Settlement to Post Settlement processes from 2009 and beyond A Mortgage Processor’s Perspective 10 September 2008 Perpetual Lenders Mortgage Services (PLMS) Mike Abel

1 Agenda  Who are PLMS and why do we have a unique industry perspective?  Where do we see the inefficiencies?  How do these inefficiencies translate into higher costs?  What can we, as an industry, do to reduce these costs?

2 Our role provides us with a unique insight into mortgage processing Securitisation Services Mortgage Services Loan Origination Mortgage Prep & Settlement Loan Servicing Trust Mgmt & Investor Reporting Trustee & Paying Agency Document Custody Variations & Discharges Application Processing Credit Assessment Our vision To leverage our capability and market position as a securitisation trustee by rapidly driving growth in the mortgage services business and becoming an industry hub and outsource partner of choice to the lending industry. We are not a lender or originator but provide services to ■ 40 different lenders ■ 170 different originators Our services cover all transaction types Broad market coverage means we see “best” and “worst” processes

3 Mortgage Processing is still a very manual, paper-based process Certification Settlement & Securities Receiving instructions Document Preparation Post Settlement

4 Mortgage Processing is still a very manual, paper-based process  Instructions are mostly received via , post and fax meaning we need to re-key data  Duplicated data entry leads to  additional processing time,  increased cost; and  higher risk of errors Certification Settlement & Securities Receiving instructions Document Preparation Post Settlement

5 Mortgage Processing is still a very manual, paper-based process  Paper documents are produced and via post/courier to borrowers  Associated costs include ■ paper ■ postage ■ file storage ■ staff handling  Reworks Certification Settlement & Securities Receiving instructions Document Preparation Post Settlement

6 Mortgage Processing is still a very manual, paper-based process  Heavy reliance on phone calls to obtain / provide status information  Client specific processes reduce productivity – high staff costs Certification Settlement & Securities Receiving instructions Document Preparation Post Settlement

7 Mortgage Processing is still a very manual, paper-based process  Physical settlements involve  Significant staff cost – weekly/monthly workload fluctuations  Production of manual bank cheques  Cost to maintain CBD settlement location  Manual stamping/lodging  Varying processes in each state  High QA costs and potential for errors Certification Settlement & Securities Receiving instructions Document Preparation Post Settlement

8 Mortgage Processing is still a very manual, paper-based process  Variations and Discharges  Process are predominantly manual  Little use of data exchange Certification Settlement & Securities Receiving instructions Document Preparation Post Settlement

9 Understanding the cost of processing a mortgage What does this mean to a lender? Cost of approximately $500-$1000 per loan over the life of loan Includes cost of initial loan, discharges, and variations but can escalate depending on the number of variations Not including lender/originator costs A relatively small investment by lenders and originators can reduce the cost of processing mortgages. As we reduce our costs – you reduce yours.

10 What can we, as an industry, do to reduce costs? Support NECS implementation Develop standardised processes across industry Commit to other forms of electronic processing Invest in LIXI compliant B2B infrastructure Reduced Costs $$

11 Support National Electronic Conveyancing System (NECS) implementation Reduced labour and risk associated with physical settlements Instant registration eliminates risk of not being able to register valid interests Increased data integrity documents are known to be registrable prior to settlement Eliminate manual cheque processes Benefits of using NECS Short implementation time frame commencing 2010 Your initial technology investment could be significant Introduction of new processes eg digitial signatures Managing a hybrid model combining electronic and manual processes Implementation Challenges The Role of Licensed Service Providers (LSP) Companies like PLMS will act as LSP’s to provide tailored user interfaces, integration and support services to NECS subscribers as an alternative to directly accessing NECS themselves. Benefits of using an LSP include Insulation from complexities and costs involved in new process/technology build Value add services beyond what NECS provides Seamless transition to NECS to manage the hybrid period

12 Invest in LIXI compliant B2B infrastructure Manual Data Entry Origination Systems (STP) Loan Management Systems Mortgage Processing System Client SystemsData transferPerpetual System

13 Invest in LIXI compliant B2B infrastructure Manual Data Entry Origination Systems (STP) Loan Management Systems Mortgage Processing System B2B LIXI Interface Client SystemsData transferPerpetual System XX

14 Invest in LIXI compliant B2B infrastructure Origination Systems (STP) Loan Management Systems Mortgage Processing System B2B LIXI Interface  Client SystemsData transferPerpetual System Benefits Faster turnaround Reduced cost Benefits Eliminate duplicate keying More accurate data  Instructions via LIXI / XML data exchange from client system  Process status updates via XML data exchange  Reduce external and internal follow-up communications  Readiness for electronic conveyancing

15 Commit to ‘new’ processing technology Efficiencies can be gained by moving to instead of post Online instead of phone call Image files instead of hardcopy document New technology Title Data We need guaranteed title data – not just guaranteed titles Reduce the need to read and interpret titles We need to ask the titles offices to provide this now – even with NECS In addition to NECS, there are other ways you can implement ‘new’ technology to enhance process efficiencies, reduce costs and ready your business for NECS implementation.

16 Develop standardised processes across industry Lenders need to ask two questions … 1.How much is our unique process costing in  Increased service provider cost  Higher technology cost  Added complexity when implementing new industry developments (e.g., NECS)  Inability to report/track/monitor multiple entities (specifically in wholesale segment) 2.Does our unique process really offer competitive advantage? Reconsider the ”Panel” Model Process standards are needed around  Methods of fee payments  Document recipient  Disbursement reporting  Settlement booking  Surplus funds management Our experience indicates that most process variations provide little to no advantage to the originator / lender – but significantly increase their cost. Data standards are a step in the right direction but process standards are also needed

17 In Summary  Our role means we are uniquely placed to understand the inefficiencies and costs associated with what is a predominantly manual process.  There is a need for process standards and technology enhancements across the industry.  National Electronic Conveyancing System and LIXI will be key factors in gaining process efficiencies and reducing costs.  The use of Licensed Service Providers should be considered as part of your NECS implementation strategy.