Several major mortgage lenders were unprepared to take a year-2000 compliance test, Freddie Mac's recent dry run showed.

Seemingly minor clerical errors-such as incorrect e-mail addresses and fax numbers-made it impossible to test their computers' ability to communicate with those of other lenders, Freddie Mac, and outside vendors.

The dry run was in December in anticipation of the Mortgage Bankers Association's year-2000 readiness test, for which the registration deadline is Friday. At issue is computers' ability to recognize the year 2000. Participants included units of Countrywide Home Loans, Capstead Mortgage Co., Chase Manhattan Corp., Crestar Financial, and Fleet Financial Group.

Freddie Mac would not say which companies experienced problems.

The dry run showed that "you have to be sure to reset everything correctly. It is just a matter of sitting down and plodding through the check," said Jim Cotton, Freddie Mac's vice president of customer support. "You need to check the communications first, like correct e-mail addresses, and the applications second."

Date-sensitive lending transactions, including automated underwriting, commitment, delivery, funding, and investor and default reporting were covered in the practice tests.

"Some of the large players were not ready," Mr. Cotton said. "Being able to test externally is not something you would expect yet-not until the end of the first quarter of this year."

GartnerGroup, an information technology research firm, warns that financial services institutions are especially vulnerable to year-2000 issues but said these companies have made more progress on this front than others have.

"The insurance industry is most prepared on Y2K issues, followed almost in tandem by investment services and banks," said John Marks, a GartnerGroup senior research analyst. "They were forced to start early because of the policies and products that they offer."

Mr. Marks said Gartner is advocating that compliant companies apply their resources to other areas.

"We do not see a major recession or anything like that because of this issue," Mr. Marks said. "There will probably be minor problems," as have already been seen with credit cards. "It is like a millennium storm that we know is coming through, and all we can do is prepare for it."

Some lenders are using proxy tests, in which compliance is presumed based on a similar system's success.

"The best way would be to test yourself," Mr. Cotton said, "but it might mitigate risk and be less expensive to utilize the proxy option."

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