The paperless mortgage remains but a pipe dream without a pipeline for overworked loan officers, brokers and consumers and while the obstacles to implement electronic loans aren't insurmountable they are formidable.

Seventy five percent of consumers are willing to complete the entire mortgage process online, according to "Myers Internet/Mortgage Industry Survey" released last month by Myers Internet, Inc. a San Jose-based Web services developer for mortgage originators.

Unfortunately, Silver Spring, MD-based MORTECH, LLC says the number of lenders automating loan origination and processing has doubled over the past decade, but that's about as far as technology goes in the mortgage industry.

Most mortgage lenders, 64 percent of them, don't even know what Extensible Markup Language (XML) is and only six percent of them use it, according to MORTECH, a mortgage banking industry consulting firm.

XML is emerging as an industry standard that, in plain language, allows the electronic applications on one company's computer system to talk to another company's applications without a hiccup and with little if any computer system retooling.

"At least half of the mortgage brokers we deal with are using e-mail addresses via Yahoo!, HotMail or AOL. They don't know how to open an attachment. They don't know how to structure a note and have never heard of a contact manager. I would estimate that they are lagging behind Realtors by at least two years," said Jim Swann, co-owner of the Grapevine, Texas-based International Real Estate Digest (IRED.com)

What's more, MORTECH found that only 1 percent of loan originators have implemented electronic signatures and only 4 percent use electronic mortgage exchange, both crucial elements for a paperless mortgage.

Why so few?

In addition to a lack of sophisticated knowledge among rank and file mortgage brokers and lenders, the slow implementation of paperless mortgages drags for numerous reasons. Capitalism in its purest form tops the list.

Profits vs. technology

The "New Economy," perhaps more so than any other period of economic growth, encouraged immediate financial gratification. The mortgage industry isn't a non-profit. It's in the money lending-to-make-money business.

"While technology modernization is good for the industry and potentially good for consumers, the potential return on investment in technology for individual firms is not certain," said Jeff Lebowitz president of MORTECH, LLC.

Since Aug. 17, 2000 mortgage rates lower than 8 percent have fueled unprecedented levels of home buying, refinancing and equity tapping. While the paperless mortgage is supposed to cut costs, lenders have been too busy making money the old fashioned way. And long as rates stay low and demand high, lending money will be the industry's priority.

"For the last year or so, the loan volume in the industry has been so large that most lenders are barely keeping their heads above water," said Scott Cooley, founder of Contour Software, the loan origination software division of EllieMae.com a Pleasanton, CA-based business-to-business provider of Internet services for the residential mortgage brokerage industry.

"With the loan volume just now starting to slow a little, this should change. The profits are there, but the loan volume is too great. Next, they'll have the time and resources to do these enhancements, but will be trying to cut costs because of the slowing mortgage market. Most of the time, lenders are in one of these two modes," Cooley added.

Change may be good, and ultimately profitable, but it isn't always easy.

"Another aspect is the pure complexity of these projects. Thousands of data elements must be handled and communicated at just the right time. It takes time to map this process, design and test," said Cooley.

An industry as piecemeal as mortgage lending also has to get its act together before it can implement a service as automated and uniform as paperless mortgages will be.

"The supply side of mortgage technology market is also fragmented. Most firms are quite small and have limited influence on the adoption of technology. This retards information flow to lenders and inhibits modernization of the infrastructure of the industry. Diffusion of technology to any industry is a complex subject" said Lebowitz, who last year penned "An Industry of Slow Adopters" which chronicled the mortgage industry's rate of adopting technology.

Earlier this year, Mountain View, CA-based BridgeSpan Inc. announced what it called the nation's first mortgage platform that enables lenders to process home loans from start to finish totally online. The eMortgageAxis platform is designed to tie together the entire mortgage process -- from origination to closing and delivery. The fully electronic process integrates e-signatures and is supposed to reduce costs in funding and production by $400 to $700 per loan, BridgeSpan boasts.

One major feature in eMortgageAxis is XML Smart Documents, a product of the Mortgage Industry Standards Maintenance Organization (MISMO), the mortgage industry's electronic commerce standards developer established in 1999 by the Mortgage Bankers Association of America.

The technology has been developed. It's ready to go. So where's the paperless mortgage?

"Today there hasn't been an offering as compelling as eMortgageAxis. You still have to have some standards in place. That is, a lender has to know that whatever solution they deploy will work with the rest of the industry and won't quickly go out of date. So some standards, particularly on data and document interchange, have to be established," said Des Cahill, senior vice president at BridgeSpan.

That puts the paperless mortgage off by years -- still.

"The day that paperless operations are the norm are several years away, but each year the hardware is better, the software is better, and more people in real estate, in mortgage lending, or other industries are learning how to do it better," said Swann.

Tomorrow: "State Laws Limit Online Mortgage Competition"