Our Market Opportunity

Mortgage originations in the United States averaged more than $960 billion annually from 1993 to 1998, and are expected to total $1.2 trillion in 1999. Forrester Research estimates that the online mortgage market will grow from approximately $18.7 billion in 1999, or approximately 1.5% of the total U.S. mortgage market, to over $91.2 billion in 2003, or approximately 10% of the total U.S. mortgage market. According to the Mortgage Bankers Association of America (MBA), the purchase mortgage market has grown at an average annual rate of 15% from 1993 to 1998. Approximately 66.3% of households in the United States own homes, and as a result there is a substantial market for ancillary services, such as title insurance, appraisals and home insurance.

Our Strategy

Our objective is to be the leading provider of online content and e-commerce services for homeowners and prospective homeowners. We intend to achieve this objective by growing our customer base aggressively and capitalizing on the full range of market opportunities through the following strategic initiatives:

• Developing a leading brand as a provider of online content and e-commerce services for homeowners and home buyers through advertising, co-branding partnerships and promotions using both the Internet and traditional offline media.
• Expanding third-party channels to grow our revenues and purchase (as opposed to refinance) mortgage originations by extending our technology infrastructure to all parties who traditionally participate in the home purchase process, including real estate agents, home builders, relocation companies and mortgage brokers.
• Enhancing our core mortgage service and expanding our mortgage offerings by more efficiently accessing and interfacing with the capital markets and adding product lines such as sub-prime mortgages, home equity credit lines and construction loans.
• Maintaining our commitment to customer service by offering value-added self-service tools such as online loan status updates that empower our customers to make informed decisions and by continually improving our customer service both online and offline through our state-of-the-art contact management center.
• Delivering a more integrated homeownership experience by extending and monetizing our customer relationships by providing related products and services, such as title insurance, appraisal, home insurance, moving and home improvement services.

Mortgage Revenues

HFCI's mortgage revenues are derived from the brokering of loans and the origination and sale of loans. Brokered loans are funded through lending partners and HFCI never takes title to the mortgage. Brokerage revenues are comprised of the mark-up to the lending partner's loan price, and processing and credit reporting fees. These revenues are recognized at the time a loan is closed. Originated and sold loans are loans that are funded through HFCI's own warehouse lines of credit and sold to mortgage loan purchasers. Loan origination and sale revenues consist of proceeds in excess of the carrying value of the loan, origination fees less certain direct origination costs, and processing fees. HFCI earns additional revenue from its loan origination and sale operations as compared to brokered loan operations because the sale of loans includes a service release premium.

Competition

The market for web-based services is highly competitive and there are no substantial barriers to entry, making it possible for new competitors to proliferate rapidly. In addition, many of our existing and potential competitors have longer operating histories in the traditional mortgage and Internet markets, greater name recognition, larger customer bases and significantly greater financial, technical and marketing resources than we do. We believe competition takes place on many levels, including pricing, convenience in obtaining mortgage loans, breadth of product offerings and lending sources, customer service, marketing and brand awareness. Our principal competitors include:

• traditional lenders and mortgage brokers with no online presence;
• traditional lenders and brokers that offer access to their mortgage products over the Internet. In addition, we compete with a variety of websites for customer awareness and Internet traffic, some of which are also our partners and all of which compete with us for awareness, including:
• websites that provide access to real estate-related content and services, including mortgage calculators and information on the home buying process and which generate leads for mortgage providers, including Priceline.com (PCLN), Lending Tree (TREE) and Microsoft's HomeAdvisor (MSFT);
• websites that offer real estate listings and related services, such as CyberHomes, HomeSeekers, Homes.com, Homestore.com and Microsoft's HomeAdvisor;
• general purpose consumer websites such as Alta Vista, Excite@Home (ATHM), Lycos (LCOS), GO.COM (GO) and Yahoo! (YHOO) that offer real estate-related content;
• newspapers and magazines that advertise real estate listings; and
• other financial institutions that are partnering with mortgage brokers to offer related services, such as DLJ Direct (DIR), E*Trade (EGRP) and Fidelity. Further, in establishing relationships with third-party partners we compete with several companies that specialize in providing services to companies in each channel, including, for example:
• companies specializing in captive mortgage operations for home builders, including CTX and Norwest; and companies providing loan origination software for mortgage brokers, including Calyx, Contour, Byte and Genesis 2000.

Risks Related To Our Industry

The real estate industry is both seasonal and cyclical, which could affect our quarterly results...

We may be particularly affected by general economic conditions...

An increase in interest rates may reduce mortgage transactions...

If we are unable to comply with mortgage banking and mortgage brokerage rules and regulations, our ability to originate or fund loans may be restricted...

Changes in the law governing tax treatment of home mortgage interest may harm our business...

Risks Related To The Internet

The regulation of the Internet is unsettled and future regulations could harm our business...

Our internal network infrastructure could be disrupted by a number of different occurrences...

The Internet industry is characterized by rapid technological change, and if we fail to effectively adapt to these changing technological developments we will be unable to successfully compete...

We could face liability for information retrieved from or transmitted over the Internet and liability for products and services sold over the Internet.

Where do we go from here?

Studies show that traditional mortgage brokers are dragging their feet when it comes to the internet. The race, however, is well underway. Consumers are suddenly up-for-grabs and winning the race means being the first to get to them. If traditional brokers hope to maintain their loyal clients, they must be online, with a competitive web site, or consumers will simply go with the competition. It will be discovered that the internet is the perfect vehicle to market home mortgages. No inventory, no deliveries, little overhead, and nothing more than a conduit for needed and valuable information, and isn't that what the internet is all about in the first place? It's as close to the perfect business as you can get, except maybe the internet itself, which has no employees and no overhead.

The projected value of internet mortgage originations in the years to come is staggering! Estimates from various sources put internet sales in the billion to trillion dollar stratosphere in just a few years. The mortgage industry has caught on to the internet faster than most other industries.There are approximately twenty major national players vying for this net business. The most successful will be what we call "clicks and bricks" operations, strong internet presence with local offices. This is the philosophy that we intend to follow. We feel that there is no downside to originating loans online. When a consumer is ready to talk to a live person, we have trained and educated loan officers available for immediate consultation. Because HFCI has a low overhead and operates from only one location, we can offer lower mortgage rates than our competition.

``...We have decided that we are going to use the internet to make our
company more efficient and more profitable, which is the true strength of
the internet,'' said Gary J. Kovner during the MarketDD.com interview.
``...We are not a pure dot-com player and feel that we can sustain
ourselves for the long haul.''

HFCI is pleased to offer our TV and radio advertising campaigns for review
on our web site at www.hfci.com , including our radio campaign with Howard
Stern.

About Home Financing Centers, Inc.

Home Financing Centers, Inc., founded in 1993, is a leading diversified
financial services company offering a variety of consumer and business loan
products. They reach consumers through multiple channels, including their
website, www.hfci.com and their relationships with realtors, mortgage
brokers, financial institutions, homebuilders, employers and relocation
specialists. They may be reached nationwide at 1-877-MY-NEW-LOAN.