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The best of both worlds.

IN JULY 1987, PHH US Mortgage Corporation, (PHH USMC) Cherry Hill, New Jersey, was a small regional mortgage company whose strategy was to significantly increase its business each year. Company officials are proud to report that the strategy is working: a dramatic transformation has taken place between then and now. PHH USMC currently maintains a $7 billion servicing portfolio; and is the fifth-largest seller of mortgages to Fannie Mae. Its origination volume tripled from 1990 to 1991. But things didn't always run smoothly. In fact, there were problems in 1987 that needed immediate solutions in order for the company to meet its goal of increased business. Taking a closer look at the company's history will bring to light several computer hardware problems and what PHH USMC did to solve them and step up its productivity.


In 1987, PHH USMC's information services department hardware support consisted of four Corvus networks, an IBM System 34 and a lease-line Telex C274 controller hookup to Computer Power, Inc. (CPI) in Jacksonville, Florida. The networks used a modified software package from Dallas-based Lomas Information Systems, Inc. for loan applications, processings and closings. The IBM System 34 was used to track loan registrations with a few on-line screens and reports. Servicing was handled by CPI. Unfortunately, there was no integrated processing between any of these systems - all of the loan data was separately re-entered into the System 34 as well as into the CPI system for servicing. The loan data was keyed-in again when it was delivered to Freddie Mac and Fannie Mae through the Midanet and Mornet systems. The pipeline hedging process was run on stand-alone PCs using Lotus spread sheets.

Thus, it is easy to see that one of the biggest problems PHH USMC encountered with its system at that time was that all of the reporting was run separately off of each network and system - consolidated reporting was a figment of the imagination. In short, the information services data processing configuration did not meet the needs of the aggressive business plan for the company. Furthermore, there were internal problems with the Corvus networks that caused them to crash several times a day for seemingly "unknown" reasons.

Taking control

The information services department at PHH USMC knew that it needed to take control of the situation. It had been receiving complaints from many users of the system. One action the company took was to set up a "help desk" that provided users a telephone number to call and submit problems they were having to the information services department. The help desk tracked the different types of problems that were occurring. Calls were logged in and categorized to determine which areas needed the most immediate attention, such as PC problems, network problems, difficulties with CPI, etc.

Soon, information services discovered that on-line reports and file maintenance brought the networks to their knees and accounted for most of the system crashes. To counteract this, these activities were moved to off hours. Network system reliability immediately improved.

Wiring improvements, better use of amplifiers and proper grounding, as well as standardizing the brand of equipment, also improved the company's ability to integrate its hardware. Compaq was chosen as the vendor with Deskpros as the work stations and dual 386s as the file servers. A PC maintenance contract with a local vendor also helped stabilize system repairs and dramatically reduced maintenance costs.

Moving to mainframes

All of the network reporting, (such as packages sent, packages received, closings by day and by week, etc.) was moved to a mainframe environment by selecting critical data elements and creating a relational database. This database was set up on parent company PHH Corporation's IBM 4341 system, which was later upgraded. By making the move to a mainframe, PHH USMC was able to work on a consolidated database and provide its office personnel with a user-friendly tool to access data. To make the transition, data was extracted from the Corvus networks and transmitted at night.

Another advantage with the move up to the mainframe was the ability to use what are known as "4GL" programming languages. These languages are more user-friendly than COBOL, and they allow employees to create their own reports in the course of a day whenever information is needed, rather than waiting until standard, end-of-the-day reports are run by the information services department. Ad hoc reporting, therefore, became a reality with the 4GL languages, as well as improved screen design and production reporting, thus dramatically reducing development time and costs. Use of the new languages also eliminated many report requests submitted to the information services department, because employees, with the new languages, could now produce the IBM reports themselves.

The next step was to remove the IBM System 34. The secondary marketing system was rewritten in 4GL on parent PHH Corporation's mainframe. The new screens and reports were designed and the critical data was sent to the parent company mainframe.

One month later, the company moved to a new facility. Business started to take off. The current Corvus network environment, under the Lomas application software package, had a limit to the number of PC work stations that could be added to the network. As business dramatically increased, the limitations of Corvus became obvious.

PC enhancements

The PHH USMC's five-year strategic plan had always assumed a mainframe would be required at a certain volume level. The company's research showed that for the most part, other mortgage companies had not been extremely successful in implementing the mortgage process in a mainframe environment, because 1) the systems were either too expensive and not cost-effective enough, or 2) because the companies did not effectively manage their pipeline or 3) because even with the mainframes installed, these companies' users still did not have information "at their fingertips." Response time and turnaround time in general was slow, no matter how large the mainframe. Even so, there was pressure from the PHH USMC's parent company office to either bring in a mainframe or obtain a software package that could run on the parent company mainframe.

An internal cost analysis was done. Advantages and disadvantages were drawn up for the PC versus moving to a mainframe environment. The study concluded that the PC environment provided better response time, document turnaround time, system availability, flexibility and portability in terms of remote and home offices and it did all this at a much lower cost. Therefore, it was decided to stay with the PC-network environment for loan applications, processing and closings.

Because the PC environment was chosen for these production functions, obvious network upgrades needed to take place. The information services department began working the Tominy, Inc., a Cincinnati-based software company whose product allows users to move back and forth from a PC to a mainframe environment. This is known as a "multivendor environment." Using this product allowed PHH USMC to upgrade its outdated Corvus network.

Tominy's Novell system was installed as the network operating system and it resulted in more flexibility and reliability, not to mention an increase in number of users per network. Compared to the original system that only supported 15 or so users, the New Novell system now comfortably supports approximately 80 users on one network, and allows users to "bridge" to other networks as well. Response time has significantly increased - from 13 seconds to less than one second. The Novell system can also eventually be used for word processing and Lotus applications, as well as for "gateway" access to the mainframes.

A pilot Novell network was installed and the system began to sell itself as speed and productivity increased. Eventually all networks were converted to the Novell environment.

The information services department currently supports 411 people on seven Novell networks in addition to the 93 people connected via the IBM 3274 link to the parent company mainframe and the 76 people connected via the Telex C274 link to the CPI servicing bureau. Recently, the lease line for the Telex was converted to satellite technology with CPI.

No multi-million dollar big box

PHH USMC's business is projected to continue its growth pattern in the coming years, requiring additional facilities, an increase in the number of people, people, and of course, an increase in the number of loans to be processed by the systems. PHH USMC is prepared to handle the volume, but if you were to walk in to our computer room, you would be surprised at what you would see - or did not see.

The computer room is only occupied by file, servers, controllers and printers. Each of the seven networks has two Compaq 386 file servers. Each mainframe link has three controllers and two high-speed printers. A Nevada board connects all the twisted pair wiring to the computer room.

This approach helps keep PHH USMC's loan production costs among the lowest in the industry. In 1990, the average mortgage banking origination cost per loan was $2,492 per loan, or 259 basis points. In 1991, PHH USMC's origination cost per loan was $1,934, or 162 basis points.

The entire information services department consists of only nine people. The information center concept is stressed in trying to get the user community "computerized." Most of the executives have PCs on their desks and actually use them. Some staff members have access via dial-up modems to the parent company mainframe from their homes. Ad hoc reporting is consistently run all day long by the user community - including the executive group.

The work load of the information services department consists of time devoted to 1) major projects such as transmitting data to Ferdie Mac, Fannie Mae and CPI, 2) information services requests that consist of items that users cannot do for themselves, and 3) help desk calls that consist of either an emergency situation or assisting users who are trying to do something themselves, but are having trouble.

Periodic reviews of this information services approach are done to assure that the company can meet the targets set in its business plan. These reviews cover manpower, technologies, facilities, software and hardware.

PHH US Mortgage Corporation uses a "best of both worlds" approach to information services in the mortgage banking industry with the computer room of the future.
COPYRIGHT 1992 Mortgage Bankers Association of America
No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 1992 Gale, Cengage Learning. All rights reserved.

Article Details
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Title Annotation:choice between personal computers and mainframe
Author:Noga, Randall J.
Publication:Mortgage Banking
Article Type:Cover Story
Date:Mar 1, 1992
Previous Article:Computerized collections.
Next Article:A crack in the foundation.

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