settlement to post settlement processes from 2009 and beyond a mortgage processor’s perspective

Settlement to Post Settlementprocesses from 2009 and beyond

A Mortgage Processor’s Perspective

10 September 2008

Perpetual Lenders Mortgage Services (PLMS)

Mike Abel

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Agenda

Who are PLMS and why do we have a unique

industry perspective?

Where do we see the inefficiencies?

How do these inefficiencies translate into

higher costs?

What can we, as an industry, do to reduce

these costs?

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Our role provides us with a unique insight into mortgage processing

Securitisation ServicesMortgage ServicesLoan Origination

Mortgage Prep & Settlement

Loan Servicing

Trust Mgmt & Investor Reporting

Trustee& Paying Agency

Document Custody

Variations & Discharges

Application Processing

Credit Assessment

Our vision

To leverage our capability and market position as a securitisation trustee by rapidly driving growth in the mortgage services business and becoming an industry hub and outsource partner of choice to the lending industry.

We are not a lender or originator but provide services to■40 different lenders

■170 different originators

Our services cover all transaction types

Broad market coverage means we see “best” and “worst” processes

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Mortgage Processing is still a very manual, paper-based process

CertificationSettlement & Securities

Receiving instructions

Document Preparation

Post Settlement

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Instructions are mostly received via email, post and fax meaning we need to re-key data

Duplicated data entry leads to

additional processing time,

increased cost; and

higher risk of errors




Post Settlement

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Paper documents are produced and via post/courier to borrowers

Associated costs include

■ paper

■ postage

■ file storage

■ staff handling

Reworks




Post Settlement

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Heavy reliance on phone calls to obtain / provide status information

Client specific processes reduce productivity – high staff costs




Post Settlement

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Physical settlements involve

Significant staff cost – weekly/monthly workload fluctuations

Production of manual bank cheques

Cost to maintain CBD settlement location

Manual stamping/lodging

Varying processes in each state

High QA costs and potential for errors




Post Settlement

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Variations and Discharges

Process are predominantly manual

Little use of data exchange




Post Settlement

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Understanding the cost of processing a mortgage

IT8%

Searches4%

Premises7%

People61%

Phone3%

Other 11%

Consumables3% Postage

3% What does this mean to a lender?

• Cost of approximately $500-$1000 per loan over the life of loan

• Includes cost of initial loan, discharges, and variations but can escalate depending on the number of variations

• Not including lender/originator costs

A relatively small investment by lenders and originators can reduce the cost of processing mortgages.

As we reduce our costs – you reduce yours.

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What can we, as an industry, do to reduce costs?

Support

NECS implementation

Develop

standardised processes across industry

Commit

to other forms of electronic processing

Invest

in LIXI compliant B2B infrastructure

Reduced Costs $$

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Support National Electronic Conveyancing System (NECS) implementation

• Reduced labour and risk associated with physical settlements

• Instant registrationeliminates risk of not being able to register valid interests

• Increased data integritydocuments are known to be registrable prior to settlement

• Eliminate manual cheque processes

Benefits of using NECS

• Short implementation time frame commencing 2010

• Your initial technology investment could be significant

• Introduction of new processes eg digitial signatures

• Managing a hybrid model combining electronic and manual processes

Implementation Challenges

The Role of Licensed Service Providers (LSP)

• Companies like PLMS will act as LSP’s to provide tailored user interfaces, integration and support services to NECS subscribers as an alternative to directly accessing NECS themselves.

• Benefits of using an LSP include

• Insulation from complexities and costs involved in new process/technology build

• Value add services beyond what NECS provides

• Seamless transition to NECS to manage the hybrid period

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Invest in LIXI compliant B2B infrastructure

Manual Data EntryOrigination Systems

(STP)

Loan Management

Systems

Mortgage Processing

System

Client Systems Data transfer Perpetual System

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Manual Data EntryOrigination Systems

(STP)

Loan Management

Systems

Mortgage Processing

System

B2B LIXI Interface


X X

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Origination Systems

(STP)

Loan Management

Systems

Mortgage Processing

System

B2B LIXI Interface


Benefits

Faster turnaround

Reduced cost

Benefits

Eliminate duplicate keying

More accurate data

Instructions via LIXI / XML data exchange from client system

Process status updates via XML data exchange

Reduce external and internal follow-up communications

Readiness for electronic conveyancing

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Commit to ‘new’ processing technology

Efficiencies can be gained by moving to

• Email instead of post

• Online instead of phone call

• Image files instead of hardcopy document

New technology

Title Data

We need guaranteed title data – not just guaranteed titles

• Reduce the need to read and interpret titles

• We need to ask the titles offices to provide this now – even with NECS

In addition to NECS, there are other ways you can implement ‘new’ technology to enhance process efficiencies, reduce costs and ready your business for NECS implementation.

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Develop standardised processes across industry

Lenders need to ask two questions …

1. How much is our unique process costing in

Increased service provider cost

Higher technology cost

Added complexity when implementing new industry developments (e.g., NECS)

Inability to report/track/monitor multiple entities (specifically in wholesale segment)

2. Does our unique process really offer competitive advantage?

Reconsider the ”Panel” Model

Process standards are needed around

Methods of fee payments

Document recipient

Disbursement reporting

Settlement booking

Surplus funds management

Our experience indicates that most process variations provide little to no advantage to the originator / lender – but significantly increase their cost.

Data standards are a step in the right direction but process standards are also needed

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In Summary

Our role means we are uniquely placed to understand the inefficiencies and costs associated with what is a predominantly manual process.

There is a need for process standards and technology enhancements across the industry.

National Electronic Conveyancing System and LIXI will be key factors in gaining process efficiencies and reducing costs.

The use of Licensed Service Providers should be considered as part of your NECS implementation strategy.

settlement to post settlement processes from 2009 and beyond a mortgage processor’s perspective

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