On the positive side, with interest rates falling we ve seen a dramatic growth in refinancings, which are Internet-friendly products as compared to the purchase mortgage. E-Loan had a strong fourth quarter of last year, and they should have strong quarters for the next two. Any significant material progress in automating the mortgage process is a second positive. The issue is that ES hasn t been adopted and it s not accepted by the lower levels of government. So anything that speeds the process of a digital mortgage where you can remove the paper cost, the processing cost, could be upside for the lenders.
Auto loans are a simpler process and are friendlier to the Internet compared to a purchase mortgage.
We are starting to see some reasonable adoption by borrowers of auto loans over the Internet, as I mentioned in regard to E-Loan earlier. These stocks represent the growth stocks of the financial service sector. If you re looking to diversify and to have some part of the portfolio with significant upside after a lower valued base, then these are the right stocks. Timing and selectivity are the issues the investor has to address. They fit where a customer is willing to accept more risk, but for a higher potential return.