More on Technology

Software Review

Pocket Computer Aids Pre-Origination Field Work

By Stephen Pizzo

San Francisco - Much attention has focused on computer programs that originate, document, track and service mortgages.

What has been lacking is a comprehensive pre-origination tool that field personnel can use to calculate mortgage options and finance charges while everyone is still in the talking stage.

PROM Software, Inc. of Burlington, Vermont is marketing a small - 5 inches by 3 inches by 1/4" thick - pocket computer that calculates fixed mortgages, fixed balloon mortgages, adjustable-rate mortgages, balloon ARM's, and the present value of virtually any mortgage.

The computer, which PROM calls the 671B Mortgage Compliance Tool, is driven by PROM's proprietary software contained on a two-inch square software cartridge which snaps securely in the back of the computer.

Ease of Upgrading This arrangement offers ease of upgrading PROM's software later by simply supplying a new software cartridge.

And it also allows users to purchase other program cards as they are developed by PROM or other venders.

Besides a standard numeric keypad which allows the 671B to be used as a calculator, the computer also includes a dedicated keypad for mortgage applications.

Pressing the "mortgage" key triggers a set of questions beginning with "PRIN ?" for starting principal amount.

The answers to the following queries lead the user though all the necessary steps including origination and other fees, term, balloon term, if any, odd days, interest rate, term until rate change is triggered, new rate, etc.

When all the relevant data is entered the computer presents the outcome.

For example for a $100,000 loan, with a 1% origination fee, and $75 in other fees, a term of 30 years, with 15 odd days left in the term, and a rate of 10%, the computer supplied the following information and disclosures:

The first payment would be $877.58. APR = 10.128%. Finance charge = $217,414.76. Amount financed = $98,514.04. Total paid out = $315,928.80. 360 payments of $877.58. Origination fees = $1000.00. Other PC = $75.00. Odd days interest = $410.96 (15 days). Total Prepaid = $1485.96.

Disclosure Regulations

The finance and closing cost results offer field personnel an early opportunity to begin fulfilling Federal finance disclosure requirements.

The computer cannot, of course, predict interest rate changes for adjustable rate mortgages which float with market rates, but it deftly handles ARM's in which rates change at set points during the loan's term.

The 671B is also a handy field qualifier.

Pushing the "qualify" key allows the user to pre-qualify a would-be borrower.

The computer asks for the borrower's annual income, taxes, utilities, and other loan payments.

It then calculates the borrower's present mortgage debt service percentage and total debt service and advises the maximum monthly payment that could be tolerated for the new loan.

Once the qualifying data is entered, the operator can enter a proposed monthly payment, interest rate and term and the computer will calculate the maximum principal amount that the borrower's would qualify for.

For investors the 671B will quickly calculate the present value or price of a simple or complex mortgage.

The operator simply keys in the interest rate at which the streams of payments are to be discounted, the number of days to the next payment, and the numbers and amounts of the payments in the payment stream.

Levels of Payment

Up to 20 levels of payments can be handled by the program on a single loan.

After the loan's data is entered the computer will calculate its present value, finance charges, the total amount of all payments and total number of payments.

For some commercial mortgages with balloon payments, it is common for servicing computer programs to accrue interest on a 365/360 day basis instead of the normal method.

The 671B allows the user to reset its internal counter to either cycle by calling up one of its embedded subroutines.

PROM's little pocket computer presents the next generation in mortgage calculators.

But unlike the old Texas Instrument calculators that simply did the math, the 671B thinks the process through from beginning to end.

Its small size and slide-on travel cover means it can travel in a briefcase, purse or pocket without fear of damage.

The 671B is easy to use, and for $329 (not including the optional printer) the unit is affordable even for the small mortgage originator.