GE Capital Mortgage Corp., Raleigh, N.C., has introduced an automated system that uses artificial intelligence to help mortgage underwriters evaluate loans.
The system, called Genius, is being tested by several mortgage lenders, including First Federal Savings Bank of Iowa, Davenport.
The system, developed by GE's Research and Development Laboratory, Schenectady, N.Y., will make recommendations based on such risk factors as credit history, collateral value, and market analysis to underwriters. The system assesses applications by assigning weighted scores to the risk factors.
"What Genius does is take a look at borrowers in light of their employment record or what their assets are and what type of [loan-to-value] ratios are we looking at here," said Judy Johnston, director of customer technology with GE Capital.
"On one side of the coin, it may look pretty dismal for a borrower," but, said Ms. Johnston, "there may enough compensating factors to say this is in fact a good loan."
"The second part of the process is 'who can I sell it to,'" she added, referring to compliance features for the Federal Home Loan Mortgage Corp., or Freddie Mac, and the Federal National Mortgage Association, or Fannie Mac.
She said the decision process, including entering the information into the system, takes less than 10 minutes. The compliance features will be tested by participating institutions later this month.
There is a widespread interest among lenders in developing artificial intelligence systems. Norwest Mortgage Inc., Des Moines, Iowa, is another institution that recently launched a pilot program of its new in-house expert system.
Lenders are particularly interested in how well these new systems will interface into existing systems and on how much more productive their underwriters can become.
P.J. Miller, vice president in charge of loan operations and underwriting with First Federal, was impressed that the system agreed with all loan decisions made in the ordinary way.
"At this point [Genius] is a little overcautious, but I would rather have it that way," Ms. Miller said. "At this point we are pleased with what its doing."
With nearly $332 million of assets as of Sept. 30, 1993, First Federal originated more than 3,500 loans last year.
The price of GE Capital's new system was not disclosed. Officials with the mortgage company said there was an up-front licensing fee and yearly maintenance charges, which include systems support and access to all future upgrades.