Countrywide Credit Is Beating Back A Rising Tide of Mortgage Paperwork

Four years and $3 million ago, Countrywide Credit Industries Inc. turned to technology to help "slay the paper dragon," as one executive put it.

Today, through its use of advanced technology including image processing, it has done just that.

"When we first implemented image processing four years ago, we had great expectations about what the technology could do for us and the extent to which it could change the way we do business," said Jeffrey Butler, managing director and chief information officer at Countrywide.

"The imaging technology has exceeded our expectations. What we have gone through in the past four years gives us a huge advantage over our competitors."

Countrywide, based in Pasadena, Calif., is the nation's largest independent mortgage banker, collecting monthly payments for more than $25 billion in mortgages and servicing more than 370,000 accounts.

In a business that historically has involved a great deal of paper shuffling, as mortgages are issued, packaged, and sold to investors, Countrywide has become a low-cost operator able to handle rapid growth.

Using sophisticated optical scanning equipment from Management Information Systems, Countrywide employees can answer customer inquiries about their loans by calling up instantaneously on their computer screens an image of the homeowner's file.

In addition, Countrywide uses its computers to store and to speed up the processing of the more than 80 different documents a branch office might need per customer. Thus, image processing reaps big savings for Countrywide in inventory, storage space, and clerical time.

Because of its imaging system, Countrywide uses one employee to service each 840 loans. That compares to the industry average of 650 loans per employee. The technology also enables Countrywide to shave nearly half a point from loan fees and cut approval time to 30 days.

But in building one of the financial industry earliest and most elaborate imaging systems, Countrywide did encounter a few problems.

"Our major hurdle was the general acceptance," said Mr. Butler. "There is a definite fear that advanced technology displaces jobs. That's more perception than reality, however. You don't lose people because of technology; you simply shift personnel into other areas."

Countrywide also had to work with a handful of vendors and consultants before it could set up a complete system to handle its accounts.

"While external sources of expertise such as knowledgeable vendors, network integrators, and business consultants are becoming readily available, they were not when we began," Mr. Butler said.

"Issues that we have never envisioned required time and effort to overcome. Had we not started the program four years ago, we would never have experienced these issues and benefitted from our successes and mistakes."

The future holds more technological innovations for Countrywide.

Currently, the company is working with IBM to develop computer software to make mortgage lending more uniform and, perhaps, less risky.

The expert system is slated to be tested this year.

"It has surpassed our imaginations," Mr. Butler said. "We started out four years ago to slay the paper dragon - reduce the amount of paper shuffling. Now there are a host of applications we're looking forward to.

Case Studies

Higher productivity, reduced costs, increased customer service: these are just three of the many benefits reported by banks that have adopted imaging technology in their operations.

The following seven banks share their stories:

* Countrywide Credit Industries, a Pasadena, Calif.-based mortgage processing company uses an image-based system to increase the average number of loans processed per employee. It also shaved nearly at a point from its loan fees, and cut its average loan approval time.

* Fleet Financial Group, which successfully introduced image statements for its upscale customers and is now looking for ways to expand this service to its two million checking account customers.

* Huntington Bancshares, which has already offset the high cost of installing its imaging system with gains in productivity and employee morale. The bank is now looking to expand its imaging program beyond the current use in check processing.

* Mortgage processor Lomas Mortgage USA, which has been able to reduce its paper use and improve its bottom line using imaging technology. The company wishes it had more money to spend on imaging.

* Michigan National, where providing imaging-based statements may cost more in postage and require more employees, but may be worth the extra expense because of improved customer service.

* Signet Bank's image-based check processing system required the bank to almost completely revamp its existing system. While the costs were high, the bank's savings are even higher.

* Wachovia Corp., which has turned its Atlanta office into a testing ground for a new check proofing system that is not yet on the market

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