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Spring is finally here. The weather has finally started to heat up and at the same tlmt' the stock market has cooled off. The Fed Is threatening to raise interest

rates once more and uncertainty abounds in the mortgage market. During the past monlh at least five subprlme lenders have closed their doors. What does this mean? Simply put the mortgage Industry Is going through a time of uncertainty and change. The financial woes of many subprime lenders has also created an opportunity for established lenders as .... eu as new up~tart 6nns. At the

~me dme the internet contlnul'.s to drive the technology revolution for the mortgage lndu\lry. This makes the mortgage industry an extremely exciting place to be.

This month Mortgage ReporL offers a special supplement on Sales Techniques. Sales arc thtl key to any business. Without sales there is no business. The mortgage business crt>atE'~ great challenges for generating new business. What

worked last year may not this ytar In this supplement we provide insight into what technlqu~ work and which do not.

b month we profile Rick Soukoulls foulldt'l' and CEO of Loanclty.rom. His oompany Is out to revolutionize the mortgage industry. Loancity hM differentiated Itself from moH of llS competitors by being a ltc-tmPd mortgage banker in~tead of Just another loan trading $hP. Loancity.com has posllloned itself with strong financial backing and an PxJX•rlenccd management team which should help it thrive In thr wholesale mortgage marketplace

We have filled this month's Issue with Informative articles covering topics of great importance to our readers. We also

take a look at key regulatory issues and other pertinent topics. Our aim rontinues to be the only mortgage publication providing comprehensive dlslrlbutlon throughout the country. offering advertisers the best value of any mortgage publication. We hope you will enjoy this months issue of

Mortgage Report.

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Publlohor Andy Cohen

Manalinr Editor Susan Pechman

s.nror Editor Elaine V.'IIIL

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Ort•lation Manager Lynda V.'alz

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Fln1ndal Coordinator Ronda Snyder

Conlributlng Writers Bruce Bergman Nonnan Cohen ChrUCrui2 E. Robert l..e\y Cory Opper Ruc!ySaln ........,Myer Moria Espooito John jordan Robert Lovinger

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Reprinted from May 2000

Rick Soukoulis is president, CEO, and founder of LoanCity.com, a business-to­business company devoted to providing local mortgage experts across the country with a mortgage marketplace and funding service that exponentially improves their productivity and quality of service-and all at no cost. LoanCity.com has developed a proprietary, open-architecture system that brings the majority of the secondary market (more than 50,000 loan programs) straight to the broker 's desktop. The company then underwrites, documents, and funds each loan at one of its regional loan processing centers .

Rick has been an innovator in real estate finance for nearly 20 years . After founding America's Funding Source (AFS), a Santa Clara-based mortgage brokerage, in 198 7, he quickly became a pioneer in the use of technology to improve and streamline the mortgage loan process. He was the first to develop an electronic mortgage marketplace that transformed his traditional mortgage bank into a technology­driven lender by 1992. In 1995, the company's success caught the attention of Charles Schwab & Co., which tapped Rick to develop the first all-electronic mortgage shopping and origination service, called "Personal Mortgage Broker," for Schwab's online mortgage finance division. The joint venture was terminated in 1996, and as result Rick switched his company's focus to a strictly business-to­business model. By mid-1999, Rick had recruited a seasoned management team and re-launched his company as LoanCity.com.

At its core, LoanCity.com's mission is "to transform the residential mortgage industry into a highly efficient, technology­enabled marketplace, benefiting the mortgage professionals that originate mortgages and the lenders that service them." Rick founded the company on the belief that nobody-and no standalone technology-can better serve the needs of mortgage

consumers than an experienced, local mortgage expert equipped with the right technology. By streamlining the process, putting the entire universe of mortgages at professionals' fingertips, and then plugging financial institutions and local professionals into a Web­based national network, LoanCity.com is poised to bring a fragmented and often inefficient industry into the Internet age.

Rick recently talked about his company and his plans for the future with Mortgage Report Publisher Andy Cohen:

Andy Cohen: Tell us about your background? Rick Soukoulis: I was born and raised in San Jose, California, the son of a Greek immigrant. My father instilled in me the value of hard work, that in America you can achieve anything if you work hard enough, and I worked a variety of jobs starting at age 12. Eventually found myself working in the mortgage industry. Back in early 1981, I started to get some ideas about how to automate the whole mortgage process, so I took $7,000, rented a tiny office in San Jose, and started my own business in 1987-America's Funding Source­always with a focus on technology. Now here we are, 14 years later, as LoanCity.com a national, multimillion dollar, business-to­business enterprise.

Ed: Why did you choose the mortgage industry? Rick Soukoulis: Actually, didn ' t choose a career in mortgage -- it chose me. When I was in college, a few of my friends started working as mortgage brokers, and it looked fun. I tried it, liked the business and the income, and grew in experience and responsibility with some local mortgage companies, and before long I had started my own mortgage company. Many of my fri ends are still in the industry, and even my mother enjoys working as a realtor to this day. It was just something I grew into.

Ed: Why did you choose to get

involved in the Internet? Rick Soukoulis: The Internet is thought of as many things, but I think it 's most useful as a tool for connecting people and providing them with information . That makes it perfect for the mortgage industry, which is a relationship­driven, information-intensive business. When I founded this company, 1 had developed an electronic clearinghouse for mortgages that saved time and increased productivity so much that we began offering it to other brokers and became a mortgage bank. Charles Schwab noticed what we were up to , and in 1995 they asked me to help them produce the first all-electronic mortgage solution. We both learned so much from that experience. Out of every 100 applications, only three would close, and we learned that there's just no substitute for the expertise and handholding you get from a live professional in your neighborhood . lt was clear that this transaction was too complex for a standalone technology solution. What was needed was for existing mortgage professionals to get connected to a central technology platform, a single source for products, service, and information. And with the rise of the Internet, I've found the perfect medium.

Ed: How did you come up with the name LoanCity.com? Rick Soukoulis: It was early 1998, and I was trying to think of something that put across the idea of everything you needed all in one place, something that made you think of a community of experts, and someth ing that

sounded both global and local. So I logged onto one of those URL registration sites, typed in "LoanCity.com, " and sure enough, the name was available. I reserved "LoanCity.com" right there and then.

Ed: Does LoanCity.com have any plans to go after the consumer market? Rick Soukoulis: No. It doesn 't work, and doesn 't serve consumers well. There are a lot of companies out there offering services to mortgage brokers who also compete with them in some other channel, but to build a successful company you need focus. LoanCity.com's focus is strict ly business-to-business. We know that nobody is better equipped to handle a mortgage customer's needs than a mortgage professional. They can do it more cost-effectively and add more value than anything I could try to do myself with a Web site and a call center.

Ed: How have you been able to build the LoanCity.com brand? Rick Soukoulis: One of the best ways to build brand with mortgage professionals is to put out a quality product, support it with turnkey services, and let the increase in productivity and profitability speak for itself. Building brand with consumers in this market just doesn't make sense. It's a transaction that takes place once every five to seven years, and most people don 't care where they get their loan . What they do care about is getting great rates and expert help, and that 's where building a strong identity with local mortgage professionals pays off. In fact, some publicly traded business-to-consumer mortgage companies spend 18 times as much on marketing and branding as they do on technology. At LoanCity.com, we spend three times more on technology than marketing, and twice more on technology than sales.

Continued on other side

Ed: Are you concerned about competition? Rick Soukoulis: Well , when you

·say "competition," you really have to look at what other companies are doing in this market. We provide mortgage professionals with a mortgage marketplace, loan funding, and technology tools. So far, nobody else does everything we do. Some companies take on distinct pieces of the value proposition-some do LOS systems, some provide multilender referral systems, and some offer Web sites. But nobody else has coupled a mortgage marketplace with mortgage funding, and that makes us unique. Ed: Why does "fulfillment" matter so much? Rick Soukoulis: "Fulfillment" refers to the work it takes to close the loan -- the underwriting, documents, and funding service that takes place. Many people think that a mortgage broker 's decision on where to send a Joan starts and ends with price. And although price is an important factor, an equally important factor is service. If a lender can save me an eighth of a point on price, but they're going to drag me through a knothole to get it, is that worth it? Most people will go with a nominally higher price to get an easier, smoother experience. Besides, fulfillment isn't an afterthought in e-commerce. It's an integral part of e-commerce. People don 't want to go to Amazon.com and then get bounced to Random House to get one book and Penguin Publishers to get another book. People don't want to go to Webvan .com only to be told, "There's a great sale on asparagus at the market across town. Get in your car and go get some." That's why our company participates in the transaction from submission to close.

Ed: How do you plan to grow your business? Rick Soukoulis: At the moment we're just finishing up our national expansion. Our broker network now spans the country and we are licensed to do business in every state, except New York (which we expect sometime in the third quarter). We have long-standing partnerships with the top 30 financial institutions in the country-such as Countrywide, Chase Manhattan, Bank of America, First Franklin, Norwest, and others-to help us maintain the most comprehensive selection of home loan products available anywhere.

Ed: Does LoanCity.com have the financial resources to be competitive? Rick Soukoulis: Definitely. Not only are we well funded, but we are backed by some of the smartest

money around. Last year we raised more than $45 million in our first two rounds of funding from New Enterprise Associates, Morgan Stanley Dean Witter, Roberston Stephens, E*TRADE, lnterWest Partners, InSight Capital, Century Capital, and Marsh & McLennan Capital. Our last post-money valuation was more than $130 million dollars. And most importantly, LoanCity.com is inherently a money-making business. We were profitable for more than a decade, and despite our significant investments in technology and launching our new Web site, we expect to return to profitability in the first half of next year -- something very few "dot­com" companies can claim.

Ed: Are you looking at expanding into other fields besides the mortgage industry? Rick Soukoulis: No. Mortgages are a huge market . Most years the market is worth more than $1 trillion . I'm satisfied to successfully execute on our plan to re-engineer the mortgage market before I consider moving into other businesses. Mortgages aren't like car loans or credit cards or other lower-value, less complex transactions. You can't do mortgages purely on the Web without a local expert to shepherd the customer through the process. For the foreseeable future, LoanCity.com is focused squarely on the residential business-to­business mortgage market.

Ed: How does using LoanCity.com benefit mortgage brokers ? Rick Soukoulis: Mortgage brokers who work with LoanCity.com save time and work with a technology partner who gives them one source for mortgage products and underwriting. What used to take a mortgage broker days anywhere else takes hours or even seconds at LoanCity.com. Our technology Jets brokers instantly match their borrowers to the best loans from more than 50,000 Joan programs. And our proprietary system automates the process from submission to close, so LoanCity.com underwrites, documents and funds every loan on our system quickly and easily. Plus, we give mortgage brokers Web sites, consumer leads, marketing support, and other technology tools to give them a competitive edge.

Ed: How will technology advances affect your business? Rick Soukoulis: I think it's fair to say that our business is about driving technology advances. We are the innovators in this market, and our goal is to bring technological innovations to mortgage professionals and lenders

to help them maximize their productivity. At the same time, you have to look at the rates at which technology is adopted to truly understand its impact on any given market. For example, it took 38 years for people to fully adopt radio as a broadcast medium. Cable television took 10 years, and even the Internet took 4 years-and I believe we're still in the early stages of adoption. The point is, just because somebody suddenly invents a black box that supposedly makes everything easier, people's behavior isn't going to change as quickly. That's why LoanCity.com meets mortgage professionals and their customers where they are now. We offer incentives for them to use our Web­based technologies, but they can still do business face-to-face or on the phone when they choose. The most successful New Economy companies today are in the business of helping Old Economy companies move into the Internet age.

Ed: How is your company going to succeed in a competitive environment? Rick Soukoulis: We're going to succeed by executing on a much smarter, more sensible and efficient business model for this industry. We put the right technology in the right hands-local mortgage experts­and then provide them with the service and support they need to give their customers the best deals and the best service. We're going to succeed by focusing each and every day on driving business to our brokers and fulfilling their transactions as quickly and easily as possible. And we're the only company in the market with that focus.

Ed: Why are mortgage brokers such an important part of the industry? Rick Soukoulis: Nobody can provide the customer touch it takes to find and close a Joan more efficiently, more cost-effectively, or more successfully than a local mortgage expert. It costs the average mortgage broker about $500 to originate a loan. It costs a lender anywhere from $1200 to $2000 to do the same work. Brokers originate about 75% of all U.S. mortgages, and that figure is growing daily. Especially when you're talking about a purchase transaction, people want a live, trusted expert to guide them through the process. Next to the death of a family member, relocating is the most stressful event a person will ever face in their lifetime, and we're talking about an extremely complex process. There are more than 80 variables of price and more than 120 product types to wade through, with rates and programs from scores of lenders changing

daily. People need the extra guidance, expertise, and handholding a mortgage professional provides, and we don't see that changing any time soon. That's we focus our business on empowering local mortgage experts. Ed: How fast can a broker get started? Rick Soukoulis: Becoming a member of the LoanCity.com broker network is quick and easy. A broker can get started by contacting us on our Web site at www.loancity.com, through email at: brokerprog@loancity.com or by phone at 1-800-300-5229.

Ed: Does a mortgage broker actually get better pricing using your service? Rick Soukoulis: Absolutely. Because we are a mortgage marketplace, we have loan products that match the most competitive rates and programs available at any given moment. Brokers aren't limited to just one product line from one lender. On any given day for any given loan type, we are either the lowest rate available or we're within one­eighth of a point. And because we underwrite, doc, and fund every loan on our system, we stand behind the pricing on every loan on our system.

Ed: How can you convince skeptics to use LoanCity.com? Rick Soukoulis: Just try us once. It's free , and you'll see how fast and easy it can be.

Ed: Can someone use your system without a computer? Rick Soukoulis: Although we do accept paper-and-fax loan packages, brokers find they can increase their productivity and reduce their cost of doing business by using our technology.

Ed: Are you concerned about any pending regulatory issues that may affect your business? Rick Soukoulis: No. I've been working in this industry for nearly 20 years now, and it's never been a cause for concern. The regulations that are in force are there to protect the end consumer, which we wholeheartedly support.

Ed: If you could choose to be in any other profession would you still chose to be in the mortgage profession? Rick Soukoulis: Yes. There's nothing like the feeling you get when everything goes right and a mortgage broker is able to help people achieve their dreams of owning their own home. That's when the true rewards of the job come to light. I'm in a position to help thousands of mortgage experts become even better at their jobs and help make more people become homeowners. This is a great business to be in. •..rrl•