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.

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