A COMPUTER SYSTEM is only as good as its programmer.
FBS Mortgage Corp. is banking on its top underwriter's programming skills.
The mortgage arm of Minneapolis-based First Bank System recently began using an artificial-intelligence system to streamline its application and approval process.
The system has been programmed by the bank's top underwriter - Debra Ringler - to think as she thinks during the application process, to make decisions more quickly and efficiently.
The system, which uses software from Cybertek-Cogensys, is judgement based. That means the system receives input from " a mentor" to illustrate his or her thought process during the application procedure.
"Our top underwriter has been working with the system for a year and a half teaching it how to make decisions and to make it think like she thinks," said Becky Walker, executive vice president at FBS.
Installing the artificial intelligence system was the final step in FBS Mortgage's effort to reengineer its mortgage origination process, which has been underway since 1991.
"We needed to find ways to streamline the process and make it more efficient. We wanted to find a way to get the decision to the customer faster," said Ms. Walker.
"Reengineering meant looking at the whole process from the time the application is taken to when it is approved."
Artificial intelligence allows the bank to emulate Ms. Ringler's decision-making process.
The data from the loan application is fed directly into the system and compared to similar loans Ms. Ringler has underwritten. Once the closest match is found the system approves the loan based on the match. If no matching loan is found the system refers the application to an underwriter for review.
"The system is not able to reject a loan," said Bob Stokke, a business analyst at FBS.
"It either accepts the loan or refers it to an underwriter for analysis."
Mr. Stokke said that often a loan," said Bob Stokke, a business analyst at FBS.
"It either accepts the laon or referse it to an underwriter for analysis."
Mr. Stokke said that often a loan referred by the sytstem needs to have some of the variables changed before it can be approved - switching from a variable rate to a fixed rate, for example,
According to Ms. Walker, the system currently is being used to gather loan data and sende it directly loan data and sende it directly to an underwriter review.
"We are now able to look at all the data before it is verified and weed out files that are not going to be acceptable," she said.
"It allows us to spend less time on loans that will not work and have those customers look at productse that may work better."
According to Mr. Stokke, the system is able to approve a loan within ten seconds. wherease the process takes an underwriter more than an hour.
"Approval is now closer to the front end of the application process," he said.
The faster approval times give the company a competitive adge in the marketplace.
"borrowers are not going to wait 30 to 60 days for approval," said Ms. Walker. "We think that by using the system we will be able to get them approval at application."
Because the system easily approves the best applicants without human intervention, FBS employees and underwriters can spend more time making decisions on the "maybe" applications.
"The system identifies which items will ultimately be funded and gets the other items out of the pipeline quicker," said Joseph Filoseta, president of Dallas-based Cybertek.
"Artificial intelligence is at the forefront of the competitive advantage in encapsulating and leveraging human intellectual capital."
Independent consultants agree.
"Using artificial intelligence makes a lot of sense," said Robert E. Moll, a director at Arthur D. Little in Cambridge, Mass. "It is not terribly complex to build an expert system."
Mr. Moll believes that 75% of all residential mortgages could be underwritten using artificial intelligence.
"The real interesting thing will be when the real estate community is able to shop around an application," said Mr. Moll.
"Once an application has already passed [an artificial intelligence] screen, the realtor will be ablke to send the information electronically to financial institutions to find the best deal and find out who wants to write it," he added.
FBS Mortgage's system, which became active the first week in October, is being used by a group of 20 underwriters.
"Over the next two months we hopd that the underwriters become comfortable with the way the system makes a detailed decision and become used to using it," said Mr. Stokke.
The bank plans on having all of its underwriters using the system by the end of the year.
According for Ms. Walker, the bank eventually extend the system even further, providing all of its originators with laptop computers that can access to system.
"Eventually the system will enable an originator who is sitting with an applicant to approve the loan, right then and there," she said.
The program will also alert the underwriters to areas of an application that do not need to be reviewed because they meet the lending criteria.
"In some cases the system will be used to ilustrate areas that need to be looked at more closely because they appear questionable." said Mr. Stokke.
The system is able to handle all types of conventional loans but is unable to handle Federal Housing Administration and Veterans Administration loans.
Government loans have different qualifying ratios and the system has not yet been modified to handle those parameters.
Mr. Stokke said that government loans make up 20% to 30% of the bank's loan volume. Applicants for those FHA and VA loans will continue go through a manual review process.
The bank's short-term goals are simple: have the underwriters accept the new system and gain efficiency in underwriting analysis.
According to Mr. Stokke, the ultimate goal is to process more loans with the same amount of staff in less time. The bank plans to have to entire mortgage staff using the system by the end of 1994.
According to Ms. Walker, using artificial intelligence is one of many steps the bank is taking in its ongoing process of reengineering its operation.
"By rethinking the process and using technology, we will be able to increase volume and efficiency," Ms. Walker said.
