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e-Commerce Standards Extended to Shave $10m Off Residential Lending Industry The residential lending industry is set to save up to $10 million annually and face fiercer competition as e-commerce standards are extended to property valuers and mortgage insurers, according to LIXI, the Lending Industry XML Initiative. LIXI is a not-for-profit organisation made up of leading firms in the lending industry. It developed Credit Application Language (CAL) to allow the information required for home loans to be standardized and transferred electronically between brokers and lenders. Prior to CAL's launch each lender had separate, non-compatible systems. The release of CAL 1.2 extends the e-commerce standards to allow banks and brokers to exchange loan data with property valuers and mortgage insurers, the next step in the settlement chain. The updated standards are the next step in automating the residential lending industry from the first open house right through to settlement. According to the Australian Bureau of Statistics, the household mortgage sector is worth more than $365.1 billion and grew 18% between 1995 and 2001*. Already CAL has been adopted by mortgage insurers PMI and GE. They join 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, Smartline, Loanmart, and Homeside.
According to Barry Thomas, LIXI Director and convenor of the CAL working group, CAL will improve approval times by at least 50 percent and reduce costs by $10 million. One valuer to adopt the LIXI standards is RPG Valuers, one of Sydney's
leading valuation firms which services more than 30 major banks, regional
banks and RPG Valuers is currently beta testing a valuation application which streamlines the valuation process. In doing so, Managing Director, Ron Gedeon felt it was important that the system be LIXI compliant. "The entire mortgage industry is moving towards a standardised e-commerce system. As a supplier to the banks, it was vital that RPG embraced this move too," he says "When valuing a single property, RPG Valuers presently has to prepare and submit different valuations for each bank involved in the financing process. Standardising the process will save time and money." In a fiercely competitive industry, Gedeon sees adopting the LIXI
standards as an important way to maintain margin. "Valuation
prices are already at rock bottom. By implementing CAL, valuers can
be more competitive and attract additional business from LIXI compliant
banks." John Hearne, Head of Operations for PMI Mortgage Insurance and LIXI
board member agrees, pointing out that CAL 1.2 has remove the need
for multiple "In our business, it is necessary for mortgage lenders to be able to send application information to us so we can approve insurance. Because the data gathered by lenders differs across the industry, we needed to build tailored solutions for each lender partnership that we have. Setting up e-commerce links for each of our lenders was an unnecessarily high cost for both of us," he says.
Barry Thomas agrees, "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." In the long term, Thomas sees CAL as moving the industry towards instant approvals. He says, "This is a significant advantage for banks which will be better able to attract, maintain and satisfy customers. "At the same time, lenders and brokers will experience cost efficiencies and service improvements through reduced data entry and lower error rates in transmission of information. "Banks and brokers will both benefit from avoiding rework as well as handling more clients in less time with lower processing costs. Brokers have the added advantage of using the same set of data to apply for multiple loans. This may add pressure to the banks to be more competitive in their rates and fees," he says. Thomas warns lenders, mortgage insurers and brokers who ignore the LIXI standard will risk losing business. He says, "Even the smaller lenders and brokers will have the chance to compete on the same footing as the major lenders. Financial institutions that don't use CAL may find that their customers simply won't wait the extra time for their loan to be approved and will go elsewhere." LIXI plans to continue develop of CAL to include surveyors, title office and settlement agents. 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. *Australian National Accounts: Financial Accounts (Cat. No. 5232.0),
Mar Qtr 2002
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