with most of the top 100 originators currently using computer systems to receive and process loans. About 84% of origination business is automated at present, according to Jeff Lebowitz of SSP Associates in Chevy Chase, Md. Only 10% of the top 100 mortgage originators do not have some form of automated system, he said. "There is a tremendous pressure financially on the industry to automate," said Stephen McCabe, senior vice president with PFA Financial Centers in Charlotte, N.C., although many smaller lenders are still doing traditional originations. PFA has set up a chain of retail stores in North Carolina malls where customers can select financial products from a computer screen, and have their loan application processed on the spot. "Your four-week loan application now takes four minutes," Mr. McCabe said. But the battle is not over once a company attaches a computer system to its origination procedures. Software systems have a high turnover rate - about once every three years, according to Mr. Lebowitz. And that rate went up in 1994, particularly among larger firms, he said. "The market is a replacement market," he said. "As the industry has gained more experience (using computers), it has become more demanding about having control over modifications to the screen." The larger lenders prefer to develop an in-house system rather than purchasing one from a vendor. Fleet Mortgage Group is the latest company to join the ranks of automated originators, after hanging onto traditional methods long after other companies of its size had moved to software systems and networked computers. The company has hired Andersen Consulting to help it develop a proprietary system, rather than purchasing existing software. One expert estimates the system will cost Fleet $11 billion to $12 billion as opposed to the $3 million or $4 million it would have cost to buy one from a vendor. Smaller lenders are still stumbling with start-up and updating costs. The front-end side of the business is fragmented, Mr. McCabe said, with a large number of vendors without a lot of capital. But once smaller originators do have an origination system in place, they can reach larger audiences. "If you're a little bank, you have a tough time competing with a Chase or a Citibank," said Mr. McCabe. Computerized distribution will allow these banks access to major markets without needing to build additional branches, he added.

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