Electronic Data Systems Corp., Plano, Tex., has signed a deal to build and manage an electronic registry for Mortgage Electronic Registration System Inc.
Under terms of the deal, EDS will foot the developmental bills of the multimillion-dollar system - a national clearing house for the electronic transfer of ownership and servicing rights for mortgages.
Factoring in development costs, EDS officials said, the six-year deal should be worth between $60 million and $100 million. The value of the contract depends on the volume of transactions that eventually run through the registry.
EDS was among three companies that answered an October solicitation for bids from Mortgage Electronic Registration System. Officials at the Washington-based firm declined to name the other bidders.
A prototype system is expected to be available in October.
"Mers will literally transform the mortgage industry," said Larry Walker, head of EDS' real estate and mortgage industry unit.
"It's the most significant industry-backed initiative since the formation of the government-sponsored enterprises," the Federal National Mortgage Association and the Federal Home Loan Mortgage Corp.
EDS is taking some risk in striking the deal, because transaction volume, and thus EDS' fee, is likely to be small in the early stages of the system's operation.
But EDS officials are betting that a paperless system for mortgage servicing eventually will generate enough transactions to offset the development costs. EDS did not say how much development of the system would cost.
Registry executives see their see system as an industry utility, analogous to Wall Street's Depository Trust Co. The company is owned by the Mortgage Bankers Association of America, Fannie Mae, Freddie Mac, and several mortgage companies, including American Home Funding Inc., Knutson Mortgage Corp., and Norwest Mortgage Inc.
Officials EDS and the registry said the aim of the new system is to reduce the need for mortgage paperwork after initial public land records are filed.
It will let mortgage companies to register sales, pledges of securities interests, and mortgage servicing rights electronically from a central location.
Officials from both companies said they expect use of the system to grow quickly, once those using the system get used to the idea of conducting parts of their business electronically.
Leilani Allen, a mortgage technology consultant with Tenex Consulting in Boston, said EDS won the contract based on its technical and administrative experience, and its proven ability to handle large developmental projects in a timely manner.
Ms. Allen and Tenex are responsible for creating the system's specifications.
Paul E. Mullings, the registration firm's chief executive, said his company chose Electronic Data Systems because it wanted a "technology provider that shares our vision. In EDS we found a company that had not only technological expertise, but extensive mortgage industry knowledge."
Mr. Mullings said his firm will handle marketing for the new system.