The Federal Home Loan Mortgage Corp. has agreed to use a software program based on neural network technology to help evaluate the worth of loan portfolios.

The McLean, Va.-based secondary market agency, known as Freddie Mac, already uses the PC-compatible software, developed by HNC Software Inc. of San Diego, to value individual residential properties as part of its Loan Prospector automated underwriting system.

Freddie Mac will use the software, called Areas, to value hundreds of residential properties within a single loan portfolio.

The information, which is based on statistical samplings rather than on property appraisals, will be used to help the agency decide whether to invest in a particular portfolio.

This is the agency's first agreement to combine its proprietary Loan Prospector software with a third-party product to evaluate portfolios, a spokeswoman said.

Loan Prospector is used by mortgage originators to receive real-time underwriting evaluations.

A spokeswoman for HNC Software says the Areas program will eliminate costly and time-consuming portfolio property appraisals.

"We can value a single property in less than 15 seconds," she said. "The software eliminates the need for hiring outside appraisers and waiting, sometimes days, for their results."

Based on a neural network, which attempts to problem-solving patterns of the human brain, Areas uses statistical comparisons of adjacent properties to determine the value of a property in question.

The software accesses a data base of similar sales in the same neighborhood, comparing property characteristics, sale prices, and trends in property values in the county.

It then predicts a low and a high value for the property, showing the margin of error as a percentage.

HNC Software, which has developed similar neural network technology to detect credit card fraud, believes statistical samplings provide a more accurate measure of a portfolio's value.

"The results don't have the bias that a human appraiser would have," the spokeswoman said.

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