Mortgage Companies and Information Technology

There was a time when a person decided whether or not you got a mortgage loan. While that did provide personalization, discretion and general goodwill on behalf of the mortgage company, it did result in a very time-consuming approval process, and it could well take several months before a decision was reached.

Today, information technology has changed the face of mortgage companies, with preliminary decisions being made primarily by computer programs. Automated underwriting systems have been examining loan applications, using computerized models since about 1995. The goal of these programs is to simplify the approval and underwriting process for lenders, and minimize delays for consumers. Today, about three-fourths of mortgage companies use computerized approval programs.

The most common of these automated programs are Desktop Underwriter and Loan Prospector, both of which were created by Fannie Mae and Freddie Mac. Lenders who resell their loans to these two mortgage companies fill out a computerized application, and send it to either Fannie or Freddie through their network. The agencies’ computers then make a recommendation to the originator in less than two minutes. Another advantage of this automation is that the documentation requirement for the borrower is streamlined.

In addition to automated underwriting, mortgage companies are spending more on information technology in general. In 2004, mortgage companies are expected to spend 47 percent more on technology than they did in 2003; technology that has become essential today to comply with new regulations, automate risk management and make better decisions, and to remain competitive and offer consumers a broad array of choices and conveniences. Internet technology has also come to play a major role in the mortgage industry, with virtually every mortgage company having at least a minimal Web presence, and some mortgage companies operating entirely online.