Magazine article American Banker

MBA Plans Industrywide Testing Project to Blunt Year-2000 Threat

Magazine article American Banker

MBA Plans Industrywide Testing Project to Blunt Year-2000 Threat

Article excerpt

The Mortgage Bankers Association plans to spearhead a year-2000 testing effort for lenders, servicers, and government agencies.

The problem, which involves computer code that mishandles references to dates after Dec. 31, 1999, could cause system meltdowns for many companies, experts believe.

The mortgage industry is particularly vulnerable because of its heavy use of dates in interest calculations, and because many companies have been slow to keep up technologically.

The MBA wants to forestall a domino effect in which companies that had not addressed the problem adequately corrupted the systems of those with which they exchange information.

"We want to help our members gain some level of comfort with their trading partners," said James Horn, director of technology initiatives at the MBA. "We decided to initiate discussions and work on creating an industrywide test."

Participants would include the Federal Home Loan Mortgage Corp., the Federal National Mortgage Association, the Department of Housing and Urban Development, and important private sector players such as Alltel Corp., Chase Manhattan Corp., Checkfree Corp., and Fiserv Inc.

The test project, which would begin in 1999, would examine how a participant's systems handle exchanges of information on credit scoring, loan insurance, loan underwriting, and loan servicing.

It would establish a data base that participants could use to measure their performance. The data base could point to areas where the industry needs to focus its attention.

Further, the data base could help alleviate the burden of cross-testing between individual mortgage businesses.

"I think the industry is waking up and realizing that it is far too expensive to try and deal with this one-on-one," said James Cotton, vice president of year-2000 compliance at Freddie Mac. …

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