Expert Systems For Mortgages

Expert Systems For Mortgages

An expert system for mortgages is a computer program that contains the knowledge and analytical skills of human experts, related to mortgage banking. Loan departments are interested in expert systems for mortgages because of the growing cost of labor which makes the handling and acceptance of relatively small loans less profitable. They also see in the application of expert systems a possibility for standardized, efficient handling of mortgage loans, and appreciate that for the acceptance of mortgages there are hard and fast rules which do not always exist with other types of loans.

Since most interest rates for mortgages are controlled by the government, intense competition sees to it that a great deal in terms of business depends on the quality of service offered to clients - who shop around for the loan best suiting their needs. Expert systems for mortgages considers the key factors which enter the profitability equation. For instance, “part and parcel of the quality of a mortgage loans portfolio to the bank is the time which elapses between the first contact with the customer and the bank's offering of a loan. Another key ingredient is the fact that home loans have significant features which are not always exploited through classical DP approaches. The expert system corrects this failure”.

The expert system also capitalizes on regulatory possibilities. In France, the government subsidizes one type of loan which is available only on low-cost properties (the HLM) and to lower income families. Known as "frets Conventionnes", these carry a rate of interest lower than the rate on the ordinary property loan from a bank. The difficulty is that granting them is subject to numerous regulations, concerning both:

• the home which is to be purchased, and
• the financial circumstances of the borrower.

To assure that all conditions have been met, every application has to be first processed at branch level and then sent to a central office for checking, before going back to the branch, often with requests for more information from the applicant. This leads to frustrating delays. Expert system for mortgages takes care of these by providing branch employees with tools permitting them to process an application correctly, even if a bank employee does not have an exact knowledge of the screening procedure.