Denmark's leading residential mortgage lender goes online

By Kenneth V. Smith

COPENHAGEN Nykredit Bank, the largest mortgage credit and home sales institution in Denmark, is set to announce a package of Internet-based services for Danish home owners and buyers.

Within the next two weeks, Nykredit will begin launching a greatly expanded Web site for integrated banking, real estate sales, mortgage initiation and refinancing.

An estimated 23 percent of Danish homes have access to the Internet, and this number is growing rapidly. The importance of a Web site in Danish life and business can be seen nearly everywhere.

A Web address is found in much of the broadcast and print advertising in Denmark. Even a purchase at a grocery store or gas station will have a reminder of the Internet where the cash register receipt will have the familiar "www" Web address printed at the bottom.

Like other parts of the world, Denmark's early adopters of the Internet tend to be younger. This demographic characteristic works well for the real estate industry in Denmark where the average age of a first-time homebuyer is 22 years old. With these statistics in mind, Nykredit Bank's management began incorporating the Internet into its business plan two years ago.

Throughout Denmark, with its population of five million, Nykredit now has 44 branch offices where home loans are made along with a subsidiary that has 250 real estate sales offices. The degree of integration of real estate services in Denmark is unheard of in the United States. In addition to selling the home and making the loan, Nykredit also offers the equivalent of title and escrow services. And the real estate agent serves as the appraiser.

"Four years ago Nykredit transformed the highly regulated business of residential lending in Denmark," said Henrik Hougaard, the bank's head of corporate communications and online services. This included buying smaller mortgage lending competitors, buying a traditional full service bank to get its banking license, and buying several real estate sales companies.

"To stay competitive, we needed a revolution-not an evolution-in the way we conduct our mortgage credit business," Hougaard said. "So, we are committed to the Internet as the best way to expand services without adding more branches and people."

Within the first couple of weeks of the New Year, Nykredit will begin announcing new banking and mortgage products that will be available through branch loan offices and real estate agents.

"In financing a home purchase, Nykredit is like a tube between the borrower and the investor," Hougaard said. "Bonds are issued for the purchase money, then those bonds are sold on the free market." Nykredit has 550,000 active home loans, or 39 percent of the Danish market.

According to Danish law, a mortgage credit institution can loan only 80 percent of the loan to value. With its newly acquired banking license, Nykredit will be moving toward 100 percent financing by offering bank loans for the 20 percent down payment, Hougaard said.

"It will take a long time before we can actually sell a mortgage online," Hougaard said. "That's way out in the future."

He explained that in addition to technical problems of online funding, the Danes like to do the preliminary work themselves but demand personal contact when it comes to making contractual obligations for home purchases or refinancing.

When interest rates are falling, Danish homeowners begin to recall their bonds, or refinance as it's called in the United States. "By our Web page counts, we know that many Danes are bookmarking the page to calculate monthly payments if they refinanced," Hougaard said.

Hougaard said Nykredit has no plans to expand its mortgage loan business in other counties of Europe. The bank maintains small offices in Frankfurt and London for commercial loans.

Nykredit will continue to make home loans only in Denmark, but the bank plans to use the Internet to sell mortgage bonds to international investors. The Nykredit bonds are rated Aa3 by Moody's. Last year, Nykredit issued the largest bond series ever in Europe.

Since obtaining the Moody's rating there has been a sharp increase in sales of Danish mortgage bonds to American and Japanese investors. The bonds are not taxed by the Danish government.