After years of sitting on the sidelines, mortgage bankers are stepping up their use of technology to speed originations and improve customer service, a new study has found.

Nearly one-quarter of lenders are now investing in systems to enhance operations, enter new markets, and generally reengineer their business, said the report by SSP/RES Research.

The Chevy Chase, Md., financial services firm found that 22.8% of lenders are making technology investments this year, double the 11.2% showing of five years ago.

The way in which lenders are spending is also changing. In the past, mortgage bankers invested on an "as-needed basis," said Jeff Lebowitz, a principal at SSP/RES Research. "They weren't implementing technology to change the way they do business."

But now "lenders' attitudes have changed," he said. "The business has not been profitable in a predictable way, so they are looking for ways of increasing productivity and services."

Analysts at SSP/RES Research came to that conclusion after interviewing executives at 620 mortgage banks, mortgage companies, commercial banks, and thrifts.

On the higher end, lenders are starting to invest in technology like data warehousing systems, which display customers' entire relationship with a lender and give indications of what their future product needs may be.

But the vast majority of lenders - smaller operations that lend less than $1 billion a year - are adopting more basic systems that let them speed loan applications and improve relationships with customers.

Fully 83% of lenders now use automated underwriting systems, a figure that has grown steadily since 1988, when just 50% used this approach.

Mortgage bankers said the times are indeed changing. "There is a trend industrywide to reduce the amount of time it takes to get a loan to the settlement table," said John L. Sly, president of Lincoln Mortgage, Commonwealth, Pa.

"It's exactly where we should be heading," he said.

By leveraging technology, the average lender can drive origination costs to $1,100, from $2,800, said William E. Kelvie, executive vice president and chief information officer of Fannie Mae, the Federal National Mortgage Association. "All the technology required to be the mortgage bank of the future is available now."

Cost savings are found by moves such as centralizing processing and streamlining documentation and appraisal systems, Mr. Kelvie said.

Fannie Mae and its rival Freddie Mac, the Federal Home Loan Mortgage Corp., have a vested interest in seeing lenders embrace technology, since the two secondary-market agencies supply some of the most widely used automation systems. Mr. Kelvie said that, whether lenders team up with one of the government-sponsored enterprises or an outside company, "picking a good partner is imperative."

Smaller companies are especially vulnerable to competitive pressures and can get a leg up by choosing the right teammate, Mr. Kelvie said. They "can be more nimble and move more quickly to take advantage of the technology."

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