IBM, Countrywide to Offer Expert System for Mortgages

International Business Machines Corp. is joining with one of the nation's largest independent mortgage companies to develop a system for underwriting home loans.

IBM's partner is Countrywide Credit Industries, the parent company of Countrywide Funding Corp., the 14th-largest firm in the mortgage servicing business.

The software incorporates expert systems, a form of artificial intelligence, and is designed to speed the handling of mortgage applications.

Expert systems "learn" to evaluate information by drawing from the knowledge of human experts in making decisions or recommendations.

Enhancing Productivity

Countrywide, which is seeking efficiencies to accommodate its rapid growth, believes applying expert systems to mortgage underwriting will increase productivity by 60%.

The company plans to begin using the system in January and have it in use at its 120 branches by midyear. Countrywide and IBM plan to market the system to other mortgage banking companies, commercial banks, and thrifts starting late next year.

The mortgage company, which earned $22.3 million in fiscal 1991, had a servicing portfolio of $17 billion at mid-1991, a 13.5% increase from the previous year, according to an American Banker survey. Countrywide plans to increase its portfolio to $80 billion by 1996.

More Capacity Possible

Processing applications electronically using expert systems will allow Countrywide to handle more volume without an increase in operators.

An expert system will be incorporated into Countrywide's personal-computer-based automated loan origination system. Called Edge, the system handles loan application processing -- collecting credit information, loan rates, discount points, and other information that is either keyed in or downloaded from Countrywide's mainframes.

Instead of routing an application to an underwriter, the application will go to the expert system, which will either approve the application or flag problem items, based on criteria programmed into the system.

The criteria follow guidelines on such factors as an applicant's income, cash reserves, and ability to handle debt.

Processing in 10 Seconds

IBM and Countrywide are using an expert system from Inference Corp., a provider of artificial intelligence software. Approved applications can be processed in as little as 10 seconds. Manually, the procedures sometimes take 40 minutes.

Applications that are flagged are routed to an underwriter with suggested approaches to solving the problems.

Jeffery F. Butler, managing director and chief information officer at Countrywide, said the company will market the system directly to other institutions, while IBM will refer customers to Countrywide. He would not say how much the system will cost, but expected it to be priced below other expert systems, which cost $200,000 to $400,000.

Subscribe Now

Access to authoritative analysis and perspective and our data-driven report series.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.