Attempts by Mortgage Guaranty Insurance Corp. to sell off its eMagic and Myers Internet units have failed and the mortgage insurer will shut down the pair of technology providers on Sept. 1.
The move comes as the beleaguered MI company looks to consolidate resources and focus on its core business. Milwaukee-based MGIC is still the largest MI provider in terms of existing insurance, called policies-in-force, but has ceded the top spot in new insurance written to competitors Radian and United Guaranty.
The eMagic platform connects lenders with third-party origination services, while Myers Internet provides a toolkit for lenders and real estate professionals to create and maintain websites that include point-of-sale functions like borrower-facing loan rate searches, applications and calculators.
Mortgage Technology first reported that MGIC planned to divest itself of the technology units in September 2011. By May, MGIC had abandoned its aspirations to sell the units and moved forward with the process of shutting them down.
An MGIC spokesperson would not make officials available for comment about the decision to shut down the units. In an emailed statement to MT attributed to Sal Miosi, MGIC’s vice president of marketing said the company explored “all options, including selling and discontinuing the platforms.”
“After nearly nine months we have exhausted all available options and concluded that we will discontinue all services effective September 1,” the statement adds.
But according to Myers Internet founder Warren Myer, MGIC rebuffed his attempts to repurchase the company that he founded in 1995. Myer, who stayed with his company for a year after selling it to MGIC in 2006, said he’s maintained contact with MGIC officials since his departure in 2007.
Myer said he discussed the sale of the units with MGIC officials and had interest in acquiring his old company, but not eMagic. However, Myer said, “They wanted to sell both companies. They wanted to sell Myers and eMagic together.”
“When I spoke to them earlier, they said they were going to sell the company; that they had a potential buyer for both units,” Myer added.
But Myer didn’t find out that the deal fell through until he learned that MGIC decided to shut down the units and it was too late. “When I found out they were going to shut them down, I approached them to see if I could buy Myers and they said at that point, they had made a decision already and they were going to proceed with shutting them down,” he said.
“If I had known that they were going that route, to shut them down, I would have approached them,” earlier, Myer said. “I would love to run the company again and keep it alive, but I missed my chance.”
Until recently, a noncompete agreement left Myer on the sidelines of mortgage technology. When he returned, he said he surprised to see the technology he created was still relevant.
“My initial impression was that this company had been around for a while, there’s probably a lot of new technology and innovation in the space,” he said. “But I started looking at the competition and was really surprised that there hasn’t been much innovation in the mortgage technology space on the origination side for a long time now.”
Myer said he hopes the legacy of Myers Internet will be the strengths of the technology and that what it provided the industry was ahead of its time.
“Overall, it was the robustness of the application and the details of taking the loan application and making sure everything is accurate,” he said, adding “the websites had this automated technology to edit the websites and build out new designs.”
Myer got his start developing a website for his own mortgage company in 1994. At that time, Myer said, the mortgage industry was just starting to adopt PCs and most companies did not use email.
“There was widespread skepticism in the industry that consumers would apply for mortgages online,” he said. “We spent a lot of time in education and research to help the industry embrace this new medium.”
Myer said at its peak, the company boasted a market share of 80% before competitors entered the space. Its first real competitor was Ellie Mae and during the dot-com boom at the turn of the century, many new entrants came along and many went out of business.
“The strongest growth years for Myers were in 2002 and 2003 as the industry started adopting technology,” he said. The good times continued for a few years after that, but eventually the housing crisis took its toll on technology innovation.
“After the collapse of the mortgage industry, I think the innovation dried up,” Myer said.
MGIC launched eMagic in January 2000 as an expansion of its Magic Carpet platform, which provided e-commerce functions for lenders to order mortgage insurance, obtain automated underwriting decisions and check the status of mortgage insurance and contract services orders. It also provided wholesale lenders with Web-based tools to market products and services to mortgage brokers, which included an order management feature to track the products and services ordered by individual originators.
As eMagic, the technology was enhanced to provide access to products and services from third-party wholesalers, investors and vendors. Over the years, the technology evolved and MGIC added new offerings, including website tools from Myers Internet.
But the units provide minimal revenue to the company. Hit hard during the housing crisis, MGIC continues to hemorrhage cash—though its $20 million loss in the first quarter of 2012 was better than the $34 million loss it posted in 1Q11.