Crestar Mortgage Corp. has become the first lender to use Freddie Mac technology to make Department of Veterans Affairs loans.

The shift to automated underwriting for VA loans has enabled the Richmond, Va., lender to tell borrowers within hours if they qualify for a mortgage, said Mary Matthews, vice president of risk management.

Such technology is becoming more important because speedy service has become a chief way for lenders to distinguish themselves.

While Freddie Mac and Fannie Mae have offered these systems for conventional loans for over a year, the Crestar program is the first to apply the process to VA loans.

Crestar's program dispenses with time-consuming paperwork and pares reviews by allowing Crestar underwriters and Freddie Mac loan authorizers to communicate directly by personal computer, Ms. Matthews said. The first loans under the program were made two weeks ago.

Cutting approval time to as little as two hours has been a hit with customers, who previously faced waits of a week or longer and found the process "anxiety-producing," she added.

Three other lenders - H.F. Ahmanson & Co.'s Home Savings of America, Norwest Mortgage, and PHH Mortgage Services - plan this month to join the Freddie Mac pilot, which will run until next spring.

Crestar's marketplace made it a natural for the test. The company has offices across Virginia, Maryland, and Washington, D.C. - home to many active-duty and retired military personnel who can qualify for VA loans.

Crestar has already logged five loans under the program, and all were processed without major glitches, Ms. Matthews said.

The company sees the automated system as a key way of boosting VA volume, Ms. Matthews said. The loans accounted for $108 million of the $3 billion Crestar lent on mortgages during the first 10 months of this year.

Lenders can also save money by using the system, said Peter Maselli, vice president for automated underwriting at Freddie Mac - formally the Federal Home Loan Mortgage Corp. Even after paying the agency a processing fee, lenders can expect to shave between $200 and $500 off loan origination costs that generally top $2,000.

The pilot program's participants are receiving further benefits by being in early, said Jane Lejeune, an underwriter in Norwest Mortgage's government loan group.

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