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Continued Capital Gains in Property Market Drive LIXI's Online Settlements High demand and continued capital gain in the residential property market has forced the finance industry to extend e-commerce standards to bring settlement agents online to fast track settlements, according to LIXI, the Lending Industry XML Initiative. LIXI is a not-for-profit organisation made up of lending industry representatives. It developed Credit Application Language (CAL) to allow the information required for home loans to be standardized and transferred electronically. Prior to CAL's launch each lender had separate, non-compatible systems. LIXI has launched CAL 1.3 that extends the e-commerce standards to include solicitors and settlement agents. CAL already allows online data to be accepted from brokers, mortgage insurers and valuers. According to Barry Thomas, LIXI Director and convenor of the LIXI Vocabulary Working Group, the settlement phase of property buying has been a bottle neck. "In an era of e-commerce, the settlement phase still occurs via fax and phone, creating a high margin for error. Mistakes can occur regarding simple issues such as the time and date of settlement or what cheques need to be issued. "As the settlement process is hidden from the borrower, 'islands' of important information get locked up with the agent. Settlements can be made faster by automating the flow of information between buyer, broker, lender and agent while making it transparent to all parties," he said. Currently each settlement agent uses a different and incompatible system to exchange data. As a result, lenders need several systems to deal with their panel of agents. The cost of this creates a barrier to appointing new agents.
Standardizing e-commerce systems will allow smaller agents to compete with larger firms putting pressure on price and creating cost saving for lenders that may be passed on to consumers. According to Thomas, LIXI extended the e-commerce standards to include settlement agents in response to market demand. He says, "The larger legal firms were already exploring ways to exchange data electronically. LIXI realized that automating settlements was the next logical step in expanding the lending industry's e-commerce standards." To create workable standards, the LIXI Settlement Working Group included
input from lenders, solicitors and settlement agents including Gadens
National Mortgage Services and Russell Kennedy Solicitors. Gadens National Mortgage Services is currently exchanging settlement data electronically through its National Mortgage Services site. It found electronic data exchange allowed documents to be prepared up to 30 percent faster by reducing data entry time and ensuring data accuracy. Michelle Cluley, Operation Paralegal, Gadens, points out, "The benefits of electronic exchange are obvious. Our response time to our clients is immediate. Additionally we can update the relevant parties as to what stage the matter is up to which is extremely helpful to our clients and their brokers." While Gadens National Mortgage Services is making its system CAL compliant to maintain its position as an industry leader, Cluley believes that CAL will streamline the entire industry making it easier for all settlement agents to exchange data. Already software vendors such as Lending Technology Services and Leap Legal, are creating products compliant with CAL 1.3.
According to Mike Thanos, LIXI Board Member, Convenor of the Settlement Working Group and c-founder of Lending Technology Services, "As a vendor, ensuring our software is CAL compliant and compatible with all systems is an important selling point. It enables smaller software firms to provide critical services to the finance industry, including multinational banks. "Any vendor that overlooks CAL 1.3 will find its products obsolete," he said. The updated standards are the next step in automating the residential lending industry from the first open house right through to settlement. It is expected that the e-commerce standards will improve approval times by at least 50 percent and reduce costs by more than $10 million. As Thomas points out, "Applying for a mortgage is amazingly complex involving up to nine organizations. The extension of CAL opens up the industry to be more competitive. In the end it will be consumers who benefit from faster approvals, better service and possibly cost savings." Already CAL has been adopted by more than 22 LIXI members and a further 30 associates, including Commonwealth Bank of Australia, ING Bank, Westpac, ANZ, Adelaide Bank, Perpetual, Allette Systems, Lending Technology Services, Mortgage Choice, Pioneer Mortgage Services, PMI Mortgage Insurance, GE, Smartline, Loanmart, and Homeside. "CAL lenders and brokers will experience cost efficiencies and service improvements through reduced data entry, less rework and lower error rates in transmission of information. Clients will be dealt with in less time and with lower processing costs," says Thomas.
"While CAL 1.3 addresses the relationship between lenders and
settlement agents, it is also good news for brokers. As they receive
their commission at settlement, brokers are likely to be paid faster
and more reliably." Thomas warns that financial firms who ignore the LIXI standard will risk losing business. He says, "Companies that don't use CAL may lose business as their customers simply won't wait the extra time for their loan to be approved or processed." LIXI plans to continue development of CAL to include the entire lending chain all the way through to the final payout of the loan. Eventually this will mean that each item of data will be entered once and once only no matter how many different organizations act to use, manipulate or add value to that data. LIXI is also extending CAL to support transactions particularly close to broker's hearts - the commission details. The goal will be to provide brokers with a single, consolidated, up-to-date view of their receivables across all of the lenders with which they deal. CAL was specifically designed for the Australian lending industry
to ensure that it adequately met with its standards and needs. It
is now recognized as one of the world's best e-commerce banking standards.
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