LIXI 2007 GMUpdate

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Welcome & Update

Key topic is Membership:

Review of change of membershipLong term aims of the strategyUpdate on impact & feedbackCall to support new model

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Membership Review

Drive to change the membership was on feedback from the majority of members Request can be distilled down to:

Fairness to all membersRelevance to all membersDerived value balance

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Aims of New Model

Aims of new membership & licensing model are:

Encourage use of the standard by breaking barriers to entryBroaden the appeal of the standard by encompassing all areas of industryInvolve more members across new domains to create additional standards

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Membership update

Membership numbers growing$ entry barrier brokenPrevious Associates taking membershipSome Licensing only instances

Smaller entitiesTime or $ barriers

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Call to Action

Check the forms & select carefully

Sign and return forms – corrections?

Organise payment – funding of WGs

Propagate the standards

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Technical Vision – Erik Fenna

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Technical Director’s ReportMarch 2007

OutlineProgress since the last General Meeting

CommissionsProductsValuationsCAL 1.4Loan servicingVocabulary documentation

Plans for 2007Publication timetableLIXICodes“Visible Loans” projectCAL 2 planningLIXI New Zealand NECS

Progress: Commissions

Several major lenders are looking to implement Commissions ASAPBUT looking closely at Commissions raised a few questionsWorkshop held March 5 & 6 attended by CBA, St.George, Aussie, Mortgage Choice and AFG to examine the Commissions standard line-by-lineEnd result is an updated set of requirements that will result in a new release of the StandardThe initial draft of Commissions 1.1 is about to be published.

Progress: Products

AKA “The Never-ending Story”A draft schema now exists for members to testWe are inviting all to test the schema by checking that they can express the products they work with via this schema.Provided we don’t uncover any nasty surprises the Products standard should be released to members by mid-year.

Progress: Valuations

In 2005 and 2006 there were increasing calls for greater assistance to help members implement the Valuations standardIn response LIXI teamed up with NICTA to produce the “Valuations Reference Implementation”:

Fully functional implementation of the standard from both the ends (lender/valuer) of the process, with documentation and process modelsDesigned to give developers a quick start, or at least a working example.

Download available free to all LIXI members from the LIXI website.

Progress: CAL 1.4

CAL has a major gap in that if fails to support applications for non-conforming loansAnother gap that has become important in recent times is support for equity-release loansThe LIXI Applications Working Group has recently re-convened to create CAL 1.4 to plug these gaps.The Working Group held it’s kick-off meeting on Feb.19 and draft Business Requirements are now available online for review and comments by any member.

Progress: Loan Servicing

This is easy - “nothing to report”Loan Servicing is currently a great example of how LIXI work prioritises itself. While there was enough interest shown to get the Working Group started there hasn’t been enough to keep it moving.The moral of this story is that LIXI can only create standards where members provide real and ongoing supportA similar story applies to our long-standing effort to create a standard for Mortgage Insurance applications.

Progress: Vocabulary documentation

All of LIXI’s standards are derived from a common vocabulary. Unfortunately documentation of that vocabulary has been inconsistent at best.We have been incrementally improving the LIXI Vocabulary documentation over recent months, and will continue doing so. A re-write of the LIXI Implementation Guide is also underway.

Plans: Publication timetable

Deliverable Due dateCommissions 1.1 MayProducts 1.0 JuneCAL 1.4 July

LIXICodes

We have long recognised that it would be very useful if every LIXI member could be identified by a single, globally unique identifier - and in fact all the LIXI standards already allow for the use of just such a “LIXI Code”Now the Products and Commissions Working Groups have stated firm requirements for this identifierThe plan is to allocate an identifier to each LIXI member (and licensee?) when they sign up, and to publish and maintain this list at a single location visible to all membersDetails are still being worked out! If you have an opinion on how this scheme can or should work please feel free to speak up.

Plans: “Visible Loans” project

The principles of e-business are simple, but in reality getting everyone connected to everyone is time- and resource-consuming A publish-and-subscribe model would be much easier to set up and maintain than countless point-to-point linksA well-proven technology called RSS could make this possibleIn collaboration with NICTA we aim to develop a demonstration of how this can work, plus a download-able Reference Implementation for all members.

Plans: CAL 2

We have spoken of CAL 2 for years. It is intended to be a major re-write of CAL to get rid of all the quirks and mistakes that have accumulated since CAL 1.0 was first published in December 2001.CAL 2 will be a big change that will require significant work by members to support, so we won’t be rushing developmentAs a first step a white paper outlining how CAL 2 might look is being prepared and will be published in the near future. This will then be extended into a CAL 2 business requirements and benefits analysis.

Plans: LIXI New Zealand

There is strong interest in New Zealand in adopting suitably modified LIXI standardsMany of the lenders, brokers, service providers and software vendors in the NZ market already have experience with LIXI standards in AustraliaExtending LIXI standards to support NZ requirements will provide direct benefits to many current LIXI membersDevelopment of NZ standards can be, and will be, funded entirely from NZ contributionsA decision to go ahead has yet to be made.

Plans: National ElectronicConveyancing System

Actual work is still yet to startAll LIXI members will be notified when a NECS Working Group is formed and will be welcome to participate.

LIXI vs. MISMO

Guest Speaker – Victoria Jones

miss_victoria_jones@hotmail.com

www.lixi.org.au

OverviewStandards- where are we? How did we get here?MISMO- background and structureWho is using MISMO?What is MISMO delivering?What can we learn from MISMO? Barriers to adoption of standardsWhere to from here?Discussion

MISMO- Background

Founded 1999 by the MBA (Mortgage Bankers Association)Over 20 working groups, split according to area of business- XML architecture, governance, eMortgage, origination, etc.Members are elected to the Governance Committee

Who is using MISMO?

LendersSolicitorOriginatorsTrusteesBanksBrokersTitle InsurersBorrowers

FunderCredit AgenciesRating AgenciesMortgage InsurerTechnology VendorsMBA

What is different?

MISMO is directly funded by the Mortgage Industry body- MBAMISMO has several paid staffMISMO provides benchmarking data and guidance for participantsMISMO standards are freeMISMO has defined many policies-intellectual property, Antitrust, etc

What is MISMO delivering?Standards in both residential and commercial lendingGuidance on how to implement MISMO standardsDigital signatureseMortgagesLoan documentation deliveryStraight through processing

Why has MISMO been successful?

Strong governance foundationAccess to fundingStandards are widely accepted Government and Industry bodies collaborate to work towards greater efficiencyCommitment from a wide range of participants- both business and technical

What can we learn from MISMO?

Research is the key- especially when trying to obtain project fundingKnowledge sharing is a business enablerCollaboration produces resultsGovernment backing and flexibility is usefulBusiness understanding drives development

Barriers to the adoption of standards

Lack of business buy inLack of understandingI.T strategy alignmentLegacy systemsCostTimeMotivation

Legal Issues

B2B AgreementsService level agreementsSecurity/ Privacy IssuesIntellectual property rightsCredit reportingDigital signatures

Where to from here?

EducationUnderstandingResearchContributionKnowledge sharingDevelopment

CASE STUDY

USING LIXI TO DELIVER VALUATION EFFICIENCY

Andrew RobertsonCEO, Valuation Exchange

Friday 30th March 2007

Agenda

• Who we are and what we doValuation ExchangeValuation panel management

• How we use LIXI to deliver a better valuation service to the Lending Industry

• Case history: why CBA selected Valuation Exchange as its panel manager

Valuation Exchange

• The panel management business• We don’t do valuations, we manage them• National business• Head office in Adelaide• XML web-based, LIXI compliant system (ValEx)• Built in-house, by our own IT department• Launched in 2005• CBA appointment in 2006• Established panel of valuers – every postcode in Australia• Centralised national processing centre• Compliance department• Monitoring, reporting, analysis functionality• Valuer performance management

Megaw & Hogg National Valuers

• Separate company• Not directly relevant to this presentation – except to confirm that

ValEx was developed in a valuation environment• Currently under combined management for the purpose of resource

sharing – however with a very clear “line in the sand”• The valuation business• 100+ year heritage – Megaw & Hogg established 1902• Head office in Adelaide• National network since 1998/99 - now 14 locations• All offices owned and managed by one company• Launched web-based VMS (ValNet) in 2001• Good mix of bank and non-bank panel appointments• CBA appointment in 2006

ValEx: Objectives

• Market leadershipTechnology ManagementClient service…

• Improved valuation performanceFaster turnaroundLower costTransparency and communicationConsistent qualityNational coverageCompliance and credit risk managementFraud protectionBalancing lenders’ sales and credit risk imperatives

• Technology driven business outcomes

Our LIXI credentials

• Approx 1000 valuations per day being received and despatched via a LIXI standard direct data interface

Market Environment

• Highly competitive mortgage lending market• To be competitive, lenders are looking for

Faster loan approvalsReduced costs and/or increased efficiencies

• At the same time, property market trends demandStronger security/risk managementMore rigorous compliance to meet regulatory requirementsProtection against fraud

• Lenders’ systems are sophisticated, automated, controlled – with the exception, to date, of valuations

• The valuation industry is fragmented, with little consistency or quality control

The Solution

• Outsourcing valuations initially delivered speed and cost savings – but also created inefficiencies by dealing with multiple providers and potentially weakened prudential management

• The solution is to outsource valuation management• Panel management

Captures all valuations in one system, creating the consistency and control inherent in the rest of the loan approval processIntroduces an independent third party with the valuation expertise to ensure quality performance and complianceDelivers the efficiencies required to maintain and/or improve turnaround time and cost savings

The panel management difference

• The old wayValuations are sent to up to 200 different valuation firms all over Australia, each of whom works in their own way on their own system and in their own timeLenders had to chase up numerous valuation firmsNo consistent fees or process

• The new wayA single source for all valuations conducted on the same system and in the lender’s timeframe

• The difference… is not the technology platform, it’s the structure and business process

The role of LIXI

• Establishing LIXI standard electronic data exchange with 200 valuation firms would not, in itself, resolve the inefficiencies inherent in the way valuation processing currently occurs

• LIXI provides a technology platform that can lead to improved efficiencies – but it does not necessarily change the reality that “rubbish in”will lead to “rubbish out” regardless of how high tech the platform is

STP Process Flow

Integrated Industry Solution

• The mortgage industry is now a highly evolved and complex network of players

• LendersRetailWholesaleNon-conformingEtc

• Distribution channelsBrokersMortgage managersAggregatorsEtc

• ValEx has been designed to work seamlessly with, and deliver benefits to, all parties

Industry Structure

How panel management works

• A total panel management solution requiresAn IT system (LIXI compliant)Management systemsDefined policies and proceduresReporting processesQuality control and risk managementA panel (with full national geographic coverage)Valuation expertise (to be able to manage valuers)A legal framework

• So again, it’s not just a technology solution

Direct data transfer (LIXI)

• ValEx can receive valuation requests any way the lender chooses to send them

Fax, email, log on-line• The most efficient process is direct data transfer

No fax, email or phone callNo keystrokesSystem to system, B2B, seamless data transferVia SOAP connection, to LIXI standards

• CBA and ValExAll valuation requests from CBA to ValEx via direct data transferValuation reports from ValEx to CBA as data plus image (pdf) ValEx and some panel firms (eg LMW) also connected via direct data transfer, other panel firms to follow

Direct Data Transfer

LIXI-based Data Transfer Model

ValEx Val FirmsClients

Work in Progress

Valuer is Notified Immediately

Turnaround Times

• ValEx can improve turnaround times• Automatic flagging of key SLA milestones • Micro-managing each valuation – Admin teams

in the National Processing Centre• Reporting and analysis of valuer performance –

comparing subject valuer against all valuers• Re-allocating volumes to better performers

SLA Reporting

Delay/Appointment Advice

Quality/Compliance Controls

• Valuation reports cannot be completed without all required fields being entered

• Automatic compliance checks to identify anomalies prior to report completion

• Compliance department to provide independent peer review

When automatic compliance checks flag exceptionsFollowing queries and disputed valuations

• Reporting and analysis of valuer performance• Currently 13 separate automatic compliance checks

before a valuation report can be completed

Compliance Checks

Compliance reporting

Reporting and quality control example – assessed value vs owner’s estimate

• ValEx records variance between the assessed market value (AMV) and owner’s estimated market value (EMV)

• ValEx can then report on variance between AMV and EMV

By panel firmBy individual valuerBy region By postcodeBy timeframe (eg monthly)

Oct to Dec - AMV vs EMV for WA

Oct to DecAMV vs EMV

Oct to Dec - AMV vs EMV for NSW

Oct to DecAMV vs EMV

Micro and macro management

• Each valuation is “micro” managed through the ValExsystem

For example, each valuation is subjected to the 13 compliance checksEnsures quality control per valuation

• The reporting and analysis processes enable “macro”management over time

For example, which panel firms’ (and which individual valuers’) reports fail which compliance checks more often? Enables valuer performance management (eg training) to improve quality over time

• Both are made possible because all valuation information is stored as data

Commonwealth Bank

• After an extensive internal review, investigating international trends, and an exhaustive tender process, CBA selected ValEx as its panel manager in early 2006

• Implementation occurred via a staggered national roll-out from late June to early November 2006

CBA objectives (from RFP)

• Adoption of a consistent approach to engagement, management and performance measurement of external Valuation services.

• Reduction of internal costs associated with managing a large number of suppliers and transactions.

• Improved turnaround times for Valuations by addressing data errors or inefficient processes that may cause delays.

• Reduction of administrative costs and delays through automated workflow solutions.

• Cost savings achieved through more efficient and automated processes.

• Cost savings achieved through consolidation of volumes where appropriate.

• A roadmap and incentives for the future to enable the Bank to work with the Manager to become a low maintenance customer.

CBA benefits (actual)

• Faster turnaround timesFrom 3 day to 2 day SLASLA achievement from 60-80% to 80-90+% (average)

• Direct cost savingsLower valuation feesFixed valuation fees (no extras like travel costs)

• Indirect cost savingsLower valuation-related internal costsGreater process efficiency (towards STP)Single point of contact to streamline communication

• TransparencyDirect “line of sight” access to valuation recordsOpen reporting – CBA has its own access to ValEx reporting functionality

Lower internal costs

• “The ValEx system has enabled us to save a 3 hours per day casual position that we used to need to follow up all of our valuations – now we don’t. Your system is working exceptionally well.”

Janine Andersen, e-Choice Home Loans

Valuer friendly

• “In regards to on-line systems, out of those which have been utilised by Suburban Valuation Services, including ValEx and (two competitor names deleted), the most advanced and user friendly was certainly ValEx. Those at (name of lender deleted) were informed that, if an on line system was to be fully implemented, ValEx was the most desirable to be used by our firm.”

Brendan Aylmore, Suburban Valuation Services, Perth

Summary

• Valuation Exchange has proven performance managing 1000 valuations per day

• Valuation Exchange does deliverFaster turnaroundsLower costs (direct and/or internal)Improved operational efficienciesEnhanced quality control and complianceGreater transparency

• Valuation Exchange is the only Panel Manager that delivers this total panel management solution

• LIXI standard direct data exchange is integral to Valuation Exchange’s technology processes – however it is our management processes that deliver the results

NICTA LIXI ProjectsUpdate: March 2007

Paul Mackie

About NICTA

• Established 2002

• 300 research staff, 250 postgrad students, 15 research programs, 6 laboratories, 4 cities

• NICTA members:

• NICTA partners:

ANU_...

NICTA Empirical Software Engineering (ESE)

• ~40 people in total:– 14 staff

• Sydney: 13 ↑• Canberra: 1 ↑

– 12-15 postgrad students– 10 undergrad thesis students

• Three inter-related research disciplines:– Requirements Engineering– Software Architectures– Process

• Use-driven fundamental research– All projects involve industry collaboration

NICTA contributions to LIXI-related work:

• 1H 2005:

• 2H 2006:

• 1H 2007:

LIXI Projects and Activities

• Business Process Modelling

• LIXI Valuations Reference Implementation

• New Project: “Visible Loans”

• Research and technology seminars

Business Process Modelling

• Formal Loan Approval process

• LIXI Process Handbook v1.0, March 2006

• Handbook v2.0 in progress– Formal Loan Approval Process v1.5

• Includes LIXI ‘artifacts’

– Evaluation of available BPMN modelling tools

• Further process modelling research– North American collaboration

• U.Mass. Amherst

LIXI “Visible Loans” project

• Wholly new research initiative

• New standard technologies (publish-subscribe feeds) for relaying and updating loan and related information

• Long-term goal: Use of ubiquitous feed technology to communicate freely and securely any non-transactional information between parties

• Short-term goal: LIXI Loan Product Configuration updates as a pilot / model of the technique

Research and Technology Seminars

• Regular (eg., quarterly) presentations; variable format– 1 hour overview– 2 - 3 hr tutorials

• Subject matter experts– NICTA researchers– Invited guests

• Technology-focussed topics; relevant to LIXI members– Eg., Implementing web service technologies– Ontologies and vocabulary mapping– …

LIXI Valuations Reference Implementation

• Project started 2H 06– Technology demo, Sydney: Dec 06; Melbourne: Mar 07– Reference Architecture and Implementation Guide – BPEL code for LIXI Valuations Process– Web Services Interfaces

• Further work on supplementary software– LIXI compliant, but not part of contributed LIXI standard

• Case Study on adoption of Ref Architecture/Implementation– Benefits for participating companies (lenders, valuers):

• “first mover advantage”

• early access to additional NICTA solutions and research capabilities

• direct feedback for improvement of valuation processes

– See leaflet!

Q&A – Thanks to Contributors

Andrew MorrisonPaul BridgestockDominic Romeo

www.lixi.org.au