Plan to reduce mortgage expenses

Karen Dearne | September 15, 2009 | The Australian

THE long-awaited National Electronic Conveyancing System could save lenders up to $46 million in mortgage settlement costs a year, the LIXI Industry Forum heard last week.

After years of political wrangling, the NSW, Victorian and Queensland governments have begun talks aimed at forming a company to run the proposed real estate exchange platform.

The platform will be based on data standards developed by the Lending Industry XML Initiative (LIXI) for online processing of property transactions such as home loan applications, approvals and conveyancing.

LIXI chief executive Erik Fenna said a survey of members on the costs of settlement and the benefit of electronic integration -- assuming NECS was completed and had full take-up -- identified cost savings to lenders of about 15 per cent.

"There would also be benefits for consumers, but we weren't looking to measure that at this stage," he said.

"This is never going to happen if lenders don't buy into it, and they won't unless they see a benefit for themselves."

Survey participants estimated that the average cost to lenders to settle a mortgage with a large bank was about $450, and using an electronic system would reduce that cost by about $68.

"Across the industry, that represents $46 million in the past financial year, so there is substantial money to be saved," Mr Fenna said.

While LIXI has no role to play in the design or operation of NECS, LIXI members -- banks, credit unions, brokers, mortgage aggregators, insurers and solicitors -- were insisting on a single national data standard for the system.

"They've made it abundantly clear that there can only be one standard for communication and integration with the settlement platform," he said.

"NECS has approached us, and we will be working together on that."

Mr Fenna said LIXI might also become involved in the development of standards for processes normally considered internal to banks.

"Banks are surprisingly similar in what they do, from a core platform perspective," he said. "Their competitive advantage is in their products, the interest rates they can offer and quality of service.

"But where banking systems are talking to external systems, or where banking systems are modular and use contracted outside resources, then standards become very valuable."

While banks can get a first-mover advantage through custom-building systems to provide new products and services, "the drawback comes down the track when you go to rebuild them, and find you have a load of customised things that you then need to maintain".

Banks now saw competitive advantage in being first to market with mobile banking platforms, for instance.

"In our view, mobile banking is becoming a commodity, and the interface between mobile and transactional banking platforms could be standardised," Mr Fenna said.