Mortgage lenders that bite the bullet on technology investment stand a much better chance of making it into the next century, a new study asserts.

The right mix of automated systems - from underwriting to post-closing - can shave millions of dollars from operating costs, improving competitiveness, according to the study by Arthur Andersen Consulting, Chicago.

For instance, a mortgage company with rudimentary automation and unproductive sales representatives could save $4.5 million annually by upgrading systems and hiring better-trained staff, the study says.

The report, released this week, butts heads with the traditional approach in which personal contact with customers is emphasized.

Arthur Andersen looked at the best practices among the top 100 mortgage lenders and found that companies making the most money have already installed cutting-edge systems and plan upgrades as they become available.

Technology can serve as "a sophisticated partner that can intelligently seek, obtain, evaluate, and provide key decision-making information and documentation," said Michael L. Wambay, an Arthur Andersen director and one of the survey's authors.

Arthur Andersen has an interest in promoting technology, because one of its specialties is showing banks how to increase their use of automation.

But a number of mortgage banks appear firmly in the firm's corner.

Fleet Mortgage spent more than $40 million over the past two years to create a cutting-edge origination and processing system. Once the system was in place, the Columbia, S.C., lender closed a number of field offices where loan officers worked.

Still other lenders say too much technology will depersonalize the business.

"It can be a very 'hand-holding' relationship," where the loan officer stewards the borrower through the entire process, said the executive vice president at a midsize lender in the northeast.

Executives at Banc One Mortgage said they sought middle ground by spending $5 million on a new system while retaining loan officers in the field.

While the Arthur Andersen survey supports technology, it does note that quality staffing is imperative and that automation comes at a cost.

"Industry leaders will continue to develop integrated solutions at costs consistent with their high expectation for potential gains," Mr. Wambay said.

Lenders lacking the capital for full-scale makeovers can still benefit by choosing specific areas to improve, the Arthur Andersen report adds.

Low-producing companies - defined as the bottom 25 respondents in terms of closed loans - could using top performers as a yardstick for improvement.

For instance, high-producing loan officers are 69% more effective, closing 7.1 loans a month versus 4.2 for low performers, the survey found.

If the lower-ranked firms can boost productivity, they stand to increase loan volume by $441 million annually, assuming an average loan size of $120,000, the report says.

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