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What does LIXI mean for consumers?

The Australian lending industry has implemented its e-commerce standards. But what do the Lending Industry XML Initiative (LIXI) standards mean for you, the home buyer?

The first-ever e-commerce standards for the home lending industry were introduced to the Australian market in 2002.

The standards were devised by LIXI (Lending Industry XML Initiative), a not for profit, independent industry organisation. Membership of the organisation has been drawn from industry stakeholders including Westpac, ANZ, CBA/Colonial, Adelaide Bank, Perpetual, Smartline, ING, Allette Systems, PMI, Pioneer Mortgage Services, Mortgage Choice, Loanmart, Finance Analysis Services of Australia, Homeside and Lending Technology Services.

Prior to LIXI's standards each lender requires a different set of information from applicants. LIXI developed a computer language known as CAL (credit application language), that will allow the information required for home loan applications to be standardised and therefore be transferred between lending institutions over the internet.

According to LIXI board member, Socrates Vasiliadis, the biggest benefit to home loan applicants will be the increased speed of processing times.

"Currently, shopping around for a home loan can be a fairly long process. Many people apply for a loan through a range of different lenders, needing to fill in separate forms for every lender they contact," he says.

"With the new LIXI standards, home loan applicants will be able to supply their details once and know that those details can be used by any lending organisation to approve their loan in a time efficient manner."

Currently, most brokers aim to give 'in principal' approval to within 24 hours. Home-buyers who have been through the application process before know that does not always occur, and often have to wait as long as a few weeks for their approval. With the real estate market so competitive, speed of loan approval is a real issue for buyers who can't afford to miss out on their dream home.

"CAL will halve loan processing costs so buyers can get into the market as soon as possible," says Vasiliadis

For people who have previously been passed over for a home loan, the standards may provide some relief. According to Vasiliadis, CAL will make the processing of applications much easier for lenders, staff will be freed up from application re-working tasks to devote more attention to the marginal cases.

"With less re-keying of applications, less applicants will be automatically dumped in the 'too hard' basket," he says.

"Obviously, CAL does not interfere with lender credit policies, but lenders will be far more likely to address more marginal or non-conforming loan applications as regular applications will be automated."

Additionally, the standards provide potential for reduced costs for home buyers.

"In the long term, the efficiency provided by adoption of the standards will translate into lower costs for the lenders. Competitive pressure will encourage lenders to pass on these savings to their clients in reduced application fees or interest rates," says Vasiliadis.

"A range of members, including Westpac and ANZ, accept LIXI compliant applications. It will not be long before other lenders will be forced to comply or risk missing out on business to faster lenders," he says.

LIXI's technology expert, Barry Thomas, assures home loan applicants that consumer security will not be compromised by the new standards.

"The standards that we have created using CAL are compatible with the security systems that lenders already have in place. While applications can be transferred, all information will still be protected from fraud and other security breaches," he says.

In addition, Thomas points out that electronic transfer of applicant information is just as secure, if not more so than other methods, such as facsimile.

"With electronic transfer of details between lenders, applicants can be assured that the information will be directed to authorised people only. With other communications tools, such as fax, it can be difficult to know that your private information is not left on the fax machine," he says.

LIXI is the process of automating the entire lending chain to remove bottlenecks.

"The aim for the near future is that home buyers will be able to attend an open-house in the morning and have their loan approved by the afternoon so they can make an 'impulse purchase'," says Vasiliadis.