Metropolitan Federal Bank of Edina, Minn., has begun to use an automated home-loan underwriting system, according to Bell Trebilcock, vice president.

The system, which uses software from Cybertek-Cogensys Judgment Systems software, will use a "case based" form of artificial intelligence.

Case-based systems employ human mentors to train the system to make decisions in an attempt to replicate the thought processes of an experienced underwriter.

Covers More Loan Decisions

This type of system will allow mortgage originators to use automation to make decisions on a higher percentage of loans than systems which use "if ... then" logic, according to Joseph Filoseta, president of Cybertek-Cogensys.

Metropolitan wants to use the system to underwrite and approve a substantial portion of its business. "Out goal is to automatically underwrite 65 to 70% of our total loan volume with the system," said Mr. Trebilcock. The bank will use the system for mortgages with loan-to-value's of less than 70%.

Mentor System

Software systems like Cybertek-Cogensys' are often called expert systems because they use a professional experienced in the field as a mentor.

The program is fed examples by the mentor that illustrate his or her decision-making process.

The mentor lists questions considered significant in evaluating a mortgage application. The mentor then enters a long series of examples of responses to the questions and makes a decision for each.

These decisions for individual questions aggregate into situations that would mirror the situation of an actual mortgage applicant.

Prints an Explanation

Once a base of situations is entered. the program is able to make decisions on situations not encountered in its judgment base and evaluate them based on its "confidence" that the mentor would agree.

At the end of every mortgage application decision the system prints an explanation of how and why it arrived at its conclusion.

Users continue to update information into the judgment base so that the decisions reached can reflect changing market conditions. From an originator's standpoint, the main advantage of automation is an increase in efficiency.

10 Times or More Faster

Whereas an underwriter may take up to 45 minutes to evaluate a loan the computer system will do the same work in three seconds to three minutes, according to Mr. Filoseta. The program may also be used as a tool by which beginning underwriters may become familiar with the way expert ones make decisions, Mr. Filoseta added.

Cybertek-Cogensys' artificial intelligence system is used by a number of other mortgage providers, including B.F. Saul Co., Chevy Chase, Md., Home Savings of America, Irwindale, Calif., and Great Western Bank, of Beverly Hills, Calif.

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