Try to imagine all those cowboy movies from childhood: Stagecoaches streaming westward. Families clutching their children to keep them safe from unknown dangers. Everybody hoping to make a buck from their 40 acres of land.

It could be the plot for a film about the online mortgage industry, circa 1999.

From companies that just list loan programs to those with full-fledged electronic applications, hundreds of home lenders have ventured onto the Internet. They say the Web offers ease, convenience and bottom-line savings, making it the best place to obtain home loans.

More to come
But with much of the mortgage process still requiring pen and paper -- and novices spooked by the numerous twists involved in buying a home -- no clear "best" Web strategy has emerged. That means it will likely be another couple of years before the Internet's full impact on mortgage lending becomes apparent.

"To me, it's a lot like full-service and self-service gasoline," says Scott Happ. As chief executive officer of Marshall & Ilsley Corp.'s mortgage company, he oversees the direct lending operations of mortgagebot.com.

"If they're OK with the Internet and they feel knowledgeable enough in terms of what they need about a product, then the Internet offers a tremendous amount of opportunity to save a lot of money," Happ says. "But for someone who's a first-time home buyer, or is just uncomfortable with the Internet and they need some advice, in many cases they're happy to pay the extra eighth- to a quarter-point (in rate) to get the additional support."

Methods of lending
Finding the best mortgage deal in the offline world requires plenty of legwork, and borrowers usually end up considering myriad offers. There are three categories of lending:

• Bank XYZ has branches at which people can borrow its money to buy a home. This is the "retail" channel.
• The neighborhood mortgage broker runs another shop, from which people can borrow through the "wholesale" channel. Here, brokers get money at discounted rates from a host of finance companies, mark it up and lend it out to customers, keeping the added margin for themselves.
• Then, there are alternative channels, such as new-home builders who make loans through lending affiliates, and rich relatives or other private sources, who loan out cash on their own terms.

As the candy maker Reese's might say, there's no "wrong" way to get a mortgage.

"Basically, the industry is primarily retail and by retail I mean that a lending institution is going to be making -- originating the loan and closing it -- without any outsiders," says Ina Bechhoefer, a principal with the Washington consulting firm SSP/RES Research.

When it comes time to boost business without adding a lot of employees, companies often develop wholesale operations, she adds. But this gets lenders only so far, so many started dipping their toes in the online waters during the past two or three years. Others have skipped wholesale altogether in favor of the Web.

"When you get an inquiry off the 'Net, they can be in Timbuktu ... or, let's say, Pound, Va. -- a little rural area where there aren't any banks," Bechhoefer says. "There aren't really many mortgage brokers canvassing the area, but a guy in Pound gets on the 'Net and sees something attractive. Now he's got a choice of lenders that he's never had before."

Moving ahead with tradition in mind
The online offerings may seem familiar because most companies have stuck to traditional industry methods even as they ventured onto the Internet. Some direct lenders take online applications in much the same way they take applications at their bank branches. Other businesses operate like online brokers and have wholesale agreements with many lenders. Then there are the sites that allow people to auction off their lending business to the highest -- or technically, lowest -- bidder.

At its most basic level, the Web is a way to match lenders and borrowers without anybody else complicating the matter, says Happ of Milwaukee-based Marshall & Ilsley.

"We decided to go this route because we felt it would allow us to provide the customer with the best deal possible by not having as many third-parties involved," he says. "We go direct to the consumer, much like Dell Computer (Corp.) goes directly to the consumer."

That thinking led to the formation of mortgagebot.com in early October. M&I now extends loans to consumers in 18 states, significantly increasing the company's reach from its home territories of Wisconsin and Arizona. Happ says the company handles 150 to 200 online loans a month now for between $20 million and $30 million, and the number is rising. In contrast, M&I makes about 2,000 loans a month through its branches and a telephone sales operation.

For consumers with a little mortgage know-how, using a company like M&I can make a difference. Somebody who walked into an M&I branch to get a loan would be offered a rate that is one-eighth to one-quarter of a percent higher than the rate given to an identical customer who applies through mortgagebot.com, Happ says. On a 30-year fixed loan, a drop to 7 percent from 7.25 percent saves almost $6,100 in interest.

"By doing a mortgage online, you can conceivably eliminate as much as $1,000 in loan officer expense," he says. "You are having the customer complete the application online and in effect go through a self-service process, which eliminates the need for a commissioned loan officer, who typically gets paid a half-percent loan commission."

Simpler is better -- and cheaper
Yet things can become more expensive or difficult for those who want something other than a plain vanilla loan. In the case of mortgagebot.com, borrowers with less than 20 percent down must submit an application by phone.

To get the discounted interest rate that Countrywide Credit Industries Inc. offers online with its "Gold Credit Home Loan," applicants must jump through several hoops. They must have owned a home for at least three years and have worked as a salaried or commissioned employee with the same company for 30 months. They also need 20 percent down and seven and a half months worth of payments in the bank before closing.

Of course, a mortgage powerhouse like Countrywide has other online dealings, too. It is one of 16 lenders that make loans through QuickenMortgage, the Web operation run by Mountain View, Calif.-based Intuit Inc. The site acts like a mortgage broker, matching borrowers with lenders who offer loans that suit the borrowers' needs.

"We can show consumers very specific loans that they can qualify for, and custom closing costs specific for the county they are in," says Alison Berkley, group product manager for QuickenMortgage.

Visitors answer questions about income, savings and the amount of time they expect to live in the home they are purchasing, among other things. Based on their answers, the site comes up with a list of loans that are presented side by side on-screen.

Another online broker is E-Loan Inc.

No free ride
While comparing offers without a loan officer hovering nearby may appeal to some, there's no such thing as a free ride. Online brokers need to make a buck somewhere and that means borrowers end up paying fees to get loans through them. They assert that offline brokers charge more.

QuickenMortgage charges 0.004 percent of a person's loan amount and some of its lenders charge a processing fee of $200 or $300, Berkley says. E-Loan's fees are 0.00625 percent and $250 for processing, says Sharon Ruwart, vice president of marketing.

Borrowers who dislike using lenders and brokers might want to consider a different option. MortgageAuction.com, a division of Atlanta, Ga.-based Real Estate Industries Inc., went live in November with a Web site on which lenders "bid" for business.

"The consumer comes to our site, fills out financial information and they submit that information to us," says Teresa Caro, vice president of marketing. "We pull their credit report, strip off any personal information and place that out on our auction database. Our registered lenders come to that database, review all the information, put down their best rates and fees."

Caro says lenders go through a due diligence process involving interviews, the submission of lending licenses and a company profile, as well as the filing of an affidavit certifying compliance with fair business practices to discourage fraud.

Borrowers don't pay for the service MortgageAuction provides; instead, lenders ante up either $39.95 or $49.95 for each bid they win, depending on the amount of business they bring in each month.

Federal, state rules still apply
While experts say these online operators will change the mortgage industry in plenty of ways over time, consumers who expect huge savings and a much shorter wait between application and closing likely will be disappointed.

Sure, the Internet allows electronic submission of some information and simplistic rate comparisons. But it doesn't eliminate state and federal oversight, labor-intensive processes such as the property appraisal or, at the very least, the need for a borrower's John Hancock.

Cameron King, executive vice president of Countrywide's electronic commerce division, notes that his company has already converted much of its internal underwriting to a computerized format, yet delays continue, thanks to certain regulatory burdens.

"A consumer needs to, by law, receive an opening package within three days of when their application is taken and they still need to sign all that." The package includes the application, the Good Faith Estimate of closing costs, and other forms.

To make things easier for borrower and lender alike, Countrywide, Intuit, General Electric Capital Mortgage Corp., Freddie Mac, Microsoft Corp. and others formed the Electronic Financial Services Council in December to lobby for changes in mortgage lending law.

Point, click, sign
King envisions online borrowers receiving their opening package electronically. They could then just click a square saying "I accept" rather than signing the documents and express mailing them back to the lender.

In the meantime, borrowers have to deal with what's out there now. And some observers think it will be a while before online lending lives up to its promise.

"With mortgages, I still think people like to deal with human beings," says Lew Wallensky, a certified financial planner in Los Angeles. "A house is probably the most emotional thing that you get involved with in your life -- there's a lot of paperwork, there are legal issues involved, you're committing to a long-term payment, you ultimately have to sign documents -- all of the above.

"With a (plane) ticket online, you're not signing a legal document ... and in the worst case analysis, the ticket doesn't show up. But with a house, it's a big difference."