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Portraits of technology.

Portraits of TECHNOLOGY

MANY MORTGAGE bankers consider advanced technology a competitive necessity in today's operating environment. To probe just how mortgage companies are integrating investments in technology into their operations, we called on the top technology managers at four firms.

The firms were selected because all have in some way or another taken a leading role in mortgage banking automation. These profiles are intended to portray the philosophy behind the successful application of technology that prevailed inside each of these companies, as well as how technology figures in their future strategic plans.

We discovered a variety of reasons and strategies motivating the particular application of automation in each firm, but there were also many common views shared by these four executives. Each of our four interview subjects saw the people employed at the firm as the company's key asset. All described their automation as being a means to attaining their company's overall goals.

In the course of doing these profiles, it quickly became apparent that there are some distinct differences in the working philosophies of these companies when it comes to technology. As a result, what we have produced are the profiles of some innovators who have tested the waters for others, alongside those who have chosen to add technology in a more measured, conservative way.

Each profile tries to portray the involvement of top management in the decision to acquire and implement systems and other major technology. This important step - the technology decision - has become more than just a financial question for the managers profiled. It comes down to a matter of making the technological choices that will enable the lender to continue to survive in today's harshly competitive market. The technology manager is the one faced with making the prudent recommendations to ensure the company's survival.

ARCS Mortgage, Inc. Calabasas, California

Development path - the toughest road leads to the riches

ARCS Mortgage has never been one to sit on the sidelines. Rather than taking a passive stance, it has chosen to brave the waters; often before others have tested them. The result has not been a hodgepodge of failed efforts or incompatible systems. Rather, under the direction of George Lowery, vice president of management information systems, systems operate as a cohesive whole. When acquiring hardware, ARCS' policy was to do its own coding and place the equipment into an established workflow. While this approach may have been more expensive upfront, it has paid off for ARCS and serves as a standard for those who are looking for a development path to follow.

A total of 20 team members are led by Lowery, who joined the ARCS organization four years ago. Prior to joining ARCS, Lowery was the technical manager for Fannie Mae Software Systems in Atlanta. Lowery came on board when the software and hardware were bought by Howard Levine, ARCS' founder and current president.

The philosophy of being able to control its own destiny prompted ARCS to establish an in-house management information systems (MIS) department that reports directly to the president. While MIS is a separate department, MIS projects are arranged according to priority and funded by the MIS Steering Committee, comprised of senior management staff from each of the major divisions of the company. Lowery believes the committee gives him an administrative advantage. "I'm not in the hot seat for favoring one department over the other," he says. "It gets me out of the politics that exist within most organizations." At monthly Steering Committee meetings, top executives of the organization are apprised of the projects currently being addressed by the MIS department and discuss new tasks that were received since the last meeting. The new projects are then integrated and prioritized along with the existing tasks. Requests for new equipment are also presented by the requesting department head for approval and funding by the committee.

Being a technological leader, ARCS faced many situations where programmed applications had not yet been developed for the company's hardware. ARCS found that bridges needed to be built to make its system effective. For those situations where vendor software cannot yet handle specific user needs, a large, in-house programming team fills the void. So far, the group has developed systems for file tracking, payoff tracking and secondary marketing and has greatly enhanced inquiry and reporting capabilities. In addition, in-house programming has provided the means for processing servicing acquisitions through the use of tape.

The concept of automated movement of information between systems is referred to as "cradle-to-grave loan tracking." One of Lowery's accomplishments at ARCS has been to build integrated bridges that would link origination software in the retail branch system to the loan originations database on the company's mid-range IBM computers. The data then is routed to the loan servicing database and, from there, to corporate accounting. "These interfaces facilitate the movement of information between the applications, reduce errors caused during data entry and enhance the timeliness of information," says Lowery.

Branch performance can now be measured at several stages during the process. Further, secondary marketing and other departments can use the information, as authorized, to better perform their tasks.

The latest technological innovations at ARCS include an optical disk-based imaging and information management system. Imaging consists of an process that takes an "electronic photograph" of a document, much like a facsimile machine, and stores it on the computer. Right now, ARCS' imaging system is being used in the most paper-intensive department, insurance services, but Lowery says it will eventually be implemented in all of ARCS' operations. The imaging system in use at ARCS is not just an electronic filing cabinet; rather, it is a complex tool developed with a cooperative processing theme incorporating image processing, workflow control and mortgage banking application.

"We've cut down on paperwork," Lowery says, "and speeded up our processing. We've also dramatically improved customer satisfaction, increased morale within the insurance services department and reduced the amount of paper in the department by 80 percent."

While ARCS certainly didn't invent the imaging technology, Lowery figured out a way to refine the hardware to meet the particular needs of the mortgage industry. Under Lowery's direction, specific workflows were developed to aid users. For example, if a hazard insurance bill is received, the computer's workflow is programmed to move the bill through to all of the necessary departments by way of an integrated network. Therefore, ARCS has made special efforts to keep all of its systems compatible.

These forward-thinking systems ensure upward compatibility because they maintain the core function and purpose imbued from the start of ARCS' MIS department: to store its data on mid-range computers in an organized fashion. As to the future, Lowery envisions doing loan servicing acquisitions directly from computer to computer using electronic data interchange, as well as transferring document images of loan files on optical storage cartridges from one servicer to another.

Sears Mortgage Corporation Riverwoods, Illinois

Managing information as an asset

Sears Mortgage Corporation's greatest asset, according to the company, is its people. The greatest technological achievement Sears Mortgage feels it has attained is the transition from a purely manual processing and reporting management culture to one that relies heavily on technology to run the operation. Management now believes that the successful application of technology has significantly enhanced the mortgage company's ability to proactively manage and control day-to-day business on a national scale. Operational efficiencies and cost savings are evident at all levels of the company as a result of this new culture.

Denis Gingue, senior vice president of information technology, is one of the human assets that helped foster the cultural change at Sears Mortgage. Having moved through several divisions of Sears, and now having spent several years at the mortgage corporation, he brings to his position more than just knowledge about mortgage operations. He understands the operations of the entire Sears enterprise as well as its many separate business units - an essential element for this manager of 60-plus employees who work in Sears' Information Technology Development and Support department. More than managing people, loans or equipment, Gingue manages information, and his challenge is to use it to best benefit the organization as a whole.

Gingue uses the word "leverage" when he speaks about both the information and equipment that he manages. The context: using either the information or equipment to work for the maximum benefit of Sears Mortgage and other Sears' divisions. Gingue says that adding new technology is definitely in Sears' plans, but the company is also going to use existing equipment to its maximum potential. Since Sears considers automation a strategic asset, appropriate and affordable applications are the type of leverage referred to by Sears' managers.

In terms of leveraging information, Gingue and Sears Mortgage can teach quite a lesson. With Sears' corporate office providing both data communications and data-center resources, the parent's entire customer base and related information become a valuable asset for the mortgage banking division. According to Gingue, "through our network we are connected to all kinds of different data. This assists us in our marketing efforts, helping us to better service our customer base. Sears Mortgage is dedicated to meeting the needs of its customers. Whether it is offering one-stop financial service shopping, or enhanced product offerings, Sears Mortgage utilizes information to satisfy the customer."

Decision making for information technology is handled at the top. The information technology department reports to the chief financial officer and the corporate executive committee. This group decides whether to acquire technology and recommends the priority of the projects. Senior executives within Sears Mortgage and, in particular, company President Walter C. Klein, Jr., are keenly aware of the value of information technology. According to Gingue, Klein views proper management of information assets as an extremely important factor in running a financial service business in the 1990s and beyond.

Countrywide Funding Corporation Pasadena, California

Tying it all together - the prize of systems integration

Most everyone in the mortgage business recognizes Countrywide as a leader in advanced technology application. The image conjured up of Countrywide may be that of an individual machine, a process or a program, but what goes on behind the scenes is a total integration of purpose, function and result. The master planner of the company's development, Jeffery Butler, chief information officer and vice president, interprets his role in terms of the company's common goal: to provide the ultimate in service, the system must assist all the units to communicate with one another and to share information.

Butler also believes that the company's greatest asset is its people. Among Countrywide's staff are 80 goal-oriented and innovative MIS staffers, who assist Butler in carrying out corporate goals. Within MIS, employees are proficient in both technical and client-support areas. The "client" referred to here is the rest of the organization. At Countrywide, the orientation toward customer service starts from within.

Countrywide also has impressive systems that enhance the management and staff's ability to transform data into relevant information. Butler explains the importance here. "Data is just data until you unleash its powers on dedicated, well-trained management. Once this transformation takes place, information can change our perspective and our perceptions about our jobs, our company and the whole industry."

Highlighting just one of Countrywide's many technological accomplishments, we asked Jeffery Butler to tell us about the executive information system (EIS) used at Countrywide. His story clearly shows the attainable value of tying all the systems together.

"The EIS is one of the greatest achievements that MIS has ever delivered to senior and middle management," says Butler. "EIS systems, although somewhat commonplace in many large national and multinational firms, are essentially unheard of in the mortgage banking industry. Our idea was to put essential information at the finger tips of management whose responsibility it was to make daily, and sometimes hourly, decisions as to the pricing and marketing of our products (i.e., loans). Because we have over 100 branches nationwide, it was mandatory that we know every hour how many applications, cancellations and fundings they were doing," explains Butler.

Butler explains how the system facilitates decision making at the top corporate levels. "In conjunction with the new residential loan production system (The Edge), we are able to sweep each branch's activity and present it to those who make the decisions in graphic as well as textual formats. There are no people involved in this process. It is all done automatically. Management simply goes to a PC and pulls up the statistics from the sweep that occurred maybe just minutes ago. Everyone can see the numbers simultaneously: no waiting, no misinformation. The EIS system is so popular, and necessary, that even the chairman of the board dials in from his remote location to check the numbers every hour," Butler says.

"Besides the production information, we are currently adding run-off data, portfolio information, delinquency analysis and other operational statistics, which would enable management to make better and faster decisions that have a profound effect on the bottom line of Countrywide," adds Butler.

The effort to integrate information into a decision-making tool for managers is the prize of complete systems integration. To present the information in a useful format is also a challenge. According to Butler, "Meetings need to take place to determine more than just what information is to be presented. Meetings are held at Countrywide to determine how the information will be presented." Thus, by understanding the needs of the end users, the right amount of sophistication can be integrated into the charts and graphs that will be made available.

Fireman's Fund Mortgage Corporation Farmington Hills, Michigan

Using technology as a competitive tool

Sam Isaac, vice president of applied technology, has been with Fireman's Fund Mortgage Corporation for 15 years. Isaac thrived in the entrepreneurial environment at Fireman's Fund; in his last two positions he created departments from scratch. Isaac's current department, applied technology, was also defined under his direction. Isaac's visionary approach has led him to tackle challenges using his technical and business skills to improve existing capacity and use new equipment in the best way, as opposed to just maintaining the status quo with an existing system.

Isaac says he has drawn strongly on his background as an MIS programmer, a mathematician and a graduate of MBA's School of Mortgage Banking. When Isaac was a manager in the loan administration area, he always tried innovative techniques to make the best use of available resources. With a combination of systems analysis, mortgage knowledge and business insight, Isaac was responsible for two years' improvement in delinquency rates and reducing foreclosure losses. But he didn't stop at that; Isaac pursued foreclosure alternatives and started a new asset/risk management department to facilitate the effort.

At Fireman's, technology is used to make improvements in the way business is conducted. Fireman's Fund's management believes this will give them an edge over their competitors. Isaac believes that the company will succeed by employing technology to empower its personnel to meet several important objectives: capturing market share, lowering costs and meeting customer service expectations at all times. Furthermore, he agrees with other mortgage executives that people are Fireman's Fund's biggest asset.

The decision to invest in automated systems is grounded in the bottom-line impact of new applications. How the company puts the technology to work for it goes a step further - and must be compatible with all the goals of the organization. Currently Fireman's Fund uses voice-response systems in the customer service department; intelligent dialers for collections; bar coding for retention and retrieval of origination documents; and electronic mail throughout the company.

Fireman's Fund believes its systems are a cut above the industry. With this reflected in the quality of its service and the efficiency of its employees, the company's orientation is well worth examining for other mortgage lenders who wish to automate.

When asked whether having technology in place was itself the corporate goal, or a means to get to its goals, Isaac is quite clear. Applied technology is a strategic function of Fireman's Fund. It is separate from the MIS and data processing areas, although it works closely with those areas. The department performs research-oriented functions examining technology and suggests how, at a corporate level, Fireman's Fund can use technology to improve the way the company does business. Corporate acceptance and guidance also follow clear lines of authority in the firm. Applied technology management reports directly to the management committee, which is composed of the president and chief executive officer, the chairman of the board and the executive vice president. Each of these individuals is actively involved in all research and in the selection of the specific technology issues to study. Fireman's Fund's applied technology department, management committee and the MIS department together chart the course for technology within the company.

In an age where the products and players are quite similar, Fireman's Fund distinguishes itself through its processes. Fireman's Fund is one of the largest mortgage bankers in the nation with a servicing portfolio of more than $35 billion, with 50 branch locations and 580,000 borrowers whose loans it services. Fireman's Fund has not attained this level of success by being a follower. The company has not invested in technology for technology's sake, but rather to further its strategic goals.

This long-term, strategic motivation, therefore, seems to be the powerful common thread linking each of these four companies' technological philosophies. With an eye to the future, many more mortgage companies will be forging their strategic plans and investing in technology as a key competitive tool.
COPYRIGHT 1991 Mortgage Bankers Association of America
No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 1991 Gale, Cengage Learning. All rights reserved.

Article Details
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Title Annotation:high-tech mortgage systems
Author:Hershkowitz, Brian
Publication:Mortgage Banking
Article Type:Cover Story
Date:Mar 1, 1991
Previous Article:The great industry data bank.
Next Article:Eyeing technology.

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