Hi @JulesM
Great question and one that is asked regularly by members. Similarly, banks ask “why hasn’t the practitioner hit the “ready for shortfall” button?
It’s clear the process can be difficult as there are many dependent activities, and each case has it’s own set of “gotchas”. Here at PEXA we know the frustrations and have embarked on a project to improve on-time settlements across the industry. Our work so far, has identified some key points:
- Incoming mortgagees are reliant on the practitioner selecting the “ready for shortfall” button to enable them to enter loan funds
- Ready for Shortfall functionality provides an indicative figure for the bank to work with – they can’t enter an amount without this
- Stamp Duty verification needs to be performed prior
- Practitioners are reliant on banks completing the shortfall indicator to be able to select “ready for shortfall"
- Incoming mortgagees should utilise the tick boxes for loan docs sent and loan docs received to enable timely follow up with the client
- Outgoing mortgagees should utilise the tick boxes for DA sent and DA received
- Delays in receipt of mortgages and related documents, is a key reason for delayed settlements – we call this the “fruit bowl factor”
- This type of delay can grind the whole settlement to a stand still. Where jurisdictions allow, banks are deploying e-documents for digital signature which are effective at speeding up the turn around (no time in the post, not need to print and wet sign) etc
- Stamp Duty verification delays are also a key contributing factor for delayed settlements
- There are often good reasons for these delays, but, it does cause a knock on effect
- All documents need to be created to calculate figures – document and land registry fees are calculated post document creation
- Bank figures can be delayed by a client paying out additional debts for which payout figures are required
- Matters can have complex funding structures or be linked to other transactions
- Payout figures (indicative) can be provided early, however final figures can be difficult to provide until the day of - in many cases they can change depending on client behaviour
- Locking client accounts is not possible in most circumstances
Amongst this landscape of interdependencies, there have been some additional challenges. The majors have been open with their struggles throughout the pandemic with short staffing, change in processes to support remote working, swift onshoring of teams, recruitment and training difficulties. It’s been a rough ride for the entire industry as transaction numbers soar in response to the pandemic and low interest rates.
Importantly, we have discovered that around 30% of transactions scheduled to settle on a given day, will not settle on that day. Often other parties to the transaction are not aware, resulting in wasted effort for those parties. PEXA has developed health indicators to let participants know when things are off track on the key elements of a settlement. New functionality will be available in our R15.0 to help with this and a trial in the jurisdiction of South Australia will commence shortly. Rest assured, the entire industry are working together to improve the settlement experience for everyone.
Hope this helps!
Belinda
