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Custom-fit servicing software.

Custom-Fit SERVICING SOFTWARE

Many commercial services, facing growing borrower sophistication and an ever-expanding laundry list of information demands from investors, are turning to automation for solutions.

With the commercial servicing industry on the brink of changes seen in the residential market 10 years ago, a stunning variety of software has hit the market in recent years.

While many companies still use manual ledger card systems or computerized in-house systems, others are looking to outside software expertise. "We're in the process of wanting to go to an outside vendor," says Byron Fegley, vice president, portfolio management and loan administration at Eberhardt Company, Minneapolis. "We need more things on the system than we currently have."

With a 350-loan, $525 million portfolio of commercial loans, Fegley says his in-house system just can't keep pace with increasing investor demands for information. Retaining someone who can maintain an in-house system is difficult and expensive. "The cost of quality help is always an issue," says Fegley.

Servicers who, like Eberhardt, are looking for a mainframe solution to their commercial servicing challenges, have a half-dozen software systems from which to choose. Finding the manufacturers is easy. Distinguishing between their systems is not.

What are the differences among today's commercial loan servicing software systems? To find out, we asked more than a dozen mortgage services to tell us about the software they use.

Some of the systems, such as Precision Software Corporation's Loan Administrator, can run on mainframes, mid-ranges or PC-based systems. Others, including Newtrend's Infopoint system, need the power punch of a mainframe. Some, such as SSI's Commercial Loan system are new commercial offerings from well-known residential software suppliers. We even found one user who had been happily running the same commercial software for the past 15 years. Our software sampling starts with PC-based systems and works up to products that run on a mainframe. Information on costs, updates and best features was supplied by the manufacturers.

Synergy Software - the

mortgage banker's system

Software: AMICUS Manufacturer: Synergy Software, Inc., Nashville Contact: Stephen Wood (615) 371-0723 Platform: PC and PC-network Cost: $5,000 - $50,000 Updates last year: three

Best features: Ease of use; handles any variation of loan structure; easy retrieval of loan information for reports/updates; flexible system to customize servicing; complete audit control and security.

Commercial servicing has changed a lot in the last five years, says AMICUS user Thomas D. Wood, Jr., executive vice president of Thomas D. Wood and Company, Coral Gables, Florida.

"The investor is starting to ask for more information and more work. Unless you want your employee costs to go up, you add intelligent software. Then you can even add loans without adding employees," he says.

Driven by servicing rather than production, Wood and Company services 100 primarily income-property loans from the Southeast. With $270 million in outstandings and a four-person shop, Wood recently spent $15,000 laying cable and setting up a network.

Next he shopped for a system to run on the new network, focusing on two issues: price and quality. He began calling software firms but soon tired of the task. "When you get to a [certain] point, they all get similar," he says.

In the end, Wood chose AMICUS because he knew and trusted servicers in the three shops where the system was tested, including a firm subservicing commercial loans for the federal government. "The software was ripped apart by a company doing subservicing for the RTC and they are happy with the system," says Wood.

Wood's second reason for buying AMICUS? "The guys who made it are mortgage bankers. It was designed by a mortgage banker for a mortgage banker," he says.

He also liked the completeness of the system. "The only thing it won't do is your inspections," he quips. And because Synergy Software charges for its software on a per-loan basis, the system gives the smaller player a price break.

Data-Select - choice

construction software

Software: CLCS Manufacturer: Data-Select, Woodland Hills, California Contact: Sean McCracken (818) 710-1973 Platform: PC and PC-network, AS/400 and IBM mainframe Cost: $25,000 - $300,000 Updates last year: Two for each platform

Best features: On-line, real-time on all platform; can automate underwriting, construction and permanent servicing and REO with loan analysis throughout process; full functionality with loan restructuring capability; provides full turnkey implementation, including conversion, strong support.

The CLCS System was "far and away, leaps and bounds ahead of everything else in terms of construction loans, says David Matzenbach, staff officer at The Huntington Mortgage Company.

Matzenbach services $320 million in construction loans and $400 million in commercial real estate loans for the Columbus, Ohio firm.

When it comes to unit development construction and the tracking and processing of line-item budgets, CLCS is tops, he says. He also likes the way it handles the amortization of permanent loans and participations. "If we service commercial real estate portfolios for another entity, it has the capability to do that accounting," he adds.

CLCS's user-defined tickler lists also appealed to Matzenbach, who runs the system on a local area network (LAN). "It has all the document and tickler tracking, custom reporting and it's easy to get the information. It can handle all our commercial real estate, whether it's in the construction phase, permed-out or somewhere in between," says Matzenbach.

DISC - eliminating the paper

Software: Loanledger+ Manufacturer: Dynamic Interface Systems Corporation, Los Angeles Contact: Traude Christeson (310) 305-9995 Platform: PC and local- and wide-area networks Cost: $15,000 - $50,000 Updates last year: two

Best features: Flexibility of servicing for virtually any kind of loan; user-friendly; sophisticated calculations ability; management control reporting; instantaneous updating of the database.

Robert Spalter of Spalter Finance Company, Skokie, Illinois is a "manual man" who has just begun to see the light in terms of computerization. While he "loves" his new Loanledger+ system, he still posts some information off the computer to a card. "It's still the best way to collect an account," he insists.

With that single exception, Spalter planned to be paper-free by December 1. "I have been in the business all my life and I marvel at it every time I see it," he says of the system.

Spalter used ledger cards for three years while his firm tried to set up its own in-house servicing system. "When I think of the money I spent...," he laments. With Loanledger+, he says: "I spend a dollar, I get back a dollar."

With more than 500 loans and outstandings of $25 million, Spalter has halved the time that routine servicing tasks take to accomplish. Bank deposits posted to the computer now transfer to the firm's general ledger. Loan set-up is faster than ever. And no more running an amortization schedule from the back of a ledger card. Loanledger+ automatically breaks payments into the correct amount of principal and interest, he says.

Loanledger+ also helps Spalter manage troubled assets. "When we're in a foreclosure and we're selling a property, it [Loanledger+] will help us determine how much we have in the deal," Spalter says.

Customer support from DISC has been constant, he says. "All you have to do is pick up the phone and call them. And if you don't call them, they call you," he says.

FICS - user-friendly

Software: LoanWare Commercial Servicer Manufacturer: Financial Industry Computer System, Inc., Dallas Contact: Carl Gahan (214) 458-8583 Platform: PC and Novell network Cost: $20,500 - $23,000 Updates last year: four

Best features: Ability to handle any type of commercial loan; customer service and training; user-friendly; menu-driven, comprehensive escrow/accounting capabilities; accounting remittances for participants, security holders and investors.

Before purchasing LoanWare four years ago, Larry Casper, vice president for loan servicing at Davis-Penn Mortgage Company, Pasadena, Texas, relied on ledger cards. "It was almost a manual process," Casper says.

The biggest benefit of the LoanWare system? It's user-friendly, he says. That's an important feature in a office where a seven-person staff watches over a $500 million, 130-loan, multifamily portfolio, without the help of data processors who could tinker with a complex system.

"The primary thing for us is ease of usage without an extensive training session," he says. LoanWare is comprehensive, providing Davis-Penn with solutions peculiar to commercial loans, such as ticklers for taxes, insurance and Uniform Commercial Code filings, says Casper.

LoanWare also has a tremendous variety of methods for calculating interest, repayments, escrows and operating deficits, he says.

FiTECH - bang for the buck

Software: MicroServ Manufacturer: FiTECH Systems, Greensboro, North Carolina Contact: W. Lee Carter III (800) 753-6633, ext. 464; Chuck Welsh (800) 753-6633, ext. 462 Platform: PC and PC-network Cost: Base price - $15,000; depends on number of loans, terminals Updates last year: two

Best features: One system handles commercial and residential loans; loans can be segregated by portfolio/ investor; allows for asset/liability segmentation; written in "C;" fast speed system; allows for NAIC "Schedule B;" user-friendly.

Up until two years ago, James Craig, director of investment administration at Washington National Insurance Company in Evanston, Illinois, had a very "manager-unfriendly" system to service his 863-loan, $375 million portfolio: ledger cards backed up by a NCR bookkeeping machine.

"If our management came in and said, |What is our exposure in Florida?' I'd say, |I'll get back to you in a day or two,' and sit down with an adding machine and the ledger card," Craig explains.

With its outside auditors concerned about the lack of fiscal controls inherent in a manual ledger-card system, Washington National put together a committee to find a computer solution. The committee wasn't keen on developing an in-house system, and mainframes were too pricey, so Washington National began searching for a PC-based solution. As the company's accountant put it then: "I just want a system where I can put numbers in and get a report out."

"At that time, we were limited to FiTECH and a couple other PC-based systems," says Craig. There were cheaper PC systems than FiTECH, but they weren't market-tested. "We weren't willing to be anyone's guinea pig," says Craig.

FiTECH was the most reasonably priced, established system that Washington National found. "For a mid-sized shop like us, with maybe a thousand loans, FiTECH gives you the best bang for the buck," Craig says.

LSS - True customer service

Software: LOANbase III Manufacturer: Lender Support Systems, Inc., San Diego Contact: Dan DeMarco (619) 291-7172 Platform: PC and PC-networks, mid-range and mainframe Cost: $9,500 - $12,000 for network LAN; low-end specific modules available for $4,000 - $6,000 Updates last year: four Best features: Functions with dBase-like data files; window-style menu system with pop-ups and pull-downs; handles wide variety of loan calculation type and payment frequencies; unlimited investor participations by dollar and rate; powerful built-in report and inquiry generator; has relational database design.

When computer network consultant Ivan Chang began shopping for a commercial servicing software system for a neighboring property management company last May, he found eight potential suppliers.

Carlsberg Management Company, Santa Monica, needed PC-network software to service its 500 loans. That narrowed the field of potential software systems down to four. Chang called all four manufacturers. The field of likely vendors immediately shrank by half when two of the firms didn't bother to return his call.

In the end, Chang chose Lender Support System's LOANbase III. "It did everything Carlsberg wanted the loan servicing package to do," says Chang.

And importantly, the system was easy to use. "[Its] menus are very intuitive. [It has pull-down menus] so when you look at [the screen], you understand what it is," he says.

The other system Chang looked at as a possibility had similar features, but it just wasn't as easy to use. "If it's not easy to use, [users are] going to get frustrated," Chang says.

LSS's technical support staff was able to answer his questions, says Chang. The firm also keeps up with changing market demands, he adds. "They have kept up to date with the times."

Precision - cost-effective flexibility

Software: Loan Administrator Manufacturer: Precision Software Corporation, Williamsburg, Virginia Contact: Tom Shriver (800) 772-3733 Platform: PC and PC-networks, mid-range or mainframe Cost: $5,500 - $19,500 Updates last year: two

Best features: Flexibility in handling payment structures; complete general ledger interface; strong management reports; complete participation support; tickler exception reporting system with life-of-loan, "to do" lists.

The software that David Watts, senior credit manager for Household Commercial Financial Services, Inc., Prospect Heights, Illinois, uses has to manage his bank's own loans, as well as loans that are acquired from other institutions.

Precision's Loan Administrator fits the bill, says Watts. Using Loan Administrator, Watts has been able to mirror the terms and parameters of Household's loan acquisitions. "When we've had to put loans on in the middle of their life, we've had tremendous support," Watts says.

The standard tickler reports, along with a separately purchased report package, have met all Household's demands, he adds.

"It's really quite inexpensive and it's flexible. We like what it does and its ability to get data for us," he says.

Watts knew about Precision's software because he used it at his former shop, Citibank. Watts liked the way the product worked, so he purchased it without hesitation after he moved to Household.

McCracken - the Cadillac system

Software: The Strategy System Manufacturer: McCracken Financial Services, Inc., Wilmington, Delaware Contact: Cyrus M. Brinn (800) 933-4470 Platform: IBM AS/400 Cost: $65,000 - $200,000 Updates last year: two

Best features: Thorough and detailed commercial mortgage accounting capability; detailed asset administration tracking features; extensive management, investor and borrower reporting; extensive cash management; ACH and escrow modules.

When it comes to the McCracken system, even mortgage servicers that haven't bought it, love it. "The absolute best, pie-in-the-sky, most wonderful system that ever came down the pike is the McCracken system," says a commercial servicer who'd love to have the system, but can't afford even the low end of McCracken's price range.

"It's the Cadillac of commercial servicing software," says another non-user. "It's the nicest car in the dealership, but it's got a lot of bells and whistles I don't need." For instance, instead of simply storing financial statements, the McCracken system analyzes them, looking for changes in a borrower's fiscal health.

McCracken user Patricia Wallace, assistant vice president of First Union Mortgage Corporation, Charlotte, North Carolina, has just finished converting 2,200 small commercial loans purchased from failed Southeast Bank in Miami. She now has 16 staffers handling the servicing of a $2 billion, 2,800-loan portfolio.

Wallace needed more capacity and power than her System-36 computer offered for applications including security and accounting checks and balances. So, McCracken personnel came in, helped with the purchase of a larger AS/400 computer and then handled the conversion of Southeast's loan data - all in six weeks. "They really came through. They have the support we need," Wallace says.

The McCracken system is the most flexible on the market, she says. "The people at McCracken know the industry and they keep up with what's going on out there. I never found that to be true with other systems," she says.

McCracken user Thompson A. Maher, senior vice president of Thomas J. Maher and Co., Inc., Philadelphia, has a much smaller portfolio: 200 loans with an outstanding balance of $700 million.

He says the system's cost was justified because McCracken goes beyond data processing and helps manage assets. "We've been restructuring a lot of loans and many of those restructurings could not be accommodated on a servicing basis by our old system," says Maher.

Shaw - the accountant's

dream machine

Software: CL/2000 Commercial Loan and Collateral Accounting and Management Reporting System Manufacturer: Shaw Systems Associates, Inc., Houston Contact: W. Hickman Beckner III (804) 794-3316 Platform: mainframe Cost: $225,000 - $300,000 Updates last year: one

Best features: Flexibility; can handle a wide variety of loans; ease of use; efficiency for processing; on-site support offered with product; excellent training; product is established and thoroughly tested.

Like many large commercial servicers, MNC Financial, Inc., Baltimore, uses a software system to service commercial mortgage loans for office buildings and strip shopping centers, according to Vice President Daniel B. Woodard, Jr.

But MNC's 16,000-loan, $9 billion portfolio also includes more exotic products such as international loans, letters of credit, accounts receivable loans and business lines of credit, all handled by the Shaw system.

"We utilize Shaw primarily for its accounting capabilities. That is its strong point. We've been able to make just about any product fit and work very well in terms of customer exposure and general ledger," says Woodard. "However creative you can be, it can be."

When it comes to the more mundane tasks, such as tracking UCC filings and insurance information, Woodard uses a Shaw collateral module. "We even track our appraisals - address and amount - in the collateral system," he adds.

MNC has been modifying the Shaw system since it started using it in 1987. "We like to stay ahead of the marketplace in the way items are handled in a commercial loan system. We're very service-oriented," says Woodard.

What type of modifications has MNC made? "Most recently we created a management information systems (MIS) reporting system, with a download from the Shaw system providing maximum use of the Shaw data with easy access to information via a report writer," he says.

Because a separate MNC corporation handles troubled real estate management for commercial mortgages using a specialized system, MNC uses the Shaw system primarily to keep its general ledger current and to bill customers. "We ensure an accurate loan balance; we don't track all facets of the [real estate owned]," Woodard says.

The Shaw system is comprehensive, he adds. "All of the bells and whistles are there. It does almost everything you want it to. Its accruals are impecable, with unlimited backdating and history. It's when you get into specialized applications, such as property management tracking...that it falls short because it is a loan accounting system more than a tickler system. But any system can be made to do what you want it to do," Woodard says.

Newtrend - time test

Software: Infopoint Loans Management Systems: MISER2 Manufacturer: Newtrend, Orlando, Florida Contact: Greg Coine (407) 297-0870 Platform: Infopoint - mainframe, MISER2 - Unisys mainframe Cost: $73,000 - $383,000 Updates last year: Infopoint - one, MISER2 - three

Best features: Data manipulation streamlines through on-line, real-time; complete backdating and reversals; single-borrower exposure available on-line; commitment processing; monitors accounts for exceptions.

Central Bank, Jefferson City, Missouri, made the decision to go with Newtrend 15 years ago, says Barbara Rollins, Central Bank's data processing customer service representative.

"It's flexible enough that we've been able to use it for this long. We've grown with it. They're able to keep up with changes in the industry and they make an effort to keep up with [regulatory] compliance," says Rollins.

Rollins especially likes the flexibility the Infopoint system offers servicers with changing repayment patterns. "We have a lot of seasonal customers whose businesses have six great months and then no business, or [they] even shut down through the winter months. So we have to design repayment plans around their business peaks, and this system allows us to do that," Rollins says.

Central Bank uses Newtrend's Infopoint system to service a $145 million, 2,000-loan portfolio for itself and 10 other banks. Because it has a data processing staff, Central Bank uses different vendors for several banking applications, including Newtrend for commercial servicing and blends information from each system.

The bank also designed its own tickler reporting system rather than doing a lot of custom coding with Infopoint. Instead of altering the Newtrend system, Central Bank has outside systems read the Infopoint information.

Newtrend's old release, from which Rollins was about to upgrade, is not an easy system for inexperienced users to operate, she warns. "You have to know what you're doing," she says. But the newest release has some on-line changes designed to make the system easier to operate, Rollins adds.

McDonald - they supply the know-how

Software: Servicing/T.I.M.E. Manufacturer: McDonald Computer Corporation, Detroit Contact: Harry Stefaniak (800) 966-TIME Platform: Service bureau (PC connected by modem to mainframe), PC version available by end of 1992 Cost: 50 cents/month per loan Updates last year: 12

Best features: On-line, real-time systems; customized letter writer; hazard insurance tracking and automatic forced placement; on-line collection and foreclosure system; tax service interface.

T.I.M.E. user Carol Glowacki, manager of servicing for Proctor and Associates, Bloomfield Hills, Michigan, switched to McDonald's T.I.M.E. system about a year ago, after an affiliate could no longer handle her 250-loan, $750 million portfolio of life insurance company loans on its mainframe.

With only one part-time and two full-time associates and no data processing staff of her own, Glowacki wanted software anyone could use. She also worried about the possibility of breakdowns and big programming tasks.

T.I.M.E. eased those worries. The system uses PCs connected by modem to McDonald's mainframe. And because the two firms' offices are just minutes apart, help is always close by.

Glowacki says the T.I.M.E. system is easy to use. "You don't have to put in a lot of codes. In a lot of mortgage banking packages, we found imputing the information was like learning a second language," Glowacki says.

Many of the other servicing systems she compared to T.I.M.E. were more orientated to residential loans. "Everyone says their system works for commercial loans, but then you find out the fields aren't large enough or the reports don't print numbers over 100,000," Glowacki explains.

Other commercial software

Here are some other sources of commercial loan administration software: Software: The Commercial Loan System Manufacturer: Stockholder Systems, Inc., Norcross, Georgia Contact: Rick Parkins (404) 840-1270 Platform: IBM S/36, AS/400 Cost: $5,000 and up Updates last year: new product

Best features: Connects accounts receivable and payable to general ledger; comprehensive daily processing functions, such as early payoff calculations and rate adjustments; full menu of periodic reports, two-tiered processing for both month-end and calendar year-end periods; versatile database structuring.

Software: Excelis Mortgage Loan Servicing System Manufacturer: Lomas Information Systems, Dallas Dallas Contact: Dennis Davis (214) 879-5952 Platform: IBM mainframe 3090 or higher Cost: Unavailable Updates last year: new product

Best Features: Flexibility due to parameter options; on-line, real-time operation; interim batch updates throughout the course of the day to allow for more immediate updates of activities such as lock-box transmissions; an event scheduler allows virtually all the servicing to be automated; all hard-copy output is automated through an interfacing document generation system.

Software: The Loan System Manufacturer: M&I Data Services, Inc., Ft. Lauderdale Contact: Carole Blaney (800) 236-DATA Platform: IBM mainframe or service bureau Cost: Average configuration runs $400,000 to $500,000 Updates last year: major releases every 18 months

Best features: On-line, real-time system with a parameter-driven structure; flexible pricing and repayment options; sophisticated participation and investor processing and flexible reporting; extensive commitment tracking capabilities for both revolving and non-revolving loans.

Software: The Dollar System Manufacturer: Florida Informanagement Services, Inc., Orlando Contact: Anita K. Simpson (800) 243-7015 Platform: Unisys A Series Cost: Unavailable Updates last year: four

Best features: Straight monthly and daily interest methods; monthly, quarterly, semiannually, annual, weekly, biweekly and single payment frequencies; payment schedules; escrow processing; tracking of commitments, collateral and financial statements.

Dona DeZube, a freelance financial writer, lives in Columbia, Maryland.
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Author:DeZube, Dona
Publication:Mortgage Banking
Article Type:Evaluation
Date:Jan 1, 1992
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