Chase Manhattan Mortgage Corp. has licensed a vendor's integrated loan origination system instead of upgrading in-house.

Chase, the third-largest mortgage lender, is the biggest to have taken such a step.

The vendor is Dallas-based Cybertek, whose basic system Fleet Mortgage Group began using in August. Chase signed up in the fourth quarter, but the deal was announced only Tuesday. Chase said it hopes to have a limited pilot of the new system running late this year.

"This was a classic make-or-buy decision," said Steve Rotella, chief operating officer of Chase Mortgage.

Now is "a good time to have one production system," he said, but building such a system from scratch "tends to be expensive and risky."

Few vendors offer systems that can support Chase's volume, Mr. Rotella said. Cybertek "offered a good base for us to build from."

Chase plans to expand the new system over about 18 months and eventually phase out existing systems.

But Mr. Rotella said that timetable depends "on what happens in the marketplace between now and then."

Chuck Shields, a Cybertek executive vice president, said the implementation schedule is "pretty aggressive."

The system will reach from the point of sale and to just before servicing, he said. A single package will serve retail, wholesale, correspondent, and secondary mortgages.

Mr. Shields, who is also the senior vice president of electronic commerce and banking for Cybertek's parent, Policy Management Systems Corp., declined to say what Chase was paying. Pricing depends on how many functions and users a lender wants, he said.

The new system is expected to let the mortgage unit offer more products and to "enable cross-selling capabilities and enhance revenues," he said.

"This base system fits well with the electronic commerce and automated underwriting technology initiatives we have under way," Mr. Rotella said.

Chase originated $34.9 billion of home loans in the first half of 1998. Norwest Mortgage ranked first, with $46.9 billion, and Countrywide Home Loans Inc. second, with $39.6 billion.

Both of the larger originators are operating under fully proprietary in- house origination systems.

Fleet Mortgage Group, which ranked seventh, with $15.2 billion in originations in last year's first half, uses Cybertek origination systems in conjunction with its own.

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