EDS acquires mortgage software firm. (Electronic Data Systems Corp., Lakewood Corp.)

Electronic Data Systems Corp., moving to increase its product and service offerings to the mortgage industry. announced it has acquired a developer of home loan origination software.

Plano, Tex.-based EDS, a unit of General Motors Corp., completed the acquisition last month of Lakewood Corp., based in Greenfield, N.H.

The acquisition enables EDS to round out its existing secondary-marketing and servicing systems with the addition of Lakewood's loan origination software. With this piece in place, EDS now offers a seamless service, said EDS officials.

EDS is also attempting to significantly reduce the time it takes to process mortgages and to improve customer service with such technologies as point of sale originations and electronic data interchange.

The acquisition brings with it 20 key Lakewood accounts - including the largest, GMAC Mortgage Corp. - that EDS will continue to support.

EDS will also offer jobs to all Lakewood personnel, and will merge the newly acquired organization into its existing mortgage group. For now. however, the software development operations will remain at Lakewood's location in New England.

The two companies decided to work together because they share a common vision for where the mortgage industry is headed with regard to technology and the lending process.

"We believe fin for mortgage bankers to retain and grow their market share, they need to dramatically change the way they do business, beginning with originations," said John Meyer, president of EDS' capital services business unit. "Lakewood's flexible product, coupled with EDS' experience in reengineering and applying technology, will allow mortgage bankers to do what they've talked about for years: bring the origination process closer to the consumer."

Having loan officers capture loan origination information at the customer site is an integral part of EDS' product strategy. Today's mobile sales force frequently works from briefcases in cars rather than from offices, noted Mr. Meyer. Thus, Lakewood's software will be enhanced to provide laptop-toting loan officers and brokers with the tools to qualify applicants, lock in loan rates, track sales pipelines, and support marketing activities while in the field.

Mr. Meyer said that EDS is also exploring the use of the new automated underwriting system launched by the Federal Home Loan Mortgage Corp., and wireless technology for mobile salespeople.

"As new channels for delivery of mortgages become available, we will make the decision whether or not to use them," said Mr. Meyer, adding that one likely candidate is the Internet.

Lakewood's software - once known as "Control-Z" and now called the "Lakewood System," - will also incorporate interfaces to support the electronic interchange of information with third parties, such as insurance companies, credit bureaus, investors, and servicers.

"The ability to exchange information electronically is the foundation for the future of mortgage banking," said Len Tichy, former Lakewood president, who has assumed his new role within EDS as manager for Lakewood sales development.

Mr. Tichy, an 11-year veteran of mortgage systems development, bemoaned the paper- and labor-intensive approach to mortgage processing that still persists, resulting in long waits and increased costs for both mortgage companies and consumers.

"The number of bodies it takes to process a loan is way out of line with the economical value of the product to the mortgage lender," he said.

John Meyer agreed that mortgage processing continues to be too mired in paper and manual processes.

Both executives feel that EDI will play a major role in compressing the time it takes to process mortgages.

"Clearly, when all the data is in an electronic form, we can manage and control it better," said Mr. Tichy.

The ultimate goal, he said, is to pare mortgage transactions down to one hour, just like car loans. This ambitious objective will be reached later than sooner, Mr. Tichy acknowledged. At first, the industry will work on a more plausible goal of reducing the process from 30 days to one or two days, he said.

EDS supports EDI through EDS-Send, its value-added network work service, which facilitates the electronic exchange of information between financial institutions, mortgage companies, insurance entities, and state authorities.

For the mortgage industry, the service will support the exchange of information for credit checks, appraisals, and titles, and for verifying coverage and collection for escrow deposits.

The service - which went on-line last year - began as an alternative method of communication for insurance companies and trackers, which were conducting transactions by the more conventional methods of mail, phone, and fax.

Today, through access to EDS-Send, mortgage companies will be able to link up electronically with vendors without having to build proprietary interfaces, said Mr. Tichy.

While the acquisition is allowing the companies to advance a common vision, it also enables them to leverage one another's strengths.

EDS gets an open system that works on a number of computer platforms, allowing it to gain the front-end piece that it lacked, said Mr. Meyer.

He added that EDS will be able to serve customers better by relieving them of the expense of purchasing a loan origination system. EDS will offer "minimal" pricing per loan, so costs for customers will be variable, he said. EDS will also handle customer service through telephone centers.

For Lakewood, the acquisition puts its software in the hands of a company that knows how to manage technology projects and that has market reach, said Mr. Tichy.

"Quite frankly, we had a great product but lacked the large sales force and operations to install and support as many implementations as we'd like," he said. "Now that concern is gone."

The Lakewood System, in its fourth generation, runs in a client/server environment in Unix, VMS, OS/2, DOS, and Windows.

The software is designed for mortgage lenders that originate in excess of $1 billion a year and that have hundreds of users, multiple channels of business, and a wide variety of loan products, Mr. Tichy said.