Home Loan Business Finally Warming to EDI, Alltel Says

The mortgage industry has lagged in adopting electronic data interchange, but Alltel Corp.'s view is: Better late than never.

Alltel, an Arkansas-based telecommunications company, says 40 new trading partners have signed up in recent months for Alltel Interchange, the EDI feature of its mortgage servicing network. The network now has 340 trading partners-200 lenders and 140 service providers.

The network is thus bringing the universal adoption of mortgage EDI closer-but it still has some distance to go.

EDI "is clearly something the industry is striving to do," said Bob Spector, vice president of Alltel Interchange. "Lenders are in fact encouraging all their trading partners to adopt EDI," he said.

"If you're not on the system, you're not doing business with certain banks," Mr. Spector added.

Electronic data interchange is the automated exchange of business information such as purchase orders or invoices in standard electronic formats.

Scores of proprietary business networks, called value-added networks, have blossomed in recent years and have been heavily used in industries such as auto manufacturing. Such computerized information exchanges have automated the process of ordering and supplying materials and merchandise among trading partners. Noteworthy business networks are run by GE Information Services, Sterling Commerce, and International Business Machines Corp.

Alltel's servicing network, which began in the 1980s, is run by its Alltel Information Services, which also sells outsourcing and data processing services to banks. Alltel Information Services contributed 30% of Alltel's revenue last year, but Mr. Spector declined to break out revenues of the network; he would only say it was profitable.

The network is used to service 17 million loans, or more than 45% of the mortgages processed in the United States. It is expected to grow 35% in volume this year, to 10 billion transactions annually.

Lenders and service providers use the network for credit report transmissions, loan appraisals, property inspections, and various exchanges of information between tax services.

Users include BankAmerica Corp., First Union Corp., Mellon Bank Corp., Norwest Corp., NationsBank Corp., and PNC Bank Corp., Mr. Spector said.

Alltel's network is heavily influenced by the mortgage service side of the business, but it is also attempting to break into the loan origination side with networked software, which includes modules for risk management and distributing information to the secondary market.

Mr. Spector said 5% of the network traffic is related to loan originations.

The company needs to develop new lines of business to make the network more attractive considering the emergence of the Internet, which could have a serious impact on the way the company delivers services.

Ina Beckhover, president of Real Estate Solutions Inc., Washington, predicts much more EDI will eventually flow over alternative communications channels such as intranets, extranets, and the Internet.

Data security is no longer a glaring concern, Ms. Beckhover said. Further, companies can build Web sites that have components of both public and private networks, which allow only certain trading partners past various firewalls.

Presently, users have access only to the value-added networks they subscribe to, Ms. Beckhover said. But use of the Internet should vastly improve access to a broad range of services.

Scott Cooley, president of Contour Software Inc., a vendor to the mortgage broker community, agreed the Internet would help promote the use of EDI.

The many kinds of transactions in the mortgage industry, which often required multiple software programs for communicating via direct-dial modem, had brought EDI in the industry to a screeching halt, Mr. Cooley said,

But with the Internet, mortgage participants can use a single pipeline for data transmissions and "can get rid of all their modems and direct-dial communications software loaded on the desktop."

"Our customers are screaming at us to get rid of direct-dial," Mr. Cooley said.

But Alltel has not turned its back on the World Wide Web. Mr. Spector said the company is developing a file transmission system for the Internet "for smaller transfers."

"Absolutely, I see the Internet becoming one of the predominant channels," he said. "A lot of people do not necessarily want to do dial up, but they all have Internet connectivity."

But for larger data transfers, which move large blocks of information across its network, "banks would want a heavier, more robust connection," he said.

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