Freddie Mac's Pilot Shifts Servicing Functionality to the Internet.

In an initiative that could reshape how lenders transact loan servicing business with the secondary market, Freddie Mac has started a pilot program to develop and test a Web-based loan servicing system.

Currently one lender is participating in the pilot. Freddie Mac plans to add other "business development partners" to the pilot later this year, according to Patricia Chen, director of customer management at Freddie Mac.

She spoke at the California Mortgage Bankers Association's Western States Loan Servicing Conference here last week.

Freddie Mac hopes to build out the system to include more participants next year, particularly in the third and fourth quarters of 2004. That will be followed by a big push to convert lenders to the system in 2005, Ms. Chen said.

The Web-based servicing system will complement Freddie Mac's Web-based selling initiative, which allows lenders to price, commit and fund loans with Freddie Mac via the Internet, an initiative that was unveiled at last year's annual Mortgage Bankers Association convention.

Ms. Chen said that the servicing pilot is another part of Freddie Mac's overhaul of legacy systems that should streamline operations and reduce data ...