In a bid to cut costs, the nation's largest thrift has launched a massive project to centralize the underwriting and processing of its home loans.

Irwindale, Calif.-based Home Savings of America will begin next month to replace loan processing centers in 46 loan offices with centers in City of Industry, Calif., and St. Louis. The change will be completed in a year.

"A couple of years ago, it became apparent that if we are going to be a significant player in the mortgage business we had better aggressively deal with the cost structure," explained Fredric J. Forster, president of Home Savings. The thrift is the lead subsidiary of H.F. Ahmanson & Co.

In addition to the processing consolidation, Home Savings is introducing technology into every part of the origination process - laptops for its loan officers, artificial intelligence to underwrite loans, imaging technology to reduce the use of paper, and workflow systems to manage work loads better for all employees.

Fully adopted, the changes are expected to save $3 million to $4 million a month, according to Mr. Forster. Home Savings estimates that it will recoup its $60 million investment in 18 to 24 months, Mr. Forster said.

The savings will come in many forms. Home Savings will need only 400 employees - half the current number - to underwrite and process its loans.

And the thrift will be able to open and close loan origination offices easily and cheaply as local demand for mortgages expands or contracts, Mr. Forster said.

Home Savings also views centralized underwriting as "crucial" to its effort to build mortgage banking. "When you have just two places making underwriting decisions, you are much more likely to get consistency of results," Mr. Forster said.

The changes, Mr. Forster acknowledged, are not without risk. The principal hazard, he said, lies in the transition, as loan originators adjust to communicating with faraway underwriters electronically instead of stepping into the back office to talk to colleagues personally.

Already, the changes have contributed to low loan volumes at the thrift, Mr. Forster said.

Home Savings' decision to centralize its loan processing led rival Great Western Bank, Chatsworth, Calif., to examine its own setup, according to Sam Lyons, senior vice president of mortgage banking.

But Great Western, which now operates 14 loan processing centers, will not centralize as much as Home Savings, Mr. Lyons said.

"Our feeling is, you need more than two (processing centers) to adequately serve communities nationwide," Mr. Lyons said. Great Western's arrangement allows it to accommodate regional differences better in underwriting and documentation, he said.

A Home Savings spokeswoman said the thrift is sensitive to the issue. It will place underwriters in some regional sales offices, she said, and video-conference underwriters and loan consultants to discuss specific loans.

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