Countrywide Extends Its Automated Underwriting System

Lender gives third-party originators access to automated platform.

Countrywide Home Loans Inc., a subsidiary of Countrywide Financial Corp. (Calabasas, Calif.; $97.9 billion in total assets), has reaped the benefits of the recent mortgage explosion, processing more than 150,000 loans monthly. Last year it handled $434 billion in new mortgages.

"The mortgage industry has seen a huge couple of years, due to the [refinancing] market," says Scott Berry, the financial institution's Agoura Hills, Calif.-based executive vice president of artificial intelligence. Countrywide has more than doubled the volume of its mortgage originations in the past two years, he says.

Its automated underwriting software has helped make that possible by speeding up the approval timetable. "Without the technology, there is no way we would have been able to do the amount of business that we did and continue to do," Berry says.

And part of that success stems from the bank's decision to give its third-party originators access to the same software. "Industry-wide, there has been a recognition that the real efficiencies in the process come from bringing the decision closer to the point of sale, so it is accessible while the broker is sitting there in front of the borrower," Berry says.

Countrywide opted to roll out the ARTEnterprise rules-based decision engine that it had been utilizing internally since 1992 to its third-party originators. Last December, it significantly expanded its annual license for the technology from Greenbrae, Calif.-based MindBox.

Point-of-Sale Advantages

Countrywide had found some clear benefits from using the software internally. Prior to automating the process, getting an answer from an underwriter took up to a week. "We are able to produce a decision inside of 30 seconds today," Berry says.

And previously, every mortgage required a standard set of full documentation. "What automated underwriting recognized is that a lot of documents are not indicative of default," Berry says. "Based on the characteristics of the borrower, the document requirements changed."

The bank ultimately realized that the software could help it externally, too. "The same advantage that Countrywide was enjoying internally could be provided to third-party originators, to expand Countrywide's market share and make them more efficient," Berry says.

The bank did not seriously consider a new vendor for the external expansion. "We had a pretty solid track record with MindBox," Berry says. "We took a cursory glance at the other stuff out there, and we did not find any driving business reason to make a change."

Countrywide implemented the system with its correspondent banks in late 2002 and throughout 2003, and with the wholesale channel in 2003. Third-party originators access the software through Web portals provided by Countrywide; they do not need to download any software.

"Training was not necessary," Berry says. The learning curve "really was in using the site and being able to understand and recognize the results that were coming back."

The project's only challenge has been convincing some third-party originators to use the new system, Berry says. "There were some early adopter issues, until they recognized the value of bringing the decision closer to the point of sale," he says. "There were no real technical issues."

More than 100,000 third-party originators are using the software via the Web portals, Berry says. The system tells them what documentation they need from each borrower. "It makes it consistent," he says. "We are taking out the X factor of subjectivity ... we are ensuring that every transaction is being evaluated on the data."

And Countrywide is thinking about ways to evolve the system. "We are working on a product that will help the originators find the loan program that best meets the borrower's needs," Berry says. "Given the complexity of the products out there in the mortgage space - which will increase as rates begin to rise - that virtually guarantees that there will not be any loan officer or originator that exactly understands every option available."

Snapshot

Institution: Countrywide Home Loans Inc., a subsidiary of Countrywide Financial Corp. (Calabasas, Calif.).

Assets: $97.9 billion total.

Business Challenge: Offer third-party originators access to automated underwriting software.