release premium.
Competition
The market for web-based services is highly
competitive and there are no substantial barriers to
entry, making it possible for new competitors to
proliferate rapidly. In addition, many of our existing
and potential competitors have longer operating
histories in the traditional mortgage
and Internet markets, greater name recognition, larger
customer bases and significantly greater financial,
technical and marketing resources than we
do. We believe competition takes place on many levels,
including pricing, convenience in obtaining mortgage
loans, breadth of product offerings and
lending sources, customer service, marketing and brand
awareness. Our principal competitors include:
* traditional lenders and mortgage brokers with no
online presence;
* traditional lenders and brokers that offer access to
their mortgage products over the Internet. In
addition, we compete with a variety of
websites for customer awareness and Internet traffic,
some of which are also our partners and all of which
compete with us for awareness, including:
* websites that provide access to real estate-related
content and services, including mortgage calculators
and information on the home buying process
and which generate leads for mortgage providers,
including Priceline.com
(PCLN), Lending Tree (TREE) and Microsoft's
HomeAdvisor (MSFT);
* websites that offer real estate listings and related
services, such as CyberHomes, HomeSeekers, Homes.com,
Homestore.com and Microsoft's HomeAdvisor;
* general purpose consumer websites such as Alta
Vista, Excite@Home (ATHM), Lycos (LCOS), GO.COM (GO)
and Yahoo! (YHOO) that offer real estate-
related content;
* newspapers and magazines that advertise real estate
listings; and * other financial institutions that are
partnering with mortgage brokers to offer related
services, such as DLJ Direct (DIR), E*Trade (EGRP) and
Fidelity. Further, in establishing relationships with
third-party partners we compete with several companies
that specialize in providing services to
companies in each channel, including, for example:
* companies specializing in captive mortgage
operations for home builders, including CTX and
Norwest; and companies providing loan origination
software for mortgage brokers, including Calyx,
Contour, Byte and Genesis
2000.
Risks Related To Our Industry
The real estate industry is both seasonal and
cyclical, which could affect
our quarterly results...
We may be particularly affected by general economic
conditions...
An increase in interest rates may reduce mortgage
transactions...
If we are unable to comply with mortgage banking and
mortgage brokerage
rules and regulations, our ability to originate or
fund loans may be
restricted...
Changes in the law governing tax treatment of home
mortgage interest may
harm our business...
Risks Related To The Internet
The regulation of the Internet is unsettled and future
regulations could
harm our business...
Our internal network infrastructure could be disrupted
by a number of
different occurrences...
The Internet industry is characterized by rapid
technological change, and
if we fail to effectively adapt to these changing
technological
developments we will be unable to successfully
compete...
We could face liability for information retrieved from
or transmitted over
the Internet and liability for products and services
sold over the
Internet.
Where do we go from here?
Studies show that traditional mortgage brokers are
dragging their feet when it comes to the internet.
The race, however, is well underway. Consumers
are suddenly up-for-grabs and winning the race means
being the first to get to them. If traditional
brokers hope to maintain their loyal clients, they
must be online, with a competitive web site, or
consumers will simply go with the competition. It will
be discovered that the internet is the
perfect vehicle to market home mortgages. No
inventory, no deliveries, little overhead, and nothing
more than a conduit for needed and valuable
information, and isn't that what the internet is all
about in the first place? It's as close to the
perfect business as you can get, except maybe
the internet itself, which has no employees and no
overhead.
The projected value of internet mortgage originations
in the years to come is staggering! Estimates from
various sources put internet sales in the
billion to trillion dollar stratosphere in just a few
years. The mortgage industry has caught on to the
internet faster than most other
industries.There are approximately twenty major
national players vying for this net business. The
most successful will be what we call "clicks and
bricks" operations, strong internet presence with
local offices. This is the philosophy that we intend
to follow. We feel that there is no downside
to originating loans online. When a consumer is ready
to talk to a live person, we have trained and educated
loan officers available for immediate
consultation. Because HFCI has a low overhead and
operates from only one location, we can offer lower
mortgage rates than our competition.
This advisory may contain forward-looking statements
made pursuant to the "safe harbor" provisions of the
Private Securities Litigation Reform Act
of 1995. Such forward-looking statements involve risk
and uncertainties, including, without limitation,
development and introduction of new
products, continued acceptance of the Company's
products, product demand, competition and other risks
and uncertainties detailed from time to time
in the Company's SEC filings.
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CEO Interview (Dec 9th):
MarketDD.com
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