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Settlement to Post Settlement processes from 2009 and beyond A Mortgage Processor’s Perspective. 10 September 2008 Perpetual Lenders Mortgage Services (PLMS) Mike Abel. Agenda. Who are PLMS and why do we have a unique industry perspective? Where do we see the inefficiencies? - PowerPoint PPT Presentation
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Settlement to Post Settlementprocesses from 2009 and beyond
A Mortgage Processor’s Perspective
10 September 2008
Perpetual Lenders Mortgage Services (PLMS)
Mike Abel
2
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?
3
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
4
Mortgage Processing is still a very manual, paper-based process
CertificationSettlement & Securities
Receiving instructions
Document Preparation
Post Settlement
5
Mortgage Processing is still a very manual, paper-based process
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
CertificationSettlement & Securities
Receiving instructions
Document Preparation
Post Settlement
6
Mortgage Processing is still a very manual, paper-based process
Paper documents are produced and via post/courier to borrowers
Associated costs include
■ paper
■ postage
■ file storage
■ staff handling
Reworks
CertificationSettlement & Securities
Receiving instructions
Document Preparation
Post Settlement
7
Mortgage Processing is still a very manual, paper-based process
Heavy reliance on phone calls to obtain / provide status information
Client specific processes reduce productivity – high staff costs
CertificationSettlement & Securities
Receiving instructions
Document Preparation
Post Settlement
8
Mortgage Processing is still a very manual, paper-based process
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
CertificationSettlement & Securities
Receiving instructions
Document Preparation
Post Settlement
9
Mortgage Processing is still a very manual, paper-based process
Variations and Discharges
Process are predominantly manual
Little use of data exchange
CertificationSettlement & Securities
Receiving instructions
Document Preparation
Post Settlement
10
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 $$
12
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
13
Invest in LIXI compliant B2B infrastructure
Manual Data EntryOrigination Systems
(STP)
Loan Management
Systems
Mortgage Processing
System
Client Systems Data transfer Perpetual System
14
Invest in LIXI compliant B2B infrastructure
Manual Data EntryOrigination Systems
(STP)
Loan Management
Systems
Mortgage Processing
System
B2B LIXI Interface
Client Systems Data transfer Perpetual System
X X
15
Invest in LIXI compliant B2B infrastructure
Origination Systems
(STP)
Loan Management
Systems
Mortgage Processing
System
B2B LIXI Interface
Client Systems Data transfer Perpetual System
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
16
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.
17
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
18
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.