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Anthrax Scare To Fuel e-Lending?

Origination and servicing may be affected

October 29, 2001


The Department of Bacteriology at the University of Wisconsin-Madison (UWM) reports on its web site that the anthrax bacillus was the first bacterium shown to be the cause of a disease. UWM says the most common form of the disease in humans is cutaneous anthrax, which is usually acquired via injured skin or mucous membranes, and another form of the disease, inhalation anthrax (woolsorters' disease), results most commonly from inhalation of spore-containing dust. The disease begins abruptly with high fever and chest pain and progresses rapidly to a systemic hemorrhagic pathology.

According to a 1999 American Medical Association (AMA) Consensus Statement, most experts concur that the manufacture of a lethal anthrax aerosol is beyond the capacity of individuals or groups without access to advanced biotechnology, and that a 1995 terrorist dispersion of Anthrax in Tokyo failed to produce illness. As of the Consensus Statement date, no case of inhalational anthrax had been reported in the United States since 1978.

As of Sunday evening, CNN reports that there have been 8 cases of inhalation infections causing 3 deaths and 5 cases of cutaneous anthrax. CNN says that there have been 32 total cases of anthrax exposures.

An anthrax scare was recently felt inside the mortgage industry when Standard Federal Bank closed a Michigan building following an employee's report of influenza after encountering a powder. The scare proved to be a false alarm, and the company reopened the building once the Michigan Department of Community Health declared it safe.

The anthrax cases have caused U.S. mail delivery to slow, possibly making some borrowers frustrated with delayed payments or closings. The Department of Housing and Urban Development recently urged lenders to allow more time for late payments.

The U.S. Postal Service announced last week that it is continuing to take steps to guard against biological threats. It has purchased 86 million pairs of gloves made of vinyl and Nitrile and four million face masks. It has also contracted to spend approximately $40 million for the purchase of eight electron beam systems and services to sanitize mail.

Relative to the number of other cases of more common health threats, anthrax currently poses minimal risk to the average American. The New York Post reported that Robert Wientzen, president of the Direct Marketing Association, said consumer worries appear to be more psychological than real. "In reality there is very very little likelihood of the mail being used to spread anthrax," he was quoted as saying.

While the Postal Service's moves may eventually alleviate the public's fear of mail, any immediate shift to the use of the Internet to obtain or pay a mortgage will unlikely be reversed. So how will the public's fear of anthrax exposure affect the speed with which the mortgage industry shifts from mail-based origination and servicing to Internet-based?

Fannie Mae spokesman Alfred King told MortgageDaily.com that it is too much of a stretch to draw the conclusion that the recent anthrax cases will affect the transition from mail-based statements and payments to Internet-based. "You will not see that this will affect the speed with which e-mortgages move," he said.

Electronically closed mortgages were already projected to grow; Meridien Research, a Newton, Massachusetts company providing analytical research services for financial industry technology users and providers, said in a recent report that 10% to 15% of home mortgages will be closed online in 2005, compared to about 2 percent currently.

While many people have had security and identity theft concerns about Internet bill payments in the past, Steven Schneider, a State University of New York professor who has been studying Internet use, reportedly said the anthrax scare shifts the tolerance level.

"When you go from worrying about a virus attacking your hard drive to a (germ) attacking your children, people are more inclined to settle for damage to your hard drive," Schneider was recently quoted by the Associate Press as saying.

Kelly Graham, the Marketing Director at FICS, said that the Anthrax scare will have a definite effect on the transition from U.S. Postal-based mortgage statements and payments to Internet-based statements and payments. FICS provides servicing software to banks and mortgage bankers.

"The fact that everything coming out of a post office is now suspect will have many people rethinking the way they handle incoming mail," Ms. Graham told MortgageDaily.com. "Finding ways to handle automated statement distribution and payment receipt from the borrowers via the Internet will become a primary focus of Web developers. This enables companies to protect their employees from the threat of Anthrax or other contamination, or worse, possible infection."

Scott Cooley, CEO and founder of Countour Software and Chief Strategy Officer for parent Ellie Mae, said that activity for its electronic service, MortgageMail, has jumped around 50% in the last several weeks. While it is unclear how much of Ellie's activity is attributable to a recent increase in mortgage applications resulting from lower rates -- the composite index from the Mortgage Bankers Association of America is up approximately fifty percent from the week prior to September 11th -- Mr. Cooley said that the medium addresses consumer reluctance to open postal mail.

A closer look at data provided by Ellie Mae -- which says it is the largest Loan Origination Software provider in the U.S. --shows that the daily activity for MortgageMail has risen to an average of 911.9 during the most recent ten day period. This compares to the first ten days of September, when the daily average was 436.3.

An even more dramatic increase occurred with Ellie's ePASS transactions, which enables mortgage companies to send and receive electronic orders for service providers. While the average daily ePASS transactions were only 2,398 from September 1st to September 10th, that number jumped to 6,778 for the most recent ten day period. "Our customers are choosing to use this transaction platform as a better alternative to postal mail and faxing," Mr. Cooley said.

The greater, more recent jump suggests that a portion of the growth at Ellie may be attributable to fears of anthrax -- which started receiving greater media coverage once coverage of the attacks themselves subsided.

Sam Garcia has been in mortgage lending since 1980, and is managing editor of MortgageDaily.com. He also owns and operates CloseNow.com, a real estate portal site.

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