RealTime IT News

E*TRADE Enters the Mortgage Game

Online brokerage E*TRADE Group Inc. today launched E*TRADE Mortgage, a move that both helps to diversify its revenue stream and capitalizes on the acquisition of LoansDirect last February.

Menlo Park, Calif.-based E*TRADE said the mortgage operation is the latest step in an ongoing diversification strategy "to integrate online mortgage origination with Internet brokerage, value-added banking and other wealth management products and services."

Clearly the need to diversify income is real. Online trading in general is reportedly down about 40 percent from last year as the bear market has intimidated formerly bold do-it-yourself traders.

And on Friday E*Trade said in a filing with the Securities and Exchange Commission that it expects to take a $6.8 million pretax loss in the second quarter because its own holdings in tech stocks have declined in value. Analysts are expecting the company to end its second period by basically breaking even.

The company's stock was trading at $6.25 a share in late morning action, essentially unchanged.

"The E*TRADE brand doesn't stand for just brokerage anymore," said Mitchell H. Caplan, managing director, North America and chief global banking and wealth management officer at E*TRADE. The company "continues to advance a successful diversification strategy with two goals in mind: creating superior value, choice and convenience for our customers and building a solid and profitable franchise," he said.

LoansDirect was one of the nation's largest online mortgage originators and has year-to-date volumes of more than $1.6 billion, E*Trade said. The mortgage business will provide E*TRADE with revenue diversification through additional channels such as origination points, loan-related fees and gain on sale revenue. It also enhances cross-sell opportunities.

E*TRADE Mortgage has secured more than $1 billion in funding through E*TRADE Bank, leveraging the integrated financial services model to realize cost savings and eliminate its dependence on third-party warehouse lenders, the company said. Plans call for E*TRADE Mortgage to be expanded to include additional mortgage products and services, such as home equity lines of credit and pledged asset loans.

Meanwhile, rival online broker Ameritrade Inc., a subsidiary of Ameritrade Holding Corp. said it has "further enhanced the online client experience" by launching Pre-Market Trading and sophisticated Portfolio Management tools for active, self-directed investors.

Pre-Market Trading, 8 to 9:15 a.m., allows Ameritrade and Accutrade clients to trade online prior to market hours, thereby expanding the trading day from 8 a.m. to 6:30 p.m. Also, through a single point of entry, Ameritrade said its Portfolio Management now provides investors with greater ease of use for viewing multiple investment portfolios.