Industry consolidation is a double-edged sword for mortgage servicing software behemoths such as Alltel in Jacksonville, Fla., the industry's leader.
As mortgage banking giants merge, they look to service companies like Alltel - with its huge computer power and innovative programs - to handle immense portfolios. The 34-year-old company services 16 million loans whose value amounts to more than $1 trillion.
In California, Washington Mutual is buying American Savings and California Federal will become part of First Nationwide. After converting the acquired companies to its system, Alltel will service every major California mortgage banker except Countrywide.
This type of consolidation is not always the ticket to strong revenue growth.
"Our clients tend to be the buyers so we benefit in the number of loans in our system," said Jim Milligan, president of the mortgage division of Alltel Information Services, an Alltel Corp. unit.
Alltel's pricing is on a sliding scale based on volume. The more loans a client has with Alltel, the more the charge per loan drops. "If two Alltel clients are combined, we will get significantly less than the sum of the two parts," Mr. Milligan said.
To offset a slowdown in revenues, Alltel is offering several value- added programs that complement its mainstay servicing product.
Mr. Milligan insisted that consolidation did not force the company to expand beyond servicing. "As a practical matter, it does compensate for revenue loss," he said, "but it was not a cause and effect."
Rather, Mr. Milligan said, his purpose was to improve Alltel's revenues by meeting the needs of clients who might have gone elsewhere.
Alltel can provide to mortgage lenders a fully integrated and automated process that enables them to handle everything from loan origination to payoff. This includes employment and income verification, credit reports, prequalification, routing the application and other documents to the underwriter, preparation of closing papers, and other services.
"We also prepare information for investors in the secondary market," said John Wolf, executive vice president of Front End Systems/Interchange.
An Alltel service called CPI Passport offers information about the industry, enabling clients to track trends, regulatory requirements, mergers, and other developments. "Clients representing eight million loans are on Passport now," Mr. Milligan said.
The company's bread-and-butter remains its loan servicing operation, called Mortgage Servicing Package (MSP), the product that gives the Alltel its high standing in its industry. "We can provide benefits on a cost- benefit basis that makes sense," Mr. Milligan said, though he would not divulge what he charges to service loans.
The company services 10 million loans on Alltel's IBM mainframe computer system in Jacksonville; other clients, with six million mortgages, run Alltel software packages in-house.
The software permits mortgage bankers to perform eight major functions, setting up loans and maintaining them, cashiering, escrow administration, investor accounting, customer service, default management, payoffs, and management of adjustable-rate loans.
"It allows clients to have all aspects of mortgage banking services," said Gary Muzzy, executive vice president for marketing and product development for the services operation.
The data required on each loan are quite detailed, allowing the lender to know how much money should be in escrow accounts, when insurance premiums are due, when real estate taxes are due, and when an ARM adjustment is scheduled.
"The functions are all integrated from the time of origination to liquidation on the same system," said K.C. Cook, vice president of sales support for MSP. "Each function speaks to the other."
This is important, she said, so that employees do not work at cross purposes. For example, if a collector is about to work on a delinquent account but payment arrives from the homeowner in the meantime, the cashier will post the payment. "Collection will know that," Mr. Cook said.
Another type of misstep the system detects is when a home has been involved in bankruptcy proceedings. If the owner wanted to payoff the mortgage, for example, collections should alert the default department in case there are still outstanding legal fees, Cook said. The lender should then demand those fees before allowing the payoff to go through.
Alltel also seeks to help clients improve productivity by developing ever faster programs. Homeowners can call its Televoice service for answers to routine questions.
By dialing in an identification number, customers can inquire about payment due dates, escrow status, and eight other common concerns, said Glen Dowdy, senior vice president for applications development.
Two years ago, Alltel retooled its customer service department. "The clients felt they were being lost in the numbers as the company had gotten big," said Howard Griffin, executive vice president for client support.
Like 70% of the company's 1,100 employees, 65 members of Mr. Griffin's group have mortgage banking backgrounds. Mr. Griffin's people handle many calls from clients frustrated by a problem with a borrower's account.
"The important thing is that the question is being answered by a mortgage banker," Mr. Griffin said.
Keeping clients happy will remain important as consolidation continues, reducing the prospective customer base.
But companies will continue to outsource servicing of portfolios, executive vice president Peter Kaplan said. "Financial institutions simply have better ways to deploy their capital," he said.
