AS THE NATION'S largest issuer of mortgage-backed securities, Fannie Mae must get the right information into the right hands at the right time.
To this end, the Federal National Mortgage Association as the secondary-market association is formally known embarked in 1991 on a five-year technology investment project. When it is completed in approximately 18 months, Fannie Mae estimates, more than $100 million will have been spent on new technology.
The cornerstone of this technology investment is the personal computer. To ensure that employees can access the information they need, the Washington-based association has built a huge client- server architecture.
This year, Fannie Mae plans to make laptop computers available to its group of approved lenders across the country to save time and create efficiency in the loan origination process.
Senior vice president Michael Williams said Fannie found the use of client-server applications can make information available more quickly and in easy-to-read formats.
"There was a real inability for our customers [the lenders] to get at the data surrounding the operation," he said. Using client- server architecture, he added, makes the data available and easily accessible.
Fannie Mae was chartered by Congress in 1938 to ensure the health of the home mortgage industry. Today it is the largest issuer of debt in the United States aside from the Treasury.
Fannie Mae was converted to a shareholder-owned private corporation under legislation enacted on 1968. Its shares are currently traded on the New York Stock Exchange.
It has two major lines of business: portfolio investment and mortgage-backed securities.
The company operates by purchasing residential mortgages for its investment portfolio and earns a spread between the yield on the investment and the cost of debt funding.
Fannie Mae also receives pools of mortgage loans from lenders and exchanges them for mortgage-backed securities, which it guarantees. A fee paid to the company assures the payment of the principal and interest to those who invest in the securities.
Gareth Plank, a senior director at Mabon Securities Corp.'s San Francisco office, said Fannie Mae is one of the best-managed companies he has ever followed.
"The use of technology is a major contributor to its success," he said. "Fannie's investment in technology and systems has allowed it to be able to work through extremes without a problem."
To date, Fannie Mae's five-year technology investment project has resulted in the development of over 70 separate systems using personal computer technology. The system allows the organization to move information throughout its operations with ease.
"Currently, we are ahead of the five-year plan in terms of how we want to move Fannie Mae through technology," said Julie St. John, senior vice president. "We have found that by going with client- server architecture, we can deliver better functions with lesser costs than through a mainframe."
Fannie Mae wanted to ensure reliable everyday processing of the information, and "bulletproofing" the system insured accuracy.
"The first task was to make sure that our systems worked in a bulletproof fashion and could be relied upon day in and day out," said William Kelvie, executive vice president and chief information officer. "The next thing we needed to do was develop informational and analytical tools for our professionals while improving the links we have with our customers."
To meet those goals, Fannie Mae is using a Sybase relational data base that runs on Sun Microsystems Inc. hardware.
Previously, the organization used a system that operated solely on an International Business Machines Corp. mainframe, but found that it was not able to address the changing needs of its operation.
Client-server architecture has allowed Fannie Mae to deliver products and services more quickly than with a mainframe.
"The client-server technology has let us take advantage of new features that would not have been possible through centralized mainframe technology," said vice president Andrew Weiss. "Moving to client-servers has been an underlying trend that has allowed us to avail ourselves of many advantages."
Initially, the technology strategy was focused on the corporation's in-house operation. But another element has recently been added: cutting the cost of originating a loan by $1,000, to $1,500.
Fannie Mae is working to reduce the costs so that both originators and borrowers will benefit. It is also working to improve efficiency.
Its approved lenders will be able to purchase a laptop origination system that will permit data entry in the field so the application process can begin immediately.
"Currently, an application may be rekeyed up to 12 times," Mr. Kelvie said. "Having it entered at the beginning of the process will reduce the costs of the operation."
Mr. Kelvie said the use of laptops will cut down on the amount of errors in the application process, because the loan officers are more apt to "get it right the first time."
Fannie Mae will also be introducing an expert underwriting system in the fall. This system will reduce the amount of time it takes to approve a loan.
Application information can be entered into a computer system with artificial intelligence, which will score the information - thus speeding the approval process.
"Lenders will be able to manage their workflow better and work on the loans that really need their experience instead of working on the good clean loans that are out there," said Mr. Weiss.
Fannie Mae is also trying to eliminate the amount of paper used in the application process.
Mr. Kelvie said that it takes too long to close loans, and Fannie Mae is working to shorten the timetable.
"Today it takes approximately 60 days to close a loan," he said. "We would like to drastically reduce the time it takes and we think of client-server technology as a critical first step." At a Glance Federal national Mortgage Association Headquarters: Washington, D.C. Employees: 3.300 Dollar volume of purchased loans: 1993: $300 billion 1992: $257 billion 1991: $139 billion Number of loans securitized: 1993: 3.3 million 1992: 2.9 million 1991: 1.7 million
