A popular software package for mortgage lending has been upgraded to run on International Business Machines Corp.'s advanced operating system for personal computers.

Bankers' interest in the IBM PC operating system, called OS/2, was revived this spring, when the computer company released its latest version of the software. Operating systems control a computer's basic functions.

The new version of OS/2 performs processing tasks more quickly than competing operating systems, said E. Lester Dominick, president of MortgageFlex Systems Inc., Jacksonville, Fla., a vendor of mortgage lending software.

MortgageFlex has three software modules -- mortgage application processing, interest rate risk management, and point of sale loan origination using laptop PCs -- that have been adapted for use with OS/2, Mr. Dominick said.

The MortgageFlex software, which already runs on Unix and DOS operating systems, has been installed at about 70 institutions. The company has about 22%

of the market of major mortgage originators, according to Mr. Dominick.

GE Mortgage Capital, a subsidiary of General Electric based in Raleigh, N.C., is using the MortgageFlex loan origination software to allow real estate agents to file applications remotely. Huntington Bancshares, which has said it is committed to using OS/2 throughout its organization, is reportedly also interested in the software.

Battle Taking Shape

Most of the existing mortgage origination systems use Microsoft Corp.'s DOS operating system or, when PC networks are used, Novell Corp.'s NetWare. Mr. Dominick said the advantage of running on OS/2 is that those banks that are committed to the operating system can use this software and get much faster response times than if they were using DOS.

As banks move software away from the mainframe and onto networks of personal computers, a battle is shaping up among IBM's OS/2, Microsoft Corp.'s Windows NT software, and networking software from vendors like Novell.

Today, about 90% of the 805,000 desktop computers in banks run on operating systems from Redmond, Wash.-based 5% that currently run OS/2, according to the 1993 American Banker/Ernst & Young survey of technology in banking.

But a larger number, 12%, of banks use OS/2 on the server, the computers that acts as hubs on networks to store files or communications software. Another 59% run Microsoft's DOS, and 4% run Microsoft's Windows software, according to the survey.

"Banks are saying they like OS/2 on the server," said Greg Schmergel, a consultant with Tower Group, Boston.

"There's been an interesting reversal," said Mr. Dominick. "Three or four years ago, all the big banks wanted OS/2 applications. Then, about 18 months ago, all we heard is Windows. But since OS/2 version 2.1 came out, there's been a resurgence of interest in OS/2."

But Mr. Dominick also said that once all the pieces are available, his company will convert the software to run on Windows NT as well.

The software has modules to handle the origination and sale of residential mortgage loans, called the Residential, Lending System; a rate-risk management system, called Advanced Secondary Marketing System; and a system for loan origination at the point of sale that can be used by real estate agents to prequalify and take the loan application for potential home buyers.

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