A high-stakes race is getting under way to modernize the mortgage industry.
The latest entry is Computer Power Inc., Jacksonville, Fla. It has unveiled plans to create a vast communications network that would link lenders, investors, and service providers.
"Something new, something big is about to happen," said the Company, a unit of Alltel Corp.'s Systematics Information Services, in a video announcement at a recent gathering of mortgage bankers. "Everything is about to change."
CPI, however, is not the only one trying to put the mortgage industry on the electronic superhighways of tomorrow.
Fannie Driving Hard
Most notably, the huge Federal National Mortgage Association is pushing hard to develop an industrywide technology network, complete with automated loan underwriting.
Many in the mortgage industry welcomed the competition that CPI would appear to provide to Fannie Mae's initiatives.
"The more, the merrier," said Terrance G. Hodel, chief executive of North American Mortgage Co. "Let's get four or five networks."
Fannie Mae, CPI, and others are trying to find more efficient ways to transmit the vast amounts of information that brokers, lenders, appraisers, underwriters, insurers, investors, and others must exchange as they, approve, sell, and then service loans.
Currently, these players rely largely on fax, telephone, and limited computer networks to communicate with each other.
Cutting Costs, Saving Time
Improved technology, advocates say, would dramatically reduce the time it takes to originate a mortgage - and cut the expenses by more than half But the proposals have raised some thorny issues.
For example, some mortgage executives worry that Fannie Mae will use technology to enhance its already formidable influence on the mortgage market.
CPI, by contrast, provides a "neutral palette to create a network," said Gregory T. Barmore, chief executive of GE Mortgage Insurance Co.
"If you're going to have someone be the communications interchange, it works better if the system is not managed by a competitor," he said.
Working as a Translator
CPI is the leading supplier of software and processing services for mortgage servicers.
Its planned communications network, due to be in place by July, would link everyone who subscribes via satellite and phone lines to the company's "interchange system."
That system would work as a translator allowing otherwise incompatible hardware and software to "talk" with each other.
100 Companies Committed
"We manage the traffic," said Robert E. Lee, vice president of planning and marketing interchange at CPI. "We make sure their hardware talks to us. Then they have access to everyone who's signed on to the interchange."
One key would be to recruit enough lenders and ancillary service providers to join the network.
About 100 service providers, such as appraisers, credit bureaus, insurers, and others, have committed themselves to joining CPI, Mr. Lee said.
The company also is negotiating to provide an automated underwriting service on its network. It is talking to three companies.
CPI has not yet started marketing itself to lenders, but is relying on signing up many of the 270 companies that it now helps in loan servicing.
An Effective Competitor?
Would CPI have clout to compete effectively with Fannie Mae's initiatives? Industry opinion is divided.
|If there's any private company that has a head start, it's CPI," said Warren Lasko, executive vice president of the Mortgage Bankers Association. "They have a basic infrastructure in place," he said, referring to the satellite system the company uses to communicate with 200 of its servicing clients.
But Angelo Mozilo, vice chairman of the huge Countrywide Credit Industries, disagreed.
He said CPI simply doesn't have the " knowledge, commitment, or expertise" to convince enough companies to sign up to the network and to fundamentally change the way they do business.
CPI and Fannie are diplomatic as they talk of each other's efforts. Given their relationship, that is probably fitting. CPI provides servicing support for 42% of all loans held or guaranteed by Fannie Mae.
"The more competition, the better," said Franklin D. Raines, vice chairman at Fannie Mae. "I'd be more concerned if their vision was different from ours. I'd worry if I were wrong."