New Fleet Team Reshaping Systems

Fleet Mortgage Group, which in the last year has assembled a new management team, is hoping technological improvements can help reverse the unit's declining profitability.

In the first nine months of last year, Fleet Mortgage earned $33 million, 40% less than in the first nine months of 1996.

Since last summer, Fleet has hired a new loan production chief, a head of servicing, a chief financial officer, and a chairman and chief executive officer. All the positions were filled from outside.

But the most crucial management change may be the appointment of David M. Sheppard as chief information officer.

Recognizing that profits would not improve unless the unit's systems were revamped, Fleet Financial Group, the mortgage unit's Boston-based parent, tapped Mr. Sheppard to oversee technological initiatives at Fleet Mortgage Group.

Mr. Sheppard is one of Fleet Financial's own technology experts. The bank has entrusted Mr. Sheppard with revamping the mortgage company's technology because he has been with Fleet for nearly a dozen years and has had his share of challenging tasks. Mr. Sheppard has headed Fleet Services Corp., Fleet's data processing arm.

In that role, Mr. Sheppard oversaw the technological consolidation of Fleet's last two big acquisitions: Shawmut National Corp. and National Westminster Bancorp.

So Mr. Sheppard already has familiarity with the mortgage business from overseeing the conversion of Natwest and Shawmut's technology to Fleet's.

Since assuming his role at Fleet Mortgage, he has taken a hard look at its existing systems, especially on the origination side of the business.

One of Mr. Sheppard's first tasks at Fleet Mortgage was to review its in-house origination system, Compass, and decide whether it was a success. Fleet developed the much ballyhooed system in conjunction with Andersen Consulting in 1994.

Compass was created to handle all the aspects of the origination process, from prequalification to just before closing the loan. But despite this venture, Fleet was still viewed by many in the industry as a technology laggard.

Mr. Sheppard said Fleet was satisfied with portions of the system but that Compass alone was not sufficient as its origination technology.

"Compass has a significant amount of functionality in the software but it is also very slow," Mr. Sheppard said.

Fleet took a big step toward streamlining its origination operations in January, when it signed an agreement to use software from Loansoft.

Mr. Sheppard said Compass was still being used for portions of the loan origination process but that for the initial steps in the process, such as prequalification and underwriting, Loansoft's Works will be deployed to loan officers.

The product has prequalification, application, credit bureau, and automated underwriting functions. Loan officers will be able to qualify a borrower and submit a loan application in less than 20 minutes by using Works. Fleet is expected to have 300 loan officers using the software on laptop computers by the end of this month.

Thomas F. Theurkauf, an analyst with Keefe, Bruyette & Woods Inc., said Fleet's recent focus on origination technology was a wise move as the company's servicing technology had been more effective.

"They have been streamlining and making things more efficient over last year or so. The company recognized that they had a problem," Mr. Theurkauf said.

But if Fleet is to improve profits, making all of its operations more efficient will be crucial.

"The key for us going forward is to continually reduce costs. Technology is at the forefront for that," said A. William Schenck 3d, Fleet Mortgage's chairman and chief executive officer.

On the servicing side, Fleet has been a longtime user of Fiserv's Data Link software so servicing technology has not been as problematic as the production side.

But as Fleet's portfolio continues to grow-it currently has nearly 1.5 million loans totaling about $122 billion-Mr. Sheppard realizes that servicing costs need to be driven down even more if Fleet is to remain an efficient servicer.

Mr. Sheppard said the goal was to cut the cost of servicing to less than $50 a loan. He would not say what Fleet's current cost of servicing is but said it would take a great effort to reach this target.

"We are going to have to make significant progress past what is considered best practices today," Mr. Sheppard said.

Mr. Theurkauf said he was unsure whether there are greater economies of scale for servicers once they reach the $100 billion mark, but Mr. Sheppard disagrees.

Fleet is working with Fiserv to reach the $50-a-loan goal. Currently, Fleet cannot service the entire portfolio in one site because of technological constraints, so the portfolio is split into two segments.

Mr. Sheppard said Fiserv was constantly working to make Data Link more efficient and the hope was that the system would soon be able to handle up to two or three million loans. If that happens, Mr. Sheppard said Fleet would seriously consider servicing all of its loans in one site.

"A man with one clock always knows what time it is. A man with two is never sure," Mr. Sheppard said.

But Mr. Sheppard's charge is not just to lower costs. The broader aim is to use technology to build the customer base of Fleet Mortgage and Fleet Financial Group.

Fleet Mortgage has several telemarketing centers but activity will now be coordinated out of Fleet Financial's main center in Lincoln, R.I.

Mr. Schenck said call centers could help Fleet fulfill the elusive goal of leveraging the mortgage business by cross-selling other financial products.

Employees at the call center have a broad spectrum of data available to help them determine what other Fleet products a borrower might be interested in.

In addition, Mr. Sheppard said scripts for various scenarios have been created to train the call center's employees to field various mortgage- related questions.

This is especially important now since the industry is experiencing its most significant refinancing activity since 1993.

"The processing capabilities can make our telemarketing staff look like loan experts overnight," Mr. Sheppard said.

Fleet also plans to use the Internet as a means to increase production. But Fleet is crafting its Internet strategy slowly.

The company is not conducting transactions over the Internet yet. There is a section of Fleet Financial's web site dedicated to providing information about Fleet Mortgage.

Mr. Sheppard said Fleet was considering a function that would allow consumers to submit their own qualification information for a mortgage.

"There is a lot more we can do on customer service than we have chosen to do just yet," Mr. Sheppard said.

Also, Fleet has not been hawking its products on any multilender web sites, unlike some of its competitors. Countrywide Credit Industries, Chase Manhattan Mortgage and HomeSide are all featured on Intuit's QuickenMortgage web site.

But that may soon change. Fleet Financial Group is one of the members of the consortium that owns Managing Your Money, a financial services software company that competes with Quicken and Microsoft's Money. A web site is being developed.

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