A totally integrated system.
BancBoston Mortgage is doing a lot with computers. The drive to integrate grew out of the special needs of the company's quick approval product.
Images of a factory's backshop operation convey grinding gears, turning wheels and flying sparks, with manual labor sweating and pushing to produce large quantities of product.
The images of BancBoston Mortgage Corporation's backshop operation are much different. The steady hum from personal computers and the rhythmic tap of word processor keys fill the air. A short beep alerts an underwriter that work has arrived. Fax machines quietly deliver documents to the company's 25 branch offices and many correspondents across the country.
The cornerstone of BancBoston's automated backshop operation is a technology that has rapidly become a hot topic in the business world. Entire magazines are being devoted to the subject. The Bell companies are studying how to accommodate the increase in telephone line usage as a result of the technology.
This technology is called a local area network, more commonly referred to as a "LAN." BancBoston's Applied Technology Manager Warren Royal defines local area networks as a group of computers connected through cables or telephone lines that are capable of information transmission and communication. The computers can be side-by-side in the same building or 1,500 miles away in a different state. When dealing with long distances, Royal says the system is often referred to as a wide area network (WAN).
BancBoston installed two LANs during the second quarter of 1989 and has continued improving and updating its automation network. Various components of the system include laptop computers for branch loan originators, an automated lock-in system, company-wide electronic mail, fax boards and electronic file transfer.
The main impetus behind the installation of the LAN, Vice Chairman-Residential Production and Marketing Group Hugh Harris says, was the company's QuickClose product, a limited documentation, quick approval, conventional mortgage loan. "When we first discussed a quick approval product, we knew that automation and electronic file transfer had to play a large role if we were going to process and approve loans in 48 hours," Harris says.
BancBoston's Information Services area examined different types of computer systems, but Senior Vice President Charles Windham says the use of personal computers was natural because the company's Automated Loan Processing System (ALPS) was already installed and most of the branches and departments involved in the QuickClose process had PCs.
"A key to the success of our project is the way we integrate personal computers with our mainframe system," Windham says. "We have used the inexpensiveness and portability of personal computers and laptops in conjunction with the speed and storage capacity of the mainframe to create a totally integrated system."
A new environment
Vice Chairman and Chief Financial Officer Steve Matheson saw the automation project as not only a solution to the quick approval obstacle, but as the beginning of a completely new environment in mortgage banking. "We believe the playing field will favor the larger, more sophisticated companies in the 1990s. With automation, we have taken one of the major steps to ensure our competitive survival."
The company saw the need for change during an idea-generating project to reduce costs called IdeaQuest 89 (IQ89). The program began in September 1988 and plans from the IQ89 continue to be implemented within BancBoston. Matheson says automation was at the top of everyone's "must do" list. "Because machines perform routine calculations faster and more accurately at a lower cost, it made sense to automate functions wherever possible," he says. "But while talking about automation for efficiency, we discovered it aided us in speed of loan delivery, which is essential in our business."
The trend toward faster approvals at a higher level of service in mortgage banking is shadowed by the voluminous amount of paperwork that must be processed, tracked and controlled before a mortgage product can be delivered. "Although many mortgage bankers now guarantee a 48-hour approval or better, few are able to deliver a final commitment, subject only to an appraisal, within that time frame," Donald Davis, assistant vice president-residential operations, says. "During the 1990s, companies that can provide a limited documentation loan product with a guaranteed sameday commitment have a definite advantage over the rest of the industry."
Senior Vice President Tom Palmer adds that incredibly enough, the technology exists today to provide loan approval to the borrower within five minutes of the time the application is complete. But he says that initial findings from the QuickClose program have shown that customers are just as interested in the no-hassle, limited documentation aspect as they are in the speed of approval. "With an 80 percent or less loan-to-value ratio, the QuickClose program only requires four documents from the homebuyer. If the amount is 90 percent, we require six documents. Customers like that no-hassle benefit of QuickClose more than the time frame," Palmer says. In the last half of 1989, BancBoston provided approximately $250 million in loans through QuickClose.
Automating the origination process
PC Support Manager Butch Peck explains that through the use of PCs, a full mortgage application can be transmitted electronically to the processing unit along with an electronic version of the in-file credit report. The application can be underwritten, and an electronic notice of approval or rejection transmitted back to the originator in written format with any approval conditions noted.
There are several components to the automation of the origination process, beginning the moment a person is interested in buying a home. The first component is remote data entry of the mortgage application. Last spring BancBoston equipped each of its 100 loan originators with a laptop computer, complete with a prequalification program and all the documents needed to process a loan application.
BancBoston chose the Toshiba laptop computer and printer for its loan originators. "Together the laptop and printer weigh 24 pounds," Palmer says. "They come with their own shoulder strap carrier that has room for paper, folders and pens." He adds that in most of BancBoston's operating territories, the company was the first to use laptops for sales. "They have proven to be excellent point-of-sale tools at open houses and home shows. People are impressed with its capabilities and it gives an instant sign of BancBoston's professionalism and advancement," Palmer says.
Laptops are helping BancBoston reduce expenses by eliminating much of the upfront and repetitive work. Palmer says they have also helped to improve the loan originator-to-processor ratio in the branches.
As the first step in the automated system, BancBoston originators first use the laptop to prequalify the buyer. When a home is found, an application is then entered on the computer. By capturing the information at this point, the data can be used throughout the remainder of the mortgage life cycle, thereby eliminating duplicate keying. Because laptops are used, applications can be taken anywhere - in a car, the buyer's home or a Realtor's office.
After the application is complete, loan originators order an in-file credit report through the use of the laptop modem. "The credit report is viewed on-screen by the originator, who quickly can identify any potential major credit problems before proceeding," Davis says. All required mortgage documents, disclosures and verifications are printed and signatures are obtained. The collected data is then transmitted to loan processors over telephone lines to begin processing.
Currently BancBoston has more than 22 underwriters who handle the approximately 2,000 loans submitted for approval each month, says Senior Vice President Carolyn Hart. She hopes that the majority of BancBoston's underwriting will one day be done electronically. "An intelligent computer system could electronically underwrite 80 percent or more of the loans entered into the system and kick out the exceptions to be underwritten manually," she says. "This would allow the underwriters to make better use of their time by concentrating on the decisions that actually require underwriting, not the `rubber stamp' or obvious reject loans."
The system in place at BancBoston uses computer screens that resemble the paper forms the underwriters typically use. "The LAN works the other way, too, when the underwriter communicates back to the originator if the loan is approved or rejected," Royal says. "Electronic mail is extremely effective for this process." Electronic mail allows someone to leave a message on a person's computer that can be retrieved at any time by that person.
The entire process, from laptops to immediate approval, is currently used at BancBoston primarily for limited documentation loans, not the traditional conventional loan or government loans. However, Davis says these loans are also capable of being handled by the system.
Managing the risk
"Because we are dealing with limited documentation loans, there is naturally a higher risk involved," Matheson says. "It is extremely important to perform a more thorough quality control check on these loans earlier in the process to minimize the risk after approval."
The quality control area of the backshop operation monitors risk by selecting loans for audit based on risk factors that affect the overall risk rating on that account. "Our system intelligently selects those loans which are more at risk based on predetermined factors and identifies problems to correct before they become severe," Vice President-Audit and Quality Control Margaret Zakett says.
Working closely with quality control is the risk management area. "It is important to note that there are not many statistics to base the risk on with these new limited documentation loans, so managing and analyzing the risk from the onset is a large part of our program," Senior Vice President Jonathan Powell says.
BancBoston's backshop system captures all the information that has flowed from the beginning of the origination process to the closing of the loan and reviews the data. "This data allows us to statistically analyze trends in geography, borrower characteristics and other factors," Zakett says. "It is then compared against similar information available from servicing such as historical trends in foreclosures and bankruptcies to note trends and caution areas."
Davis adds that while this is fundamentally the same approach taken by the MI companies in recent years to assess risky markets, products and borrowers, "it is a new way of thinking and operating for mortgage bankers."
Quality control receives these comparisons and can take steps to reduce a higher risk. "For example, if we notice that a particular market is beginning to have problems on the servicing side, we might feed that information back to quality control and have the sample selection adjusted to make those riskier loans have a higher probability of being selected," Zakett says.
One future goal set by BancBoston for the computerized system is an automated lock-in capability. "For our loan originators and our correspondents, having the automated lock-in feature will be a big plus," Harris says. From the loan originator's laptop or the correspondent's PC, the marketing department can be dialed and a rate locked in or a loan registered. A written confirmation could also be delivered at any time of the day or night. "This ability will not only benefit our loan originators and correspondents but also our customers. They can be assured of receiving pricing information immediately," Harris says.
BancBoston's 110 correspondents across the country will soon receive pricing bulletins and the current rates through personal computers. "Because the rates will be sent across the computer lines, improper lock-ins and errors will be eliminated," Senior Vice President Mark Johnson says.
One of the most fascinating aspects of the LAN technology is how quickly it has progressed. "Two years ago we could not have installed this type of system," Royal explains. "The only obstacles we now face are external forces, such as problems with local telephone lines and current software limitations. But even those are becoming less of a problem with the newer technology. The sky is the limit as to the possibilities of the network."
Automated customer service
Not only has BancBoston offered new customers the benefit of automation in the production side of its business, but current customers are also reaping the benefits from the servicing area and its own type of automation. Last year the company installed "Infobot," an automated account information system that allows mortgagors to access general information regarding their mortgage loan quickly and easily 24 hours a day, seven days a week.
"All that is needed is a touch-tone telephone," says Executive Vice President Paul Holmes. When customers call the toll-free number, this message greets them: "Thank you for calling BancBoston Mortgage Corporation. In our continuing effort to provide quality customer service we have installed for your convenience an automated account information system. If you are calling from a touch-tone telephone please press 1 now."
A growing percentage of BancBoston's customers speak Spanish. To serve them properly, Holmes says that after the initial Infobot greeting, a voice says in Spanish, "If you wish to speak to a Spanish-speaking person, press 2." The call is then forwarded to one of BancBoston's bilingual representatives.
Without the assistance of a customer service representative, the mortgagor can access current loan details such as principal balance, interest rate, current payment amount, due date and interest paid year-to-date; analysis and escrow information such as the last payment of taxes and dates of escrow disbursements; year-end totals for tax and interest paid for income tax; and past due account information. Holmes says that the system also gives customers the opportunity to speak with a loan counselor or customer service representative during normal business hours.
If mortgagors call during non-business hours and cannot obtain the information they want from the automated system, Assistant Vice President Jo Steinmeyer says that they have the option of leaving a message on a phone mail system. All messages are returned during the next working day.
"Because the Infobot programming can be changed in about an hour, we are able to accommodate our customers in times of emergencies," Steinmeyer says. "For example, when Hurricane Hugo slammed into the Carolina coast in September 1989, BancBoston was able to set up an emergency customer service line to have Infobot process the calls from hurricane victims on a priority basis,"
Currently, 35 percent of our mortgagors are using Infobot, Holmes says. "We have encouraged customers to use the system by providing a brochure which details Infobot, inserting flyers in coupon payment books and spreading the word when they call."
Late in 1989, BancBoston added 12 telephone lines for a total of 42 in the customer service area and increased telephone staff to 25 representatives.
"Every department or person at BancBoston is involved in the automation project," says Matheson. "This whole company joined together and introduced one of the most efficient and advanced systems in the industry."
It is easier to understand the importance of this feeling of unification at BancBoston when you examine the company's history. BancBoston Mortgage Corporation evolved in 1988 from the merger of four mortgage subsidiaries of the Bank of Boston - BancBoston Mortgage Corporation of New England, Mortgage Corporation of the South, RIHT Mortgage Corporation and Stockton, Whatley, Davin & Co. Along with the merger came four different management styles, overlapping functions, duplicate operating territories and regional differences, says President and CEO Joe Pickett.
Consolidation of offices, staff and functions was crucial if the company was to be a profitable operation, Pickett says. "We knew this company was a fighter when we survived four consolidations during an extremely slow mortgage banking year in 1988." With recent acquisitions of servicing, BancBoston now ranks as the ninth largest mortgage servicer in the country with more than $15 billion in servicing volume. More than 296,000 mortgage loans are being serviced in 48 states and the company is actively involved in the secondary market. "BancBoston has emerged in 1990 as a lean, advanced, forward-moving company," says Pickett.
Susan E. Budd owns her own public relations consulting firm, SEB Communications, Jacksonville, Florida.
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|Title Annotation:||BankBoston Mortgage Corp.'s automation|
|Author:||Budd, Susan E.|
|Date:||Feb 1, 1990|
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