Another reason to pursue eMortgage

For years now, mortgage technologists have been offering electronic mortgage technology, basically digital docs that Fannie Mae or Freddie Mac will accept in the place of paper documentation, to mortgage lenders who really weren't that interested. OriginatingeMortgages would involve changing the way lenders worked with closing agents and borrowers. It might be more confusing for borrowers, despite the fact that they use a similar keypad to buy just about anything from Home Depot, Best Buy, Wal-Mart or Staples. It might involve additional software or hardware that could be expensive or difficult to implement. Some of these excuses may have been actual reasons a few years ago, but they aren't today.

Today, eMortgage technology is affordable, easy to install, understood by closing agents and borrowers and readily accepted by secondary market investors, at least the ones that are still in the market. And here's another reason to go all-electronic now:

According to a story in the Honululu Advertiser, homeowners there are finding a handy way to stall the foreclosure process. They simply ask to see the original paper documentation.

"During the real estate frenzy of the past decade, mortgageswere sold and resold, bundled into securities and peddled to investors. In many cases, the original note signed by the homeowner was lost, stored away in a distant warehouse or destroyed."

As the "victim" of possible foreclosure points out in the story:

"I'm going to hang on for dear life until they can prove to me it belongs to them," said Lovelace, a 50-year-old divorced mother who owns a $200,000 home in Zephyrhills, near Tampa. "I'll try everything I can because it's all I have left."

It's probably time now for lenders to get rid of the paper once and for all.

Rick's Notebook blog

Perfect storm hits Fairfax as rivers flow online

Terry McCrann

February 24, 2009 12:00am

Hera;d Sun

WILL there be Fairfax broadsheets for Costello or indeed anyone else to write in, much further into the future?

The most stunning revelation in Fairfax Media's numbers was that it earned more from its online operations than from the two 'rivers of classified gold' - its two broadsheets, The Age and theSydney Morning Herald.

Even more tellingly, the single biggest component of the online profit has precious little to do with media in anything remotely like the traditional sense, far less journalism. And even less to do with Australia - it was the New Zealand Trade Me online advertising business.

Talk about climate change, in the half the two rivers ran about as full and fast as the Murray - generating just $47 million in profit before interest and tax (EBIT). In contrast, online generated $51 million, with around half that coming from Trade Me.

In the December 2007 period, the two broadsheets contributed $70 million or nearly double the $45 million that came then from the online businesses.

The broadsheets have been hit by two perfect storms with any realistic assessment suggesting they will only get worse this year and longer-term.

The first is the traditional reality that costs are locked-in, so what happens to revenue tends to flow straight through to the bottom line.

In the good times that's been fantastic. In the latest half though, a $21 million drop in revenue was matched dollar-for-dollar by a $21 million drop in EBITDA (earnings before interest, tax depreciation and amortisation).

Because of a rise in depreciation, it was even worse at the EBIT level - profit dropped by $23 million.

Online is less cost-inflexible and less capital-intensive. So depreciation took just $5 million of online's $56 million EBITDA, as against $23 million or nearly a third of the broadsheet's EBITDA.

The second storm is, of course, that fundamental erosion of print's classified base. The 'climate change' that the occasional 'flood' in a property boom is not going to prevent.

But nothing could more explicitly demonstrate the basic insoluble problem: that while the ads might be migrating to the online space, whether or not Fairfax keeps them, the profits don't flow with them.

Take out Trade Me across the ditch, and Fairfax made precious little online in Australia. But those revenues came with substantial costs.

But at last they are growing. Albeit mostly in NZ. Revenues in every other division were down, and in every case operating profit fell by more than the revenue drop.

And this, when the Australian economy was still in reasonable shape. At least, compared with what might come.

Fairfax will be praying - in the non-religious sense of course, that is de riguer these days and was on display again last Sunday - that the government's stimulus packages will work and quickly.

Fairfax, and its lenders. It has $2.5 billion of net debt and is uncomfortably close to its debt covenant limits.

Shareholders are merely bystanders in all this. There is no way Fairfax is going to go to them for fresh capital.

Big Four squeezing non-banks into mergers

The Australian

Adele Ferguson | February 23, 2009

WHEN the Bank of Queensland appointed corporate advisers in December to review acquisitions, strategic partnerships, mergers and possible takeover offers, it sent a clear message that any rival outside the Big Four banks needed a new set of tricks to compete.

Bank of Queensland chief executive David Liddy told shareholders: "To compete with the big banks, smaller banks such as BoQ, as well as credit unions and building societies, have been merging and will continue to do so."

Two weeks later, on December 24, Wizard Home Loans was sold to Commonwealth Bank and Aussie Home Loans for $26million. The remaining non-bank lenders, Resi Mortgage Corp, First Mac, Pepper Home Loans, Better Choice Home Loans, Beat Home Loans and a few others are expected to either close down or merge as credit conditions worsen.

In the regional banking sector, Suncorp and Bendigo Bank are tipped as takeover targets as the dislocation in capital markets, falling asset prices and pressure to re-capitalise make it increasingly difficult to compete with the bigger banks.

On the mutual side, more credit unions and building societies are considering merging to compete with the bigger players, at a time when falling interest rates are crunching their margins and more rigorous regulation is pushing up their costs.

There are 130 credit unions and building societies in Australia, representing $65billion worth of assets, 3.4million members, and 6 per cent of the home loan market.

It is in this market that the Big Four banks are monstering competitors. To put it into perspective, they have doubled their market share in the home loan market from 45 per cent in 2007 to about 90 per cent at the end of November 2008.

For customers, the diminished competition means that banks have regained pricing power over savings accounts, credit cards and -- most significantly -- home loans.

Lenders that have reduced their presence or exited include Majestic Mortgages, Macquarie, Bluestone Mortgages and Virgin Money. For credit unions, their real competitive advantage is in the deposit market, where they capture 12 per cent of all deposits, making them the third largest holder of deposits from the household sector, putting them ahead of ANZ and National Australia Bank.

Commonwealth Bank controls 28 per cent of the market, following its acquisition of BankWest last year, and Westpac has 20 per cent following its merger with St George last year.

In the case of Australia's credit unions and building societies, five are in merger discussions, and at least another 15 are expected to join forces within the next 12 months.

Since the start of this year, HMC Staff Credit Union has announced a merger with NSW Police CU, Regional One has announced it is in merger talks with mecu, CSR has merged with Select Credit Union and Dnister Ukrainian Credit Union is in talks with Karpaty Credit Union but its members are yet to be notified. 

Consolidation of the 118 credit unions is based on using economies of scale to compete with the banks in a falling interest rate environment. 

Some mergers are likely to have the gentle hand of the industry's self-regulator, Credit Union Financial Support System and the financial regulator APRA, pushing them together. 

Such matchmaking is expected after June 30, when a few credit unions, that have indulged in risky practices are expected to report low profits or losses for the year. 

"When this happens, there could be a negative reaction from members, such as rapid deposit withdrawal, and the Australian Prudential Regulation Authority will want to avoid this," another source said. 

The Australian understands that before the government guarantee was imposed in October, APRA had put at least 10 credit unions on day watch to ensure liquidity levels and forward cashflows were sufficient to withstand the stresses and strains of the global financial crisis. 

It now has one on day watch, and is making weekly phone calls to most credit unions to check on liquidity and profits, according to CUFSS chief executive Gary Eggert. 

The majority of Australia's credit unions were strong, with liquidity above 18 per cent and sound profit, Mr Eggert said. If anything went wrong, CUFSS had the financial firepower to come to the rescue. 

One hundred of Australia's 118 credit unions are members of CUFSS, providing it with 3.2 per cent of their balance sheet. This adds up to $1billion that can be drawn upon to bail out potential blow-ups or liquidity problems. 

"In 10 years this fund has been invoked only once and it resulted in a merger with another credit union, and no one lost any funds," Mr Eggert said. 

CUFSS can decide whether the support is in the form of a market-rate loan, a concessional loan or a permanent loan (the latter category would be provided only if a credit union was to merge or transfer). 

Louise Petschler, chief executive of Abacus, the peak body for Australia's credit unions and building societies, said the tough environment could be the making of the industry. 

"Credit unions were born in tough times, and they will continue to do well in this difficult environment," she said. 

Nevertheless, as in any industry, a few credit unions wandered outside of their core business, grew too fast, expanded into risky areas and allowed their cost structures to get out of control. 

APRA's mission is weed out the weaklings by putting them on close watch, forcing the entire industry to increase its liquidity from the required 9 per cent to 15 per cent, and demanding all provide board-approved funding plans. 

These funding plans require each credit union to provide various funding options, assess the impact of various stress scenarios and set out a contingency plan if the credit union loses a significant funding source. Any funding plans not up to scratch are sent back. 

As the chairman of APRA John Laker said at a recent conference for the industry: "In the current environment, APRA will not accept a funding strategy based crudely on turning the loan tap off if funds cannot be raised. Easy to do if the ADI (deposit-taking institutions) is writing personal loans; much less easy for mortgage loans where there may be a gap of up to two months between approval and funding, and where the timing of redraws against existing facilities is unpredictable." 

Brian Bennett, who has been running the 55-year-old Encompass Credit Union in Sydney for almost four years, said in the past few months there had been a surge in deposits, mainly from self-funded retirees. 

"The government guarantee certainly helped ease any concerns about deposit lending institutions and helps explain the 10 to 15 per cent increase in deposits in the past few months," he said. 

Mr Bennett estimates Encompass's tier-one capital is 22.93 per cent, compared with the average of the banks at 8 per cent, and its liquidity is 27 per cent. 

"Credit unions are a good alternative to the banks because they are mutuals, and that means they are more personal and friendly, charge less in fees and are less risky because we didn't get involved in commercial lending, toxic assets or commercial property or development," he said. 

Victoria's largest credit union, mecu, is in talks with RegionalOne to create one of the nation's largest, with assets of more than $2billion. Mecu, with assets of about $1.8billion and 112,000 members, and RegionalOne Credit Union, with more than $270million and 20,000 members, aim to have the deal approved by members in June. 

Mecu chief executive Phylip Doughty said both credit unions had annualised growth rates exceeding 20 per cent because of increased deposits, a spike in refinancing and strong demand for loans from first home buyers. 

Mr Doughty said consolidation across the sector would accelerate, particularly as interest rates continued to come down and compliance costs rose. 

"The shakeout in the banking sector has been astounding and the Big Four now dominate. This will give credit unions an opportunity to step into the breach where the second tier banks were, and non-bank lenders such as Wizard were," he said. 

As the global financial crisis continues to take victims in Europe and the US, Australia to date has managed to navigate its way out of the mess relatively unscathed. 

The banks, non-banks and mutuals all have their own demons to contend with, but if credit unions can successfully merge to create a few mega credit unions, curb their costs and find alternatives to deposits for funding, they could well emerge as the new force in banking.

Will SAI play hardball?

The finish line is getting closer with SAI Global announcing that it holds 49.38 per cent of voting power in Espreon, the business services company it has made an all-scrip offer for.

SAI will announce today either an extension of the offer or the status of their conditions, revealing whether they will use an alleged breach in their bid conditions to scupper the deal.

The breach was an ACCC investigation into the proposed acquisition started on January 14. Although it has been going on for over a month now, SAI only made note of the breach on Wednesday (see Hopes dashed by SAI, February 18).

If the breach is declared, SAI can either walk away or cancel a sweetener of offering one SAI share for every 4.4 Espreon shares.

However, SAI is unlikely to walk because based on the company's closing price yesterday the value of their scrip offer is less than the lower end of Espreon's 48.5 cents a share valuation, according to independent experts Lonergan Edwards & Associates.

It appears then, that SAI may enter hard-ball phase. Originally the company was seen as something of a white knight for Espreon, fighting off a hostile bid from former competitor Vectis, a private company owned by Melbourne businessmen Alan Schwartz and Jacob Weinmann. However, Espreon shareholders are now likely to rue the day they refused Vectis's original offer of 65 cents a share in June of last year.

SAI is being advised by Macquarie Capital and lawyers Gilbert + Tobin. Advising Espreon are TC Corporate and Baker & McKenzie on the legals. Vectis is being advised by Grant Samuel and Mallesons Stephen Jaques. 

Business Spectator

After announcing it had crossed the 50.1 per cent threshold in its takeover of business services provider Espreon, SAI Global has redeclared its offer as unconditional – allowing Espreon shareholders a great sigh of relief.

SAI said on February 18 that an ongoing ACCC merger investigation could constitute a breach of its terms (Hopes dashed by SAI, February 18), causing consternation once again for Espreon investors who have repeatedly seen their hopes for a positive shareholder exit dashed.

Since mid last year Espreon has knocked back a series of increasingly smaller offers. Former competitor Vectis initially offered Espreon shareholders 65 cents a share in cash in June. SAI is making an all-scrip offer of one SAI share for every 4.8 Espreon shares, effectively valuing the target at 48.96 cents per share. SAI's offer increases to one for 4.4 shares if it comes to own 90 per cent of Espreon.

The outcomes of the ACCC investigation, which begun on January 14, will be announced on February 25 and, hopefully for Espreon, will constitute the last major hurdle to the deal.

SAI is being advised by Macquarie Capital and lawyers Gilbert + Tobin. Advising Espreon are TC Corporate and Baker & McKenzie on the legals. Vectis is being advised by Grant Samuel and Mallesons Stephen Jaques. 

Espreon and SAI - an update

Espreon shareholders could be once again disappointed after its supposed white knight bidder SAI Global said that an ACCC investigation had breached one of its offer conditions, meaning that the offer of one SAI share for every 4.8 Espreon shares may not necessarily go unconditional. The alleged breach will also allow SAI to walk away if it chooses to do so. 

SAI had offered Espreon shareholders a sweetened deal of one SAI share for every 4.4 Espreon shares if at least 90 per cent of shares were acquired by February 27. Latest figures show that SAI holds 45.48 per cent of voting power. 

The competition watchdog's informal review of SAI's proposed acquisition was commenced on January 14 by merger investigators Jason Byrne and Brett Morris. The ACCC has set February 25 as the date it will announce its findings. 

This latest announcement comes as a disappointment after SAI's offer, which valued the target at 52 cents a share based on SAI's closing price of $2.50 on January 9, was welcomed by Espreon on January 13.

The SAI deal favourably compared with a rival offer from Melbourne-based private investment firm Vectis Group, which was offering 45 cents a share in cash.

Vectis, which used to compete with Espreon before selling parts of its business to SAI Global several years ago, first made an offer to Espreon in June of last year – plonking 65 cents a share on the table, or $62 million, before the market went south. 

In a signal that Vectis, led by prominent Melbourne businessmen Alan Schwartz and Jacob Weinmann, wanted to re-enter the sector, Stephen Cooper and Cam Stewart from Grant Samuel were hired to advise on a scheme of arrangement, as were Craig Semple and Nicola Charlston from Mallesons Stephen Jaques. 

Espreon responded by hiring Robert Fraser from TC Corporate, along with legal firm Baker & McKenzie to advise on its options. The Espreon team managed to subsequently force Vectis to raise its offer by an extra $5 million, or 5.5 cents per share, but then that offer was withdrawn, with negotiations returning to the original proposal of 65 cents a share. 

Yet it didn’t stop there. That number was reduced again to 62.2 cents a share in August and to 44 cents in October. By November negotiations were over and the parties agreed to disagree and go their separate ways. It was thought at the time that accounting software giant Reckon would put in an alternative bid. Vectis had, after all, planned to spin off a portion to Reckon had the deal gone ahead. 

However, the day of 'Reckoning' never arrived and Vectis subsequently went hostile, this time reducing its offer to 40 cents a share, increasing to 42 cents if it managed to get full control. Espreon dismissed it as inadequate, opportunistic, uncertain and highly conditional, and a “waste of time and money”. Espreon had, after all, already spent $1 million of cold hard cash on advisory and legal fees for the original scheme of arrangement proposal.

Major Espreon shareholders Hunter Hall (19 per cent) and LUT Investments (12 per cent) had also refused to agree to the deal. Institutional shareholders, including Dick Pratt’s Thorney Holdings control a combined 48 per cent of Espreon. 

Vectis’s offer was subsequently increased to 45 cents cash before SAI, advised by Macquarie Capital and lawyers Gilbert+Tobin, came onto the scene. The rest, as they say, is history.

But now, with SAI throwing this latest spanner in the works, what can history teach us? Don’t look a gift-horse in the mouth? Probably, but it’s not over yet. SAI are due to issue their notice of status of conditions this Friday. 

Business Spectator

Westpac strife lessens, but still annoys

The operational problems at Westpac’s home loan centre in Adelaide may be improving, but they are still creating headaches for the bank.

The bank has cut the expected delays of six weeks in processing home loan applications (for loan applications submitted through the typical mortgage brokers) to nine days.

One factor in the delays, according to advice from Westpac business managers to brokers earlier this month, is that “application numbers reached record highs” creating “an unprecedented pipeline in the system”.

Westpac’s more accommodating stance on lending policies is certainly driving this demand.

It is also leading to the occasional public relations flap.

The Herald Sun today reported that Westpac denied some customers the advertised fixed rate home loan of 4.99 per cent, an offer heavily promoted in December. The bank instead amended final contract documents to a higher rate of 5.49 per cent.

Westpac told the newspaper the bank erred in one case raised with the newspaper, but said its advertising was not misleading. The bank described this as an administrative error.

 

Source Finance News

Fraud and Electronic Settlements (NECS)

FRAUD IN CONVEYANCING

Fraud and Electronic Settlements (NECS)

As most conveyancers will be aware, Australia is heading towards a national electronic conveyancing system, referred to as the National Electronic Conveyancing System (NECS). The NECS is described as “Australia's joint government and industry initiative to create an efficient and convenient way of completing property based transactions and lodging land title dealings for registration”. The proposed NECS is therefore somewhat of a misnomer as it deals with the settlement and registration aspects of the conveyancing transaction rather than a model for electronic ‘conveyancing’ as a whole. For example, the proposed NECS does not cover preparation and exchange of contracts for sale, pre-settlement investigations, procurement of any insurances required by purchasers, such as title insurance, creation of loan documentation or processes for examining and registering instruments once lodged with a Land Registry.

 

Essentially, a conveyancer using the NECS will electronically:

• prepare dealings and related instruments to register changes in ownership and interests

• settle financial transactions (including payment of duties, taxes and any disbursements)

• lodge their dealings with the appropriate Land Registry

• receive confirmation of dealing lodgement and registration.

 

One question which is often raised is whether the proposed NECS will increase or decrease the scope for conveyancing and mortgage fraud. Certainly, the NECS model has not been designed to specifically deal with the allocation of fraud risk. For example, it is stated on the NECS website that “the NECS design is based on, as far as possible, maintaining the existing risk allocations and management philosophies in the paper-based conveyancing and settlement processes.”

Therefore the NECS model does not appear intended to specifically prevent the types of fraud which are currently occurring in the paper based system from occurring in the electronic based NECS on the basis of the re-allocation of risk.

Conveyancers will still be responsible for the registration of title documents as part of the conveyancing transaction and will be responsible for identifying their clients and acting in their best interests. Although it is difficult to draw any reliable conclusions given that the NECS is still in the development rather than implementation stage, a recent study based upon the current NECS model has concluded that the types of fraud currently occurring in the paper system, ie, forgery of signature and identity theft, fraud by solicitors and conveyancers, can continue to occur in the proposed NECS.

In relation to forgery of signature it is noted that whilst NECS certifiers will digitally sign mortgage and title instruments on behalf of their clients, NECS requires a client authorisation form to be completed and physically signed by the client, in which case, fraud may still be perpetrated by a fraudster who forges a signature on the authority and the witness does not follow the proper attestation or the attestation is also a forgery. In this respect the paper concluded that “the only difference between the paper system and the NECS is that in the paper system, the forgery is on the land title document, whereas in the NECS, it is on the authorisation form”.

 

Identity fraud can also continue to occur in the NECS and the onus will continue to be placed on the conveyancer as a subscriber to the NECS to properly identify the client. In this regard, the NECS will require conveyancers to provide certifications on electronic instruments prior to signing them on behalf of their clients. The conveyancer must certify that the “prescribed procedures” in verifying the identity of the client have been followed, and the conveyancer is holding a properly completed and signed authorisation form and has thoroughly and carefully examined and retained copies of all identification documentation.

 

The identity certification procedure is intended to give all participants in the NECS confidence that the practitioner has followed the prescribed procedures to verify the identity of the client and “may protect the practitioner from a negligence claim if the identity is subsequently proven to be false”.

 

Conveyancers should therefore be mindful that failing to follow the prescribed procedures will almost definitely result in a finding of negligence.

 

Although the precise nature of the prescribed identification documents is yet to be determined it is anticipated that there will be some move towards uniformity across the States and Territories and may result in a 100 point system similar to that under the Financial Transaction Reports Act 1988 (Cth) being adopted.

 

It is argued that the NECS may also introduce new opportunities for fraud within the conveyancing industry, namely, the unlawful use of a conveyancer’s digital signature certificate (as a certifier in the NECS) to digitally sign documents. That is, a fraudulent person with access to the NECS, such as a law clerk or other employee, would be able to prepare mortgage documentation, digitally sign the document on behalf a client and lodge it for registration.

 

 

Extract from a paper presented at the Australian Institute of Conveyancers 2007 National Conference, March 2007

By Paul Watkins

General Counsel, Australia

Stewart Title Limited

Mortgage frauds involving counterfeit Certificates of Title

Mortgage frauds involving counterfeit Certificates of Title

Division: Land and Property Information No: 2007/01

Date: January 2007

This circular is issued to advise all LPI customers that a mortgage fraud scheme involving counterfeit Certificates of Title is currently operating. Since late December 2006 at least nine counterfeit Certificates of Title have been identified by LPI. The counterfeits are being used as security to obtain substantial mortgages. All instances of the fraud scheme discovered to date share the following features:

• Loans are sought from non-bank financial organisations and are arranged by a mortgage broker;

• The loans are subject to high interest rates;

• The mortgagor may be unwilling or unable to personally attend settlement;

• Directions are received to pay the loan monies to a third party rather than to the mortgagor;

• An unencumbered Certificate of Title is offered as security for the loan;

• The Certificate of Title used as security is a computerised title dated prior to January 2004.

The counterfeit Certificates of Title used in the fraud scheme are produced by superimposing details from title searches of genuine titles on forged certificates in the format used prior to the introduction of certificates with enhanced security features in January 2004. The counterfeits are of reasonably high quality and are used in conjunction with forged identity documents purportedly proving that the fraudster is the registered proprietor of the land in the title.

Conveyancing practitioners who are approached by potential clients previously unknown to them in circumstances that match those set out above should act with extreme caution. Practitioners are strongly advised to seek confirmation from LPI of the authenticity of the Certificate of Title offered as security before proceeding to settlement.

The Law Society of NSW has recently communicated with its members warning them about the scheme. The following extract from the Law Society notification provides advice that all members of the conveyancing community should note:

“The Fraud Squad has warned of the extraordinary and widespread increase in identity fraud, where whole, well-documented identities are acquired by fraudsters. Forged passports, drivers’ licences, credit cards, letterheads etc are all available to fraudsters. It is not unusual for fraudsters to have an excellent working knowledge of conveyancing procedures, and to falsely sign documents as a solicitor, justice of the peace or otherwise……If a client has not been known to you personally for some time or the signature to be witnessed was not given in your presence, do not act as witness. Think carefully about the wisdom of acting on behalf of a mortgagor whom you have never personally met or with whose directors you are not personally acquainted….The Law Society recommends that in addition to obtaining a clear copy of all documents used in the identification process, practitioners ensure that at least one such document displays both a good quality photo and the signature of the person so identified.”

 Des Mooney Deputy Director General, Department of Lands and General Manager, Land and Property Information

Mortgage Fraud White Paper

Mortgage fraud is a growing phenomenon with a signifi cant and direct impact on every party to the mortgage relationship, including brokers, managers, lenders or securitisers, insurers and consumers. The Mortgage & Finance Association of Australia (MFAA) engage PricewaterhouseCoopers (PwC) to produce a joint white paper on methods to reduce fraud risks in the mortgage loan application process. This paper represents the MFAA taking a leading role to promote discussion about mortgage fraud and strategies to address fraud risk.

The results of the study undertaken by PwC are set out in the following pages. In preparing the white paper, PwC reviewed the current state of fraud in the mortgage industry in Australia and in comparable markets overseas, and conducted indepth consultation with representatives from:

• Banks

• Securitisers

• Mortgage Managers

• Mortgage Aggregators

• Mortgage Brokers

• Lenders Mortgage Insurers

• Professional Indemnity Insurance Brokers, and

• Title Insurers.

The objective of the white paper is to assist members in reducing the risk of mortgage fraud, through awareness of the risks and providing a description of procedures that mitigate these risks.

Electronic Processing 

As with many forms of financial transactions, the future of the loan application process may evolve to include a range of electronic and/or automated aspects. Electronic processing and other technological innovations may improve processing efficiency, however, these changes carry the potential to expose particular aspects of the loan application process to an increased risk of fraud. 

All of these factors will influence consumer confi dence in and response to the mortgage loan application process. A consistent and co-operative approach to the constantly evolving risk of fraud and non-compliance will assist the mortgage industry as a whole in preparing for and managing the potential dangers and, crucially, may assist in sustaining consumer confidence in the process.

Title Insurance 

An increasing number of securitisers and lenders are taking out title insurance to manage risk particularly mortgage fraud. A title insurer will typically put measures in place to mitigate fraud. These include simple procedures for mortgage processors to follow to help detect fraud before the loan funds are drawn down, and working with originators to highlight areas where there is a greater risk of a fraud occurring.

MFAA PwC White Paper

NAB drops Satyam from IT roster

Article from: The Australian

NAB today decided to cancel the second phase of a massive outsourcing project contracted to Satyam Computer Services of India.

National Australia Bank’s technology services general manager, Craig Bright, said the bank would be exposed to too much risk if it continued with the second wave of its IT outsourcing (ITO) strategy, which was given the green light last November.

NAB announced the decision to cancel the Satyam contract at Melbourne’s Telstra Dome today, sources said, conducting separate briefings for its staff and the contracted employees of India’s beleaguered IT services firm.

National Australia Bank would not comment at time of publication.

The termination of the ITO Wave 2 is likely to see working visas revoked for the 100 Satyam staff.

The bank already retrenched about 50 employees, primarily contractors, as part of the early stages of ITO Wave 2, and had previously scheduled another round of redundancies in March.

The bank said it would not sever the ITO Wave 1 outsourcing arrangement with Satyam, which is offering support and maintenance of key technology functions. 

However, it is understood that NAB executives were considering how to stop dealing with Satyam altogether, to either bring the technology functions back in-house, or outsource them to another firm.

While it would take between three to five months to bring the components back onshore, NAB will need to find the internal resources to support the work as it has already retrenched and made redundant hundreds of permanent and contractor staff that were responsible for the functions.

The second tranche of technology outsourcing includes the management of Siebel, payments and account services applications.

The Australian recently reported that NAB encountered a number of problems transitioning technology functions to Satyam in the early stages of the outsourcing program’s life.

At the meeting today, the bank did not outline back-up proposals following the decision to drop Satyam. NAB chief information officer Michelle Tredenick has previously told staff the bank had several contingency plans to deal with situation.

NAB’s ITO strategy - spearheaded by Ms Tredenick - is part of the bank’s upgrade of its technology systems and processes, which also includes spending $1 billion over five years to replace its core banking systems.

Satyam’s chairman and founder B. Ramalinga Raju and other senior executives were arrested after Mr Raju admitted inflating the company’s books by more than $US1 billion ($1.55 billion). Two partners from the company's auditing firm, PricewaterhouseCoopers, have also been arrested.

E Conveyancing - yet another stuffed up project

I’ve been aware of this one for a while, but was reminded by the comment below.

The idea is quite simply, to have one electronic system to do property conveyancing, eliminating all that faxing around of fiddly bits of paper etc.

It isn’t that big a project (speaking with my ex IT Manager hat on) as there are only about 400 000 transactions a year across Victoria, so you don’t need a really wiz bang system to handle that type of volume, and the database wouldn’t be that big either.

Of course, that’s not how the Government is doing it, spending $30M - $40M with no usable system in sight.

This commentary was published on the VicWatch blog