The Mortgage Bankers Association announced an initiative to help mortgage companies test the compatability of each others' systems for dealing with the year-2000 problem.

The program will "make it easier for a broader number of people in the industry to test their systems," said Joseph McCartin, chief information officer at GE Capital Mortgage Services Inc. and chairman of the MBA's year-2000 committee.

Lenders will enter detailed data on fictional loans into their systems and then set the computers to 2000 to see how they react.

Many mortgage companies have already tested their year-2000 systems internally. Now MBA will provide a "centralized coordination structure" to make sure the systems interact seamlessly, Mr. McCartin said.

Mortgage banking is one of many computerized industries concerned that when 2000 rolls around its computers will wind back to 1900, throwing operations into disarray.

The MBA, federal regulators, and government-sponsored agencies want to make sure the fail-safe systems work together smoothly, because the mortgage business is so interdependent.

A mortgage payment can pass through several hands, including those of the mortgage banking company servicing the loan, the government-sponsored agency that securitized it, and holders of mortgage-backed securities.

The mortgage business "relies on fluid, flexible automatic systems that talk to each other," said Cam Melchiorre, vice president for servicer relations at Freddie Mac.

When testing the industry's readiness for 2000, "everything has to be in lockstep. It's important to map the flow of funds from the homeowner to the investor on Wall Street."

William Ehrhorn, a senior vice president at Fannie Mae, said the issue "is not just a coding problem-it's a fundamental business problem for the industry.

"If one fails, all of us fail," he said.

The mortgage bankers are under regulatory pressure to address the problem. The Federal Financial Institutions Examination Council requires financial institutions to make sure this year that their systems are ready and to test them in 1999.

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