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While most of the U.S. economy continues to inch its way through a prolonged recession, Fannie Mae, the federally chartered secondary mortgage market company, has been riding the home refinancing boom to new heights of transaction volumes. So its perhaps not surprising that, while many enterprises are focused intently on cutting IT costs and avoiding major projects, Fannie Mae is in the midst of a large-scale, 24-month overhaul of its Core application systems, an effort that is expected to greatly streamline its ability to service mortgages for banks and to provide securities for financial services companies. Leading this effort is Julie St. John, executive vice president and chief technology officer. St. John has been with Fannie Mae since 1990 and was previously a principal with Arthur Young & Co. In addition, the company, which last year accounted for $849 billion in business volume, has been investing heavily in e-business, creating a 500-person team to build new online applications under the direction of Fannie Mae eBusiness President Michael Williams (see Navy Takes App on Test Cruise).
eWeek Executive Editor Stan Gibson interviewed St. John at Fannie Maes headquarters in Washington, where they discussed Fannie Maes Core applications initiative, IBM, Linux, Web services and more.
eWeek: What has the recent spurt in refinancing meant to Fannie Mae from a technology point of view?
St. John: Its been an interesting journey. Last year, as well as this year, weve had almost triple the business volume. As far as my role is concerned, the infrastructure sets the speed limit. If youre not slightly ahead of where you need to be, you cant handle these huge increases in volume. And so I run a very large-scale environment with three fundamental goals: reliability, security and quick scalability.
eWeek: Did you have to add servers?
St. John: Last year and the year before, we scaled up very quickly and added a significant number of servers. We have almost 2,000 servers, and we probably added 75 servers last year. They are in two separate data centers. We run two separate production data centers so we can be up at all times.
eWeek: What is the architecture like?
St. John: We have a J2EE [Java 2 Enterprise Edition] foundation. We have almost 2,000 software engineers, so weve spent a lot of time, thought and care on how we architect the environment, both the infrastructure and the applications. I have a dedicated architecture and standards group that makes sure we are all building code according to a J2EE blueprint. All the design templates are on a Web site.
To foster interoperability in the industry, we need to approach things in a standard way because we integrate tightly with our business partners, and we want to make it as easy for them as we can.
eWeek: What is your hardware platform?
St. John: Were very big Sun [Microsystems Inc.] Unix users. We use some [Hewlett-Packard Co.-Compaq Computer Corp.] servers, but were largely a Unix shop with a J2EE architecture. We have mainly Oracle [Corp.] databases, and our data warehouse is Oracle.
eWeek: Right now theres an orange alert, and the hacker threats continue. What is your approach to security?
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St. John: It is a huge area of focus in my organization. I have a full-time dedicated security team. We are monitoring the environment 24-by-7, and we have significant investment every year because, like the war on terrorism, you are never done. There are more and more people out there who are trying to hack computer networks. Our production is locked down, we have very strong anti-virus and Web filtering tools, and we will continue to invest significantly in security. We benchmark ourselves frequently and we get extremely high scores.
eWeek: Just how big is your rearchitecting of Fannie Maes Core applications?
St. John: Its all of the operating platforms and how we do business—the ways in which Fannie Mae interacts with its lender partners across the life cycle of a loan. Its a huge initiative that encompasses anything legacy that we currently have. This is different from [Fannie Mae] eBusiness, which gives originators tools.
A [lending institution] customer will be able to come in through one portal and have totally streamlined business processes so theres no rekeying of data. If theyve sent us data, well have it; there is no additional work for them. Well give them view access so they can edit it online. And when they report in to us their servicing payments every month, well make that entire process streamlined for them. From a lender perspective, its all about ease of doing business. From a Fannie Mae perspective, this project is an incredible opportunity for the company.
A lot of financial services organizations have been very successful at surrounding their legacy core [with updated technology], but they have this ugly thing in the middle that is very constraining. If you could start over, you would do it completely differently. … We made the decision that were going to bite the bullet and start with a clean sheet of paper. We asked, from a customer perspective and a business perspective, what would be the optimum design given that what you want in the future is flexibility? Its a different approach. Its much more modular and much more service-based.
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eWeek: Youre using [PricewaterhouseCoopers], now part of IBM, as your consultant. Have they resisted suggesting that IBM servers ought to replace the Sun servers?
St. John: Oh, I wouldnt say that [laughter]. The [PwC] partners now have a role to know whom theyre working for. Although we are a big Sun shop, I am open to what other vendors offer and how I can achieve the most capability for the most effective cost. IBM [Global Services] is smart enough to know that we are a Sun, Oracle and BEA [Systems Inc.] shop. If IBM wants to become a worldwide technology consulting shop, theyre going to have to become more technology-agnostic. But they realize their core competence is going to be around integration. I have not felt any pressure. But I am not someone you can pressure.
eWeek: Lets talk about Web services. IBM is pretty standards-focused there. Is closer work with IBM on Web services in the offing?
St. John: Web services industry standards have to evolve to a much more mature place, to have something like [Universal Description, Discovery and Integration] be something we are comfortable with because we want a controlled and secure environment. We are a service-based architecture, using a J2EE foundation, which we think is very suitable for our business problems, and that will enable us to extend Web services to our business partners.
Whats attractive to us about Sun and BEA is their adherence to an open standard. The downside of open standards is that it takes longer because things have to go to committee, and you have to have agreement.
eWeek: It doesnt sound like you have much use for Microsoft technologies.
St. John: We use Microsoft on the desktop and for some other front-end stuff. But were a big-scale environment, and that is not Microsofts strong suit.
eWeek: Are you ready to place bets on Linux at this point?
St. John: No. Were looking at it. But were always looking at most everything. We do extremely careful due diligence on technology decisions. We want to use proven technology from the market leaders, so well only use niche emerging technologies where there is a huge competitive advantage and we have really looked under the covers so were comfortable. My approach with vendors is: Show me. I have to see a demonstrated application in an environment that is similar to mine.