Chief financial officers of financial institutions have learned investing in mortgage banking activities can tap profitable fee- driven income for their institutions, but what they are less familiar with is the financial commitment it takes to make these operations work, said one accounting expert. The banking industry CFO in the 90s has to look primarily for profits in fee-based income, we know that much, Robert Swegle, Ernst & Youngs national director for mortgage banking activities, told Mortgage Marketplace. What many do not realize is that they [CFOs] need to be the decision-makers about what kinds of capital investments are required to make these deals work. Swegle points to what he calls the recent feeding frenzy among commercial banks buying mortgage banks as an example of the importance of the CFO in making the right financial decisions for these new operations. There has been a flurry of activity in this area and some significant acquisitions have taken place, he said. But these deals are not just a fluke of the marketplace. Swegle said CFOs have have been making some savvy business decisions in deciding to gobble up some of the nations biggest mortgage houses, but have to make sure they have a solid plan and plenty of money. When you look at it there are some compelling reasons to be in the business, even with the risks, he said. But the CFO has to make the decision to commit the money to the investment, and that means high-dollar investments in technology, according to Swegle. The CFO has to be committed to deciding what kinds of capital investments are required before they jump in, and stick with these commitments later. Developments in technology will drive profits for mortgage banking in the coming years, experts believe. And commercial banks can effectively move into this market because they have some inherent advantages over many of their competitors, Swegle said. One of the principal advantages is the substantial capital that banks have available to invest in technology. As the mortgage banking industry becomes increasingly competitive, it will be critical to effectively deploy technology to gain cost and service advantages. The mortgage banking industry will benefit tremendously from trends in technology, Swegle predicts, and CFOs who can streamline the loan origination process by taking advantage of technological developments will be the most successful. Already, laptop computers are becoming common tools of the trade for producers and the sales staff of mortgage companies. These laptops are replacing paper and calculators as the medium for providing interest rate quotes, performing pre-qualification calculations and completing applications, he said. But investment in even more advanced applications will take the bank even farther ahead of the pack. Some of the advances in technology include information linkages to credit bureaus, to other banks for balance confirmations, employers for employment verifications, real estate brokers and appraisers. Some companies report they are moving rapidly to the use of artificial intelligence to perform underwriting functions, Swegle said. These developments give the banker the advantages of speed and uniform underwriting standards.

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