As technology transforms mortgage processing, many participants in the business are getting worried.

Their fear: that a new generation of techno-savvy borrowers will soon begin favoring electronic channels for origination, putting technological laggards at a competitive disadvantage.

The Mortgage Banking Association's annual technology conference, held last week in Chicago, attempted to equip lenders with the information they need to address such issues.

"The intent is to make sure the lending industry has a very visible role to play," said Daniel McLaughlin, a director of technology initiatives for the Washington-based trade association.

One conference session presented two schools of thought on the effect of technology on the future of the mortgage business.

Brenda Wilson, senior vice president at Crestar Mortgage Corp., Richmond, Va., said that one of the most important effects of technological innovations is that "the role of the mortgage company and the mortgage processor is rapidly diminishing in the mortgage origination process. Dealing directly with the mortgage company will be an option," but not absolutely necessary.

Michael Hillman, an assistant vice president at Flagstar Bank, Bloomfield Hills, Mich., countered Ms. Wilson's comments, saying personal interaction will remain an important part of the mortgage process, and that electronic origination services "will not become an alternative to the personal relationship."

"No matter how powerful mortgage technology and automation become, no matter how user-friendly, customers will always need and will always seek out expert counsel," he said.

Ms. Wilson pointed to other areas of consumer finance for examples of how technology quickly can replace services formerly provided by people. She noted the automated teller machine and electronic tax-filing software.

Mr. Hillman acknowledged the rapid acceptance of these technologies, but said people may put mortgages in a different category emotionally than other types of transactions. Thus, origination technology may require more of a human touch than other services.

Continuing to point out the need for a human presence in the mortgage process, he noted that despite the growing popularity of automated underwriting systems, half the loans processed by such systems require "human intervention," even when all pertinent information is included in an application.

Returning the debate to originations, he asked, "How can we expect" a computerized loan origination system "to make the necessary judgment absent the originator?"

Both arguments seemed to be persuasive: In a show of hands at the end of the session, the audience was close to evenly split in support for each speaker's point of view.


In other news at the conference, Mr. McLaughlin, who has been with the MBA for nearly three years, announced he is leaving the association to be an operations officer for the newly formed Mortgagelectronic Registration System, or Mers.

Rebecca Froass, associate director of the MBA, will assume Mr. McLaughlin's duties until a replacement is found.

Also, Mers announced that James Dowell, formerly with PNC Mortgage Co., has been named Mers' chief technology officer.

Mers, slated to begin operation in April 1997, is to be an industry- owned utility analogous to Wall Street's Depository Trust Co. The electronic registry will be a central repository through which participants in the mortgage process can get information electronically on sales of loan servicing rights.

Paul Mullings, formerly of First Interstate Bancorp and Mers' chief executive officer, said, "Dan brings unique skills to us because he was a part of the development of Mers."

"My job is to ensure that we nail down the core business requirements we need to deliver," Mr. McLaughlin said.


The Federal Housing Authority mandated that loan servicers with portfolios of more than $20,000 use the X.12 data format. The format, set by the American National Standards Institute, is becoming the standard for exchanging mortgage loan data.

The mandate, which becomes effective in September, is another example of the industry moving to common communications standards, said Mr. McLaughlin.

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