The aim of OCE-OLA is becoming paper-free, speeding up and securing loan application processes, improving home finance information, overcoming geographical boundaries, increasing product availability and offering the best combined loan product in Iceland. The website offers an instant on-line credit evaluation for calculating a maximum home buying price, effective calculators and loan application procedures, electronic forms and instant messenger service. Information is available in 8 foreign languages. Figure 1: www.ils.is OCE-OLA is owned and administered by the Housing Financing Fund (HFF), originally organized in co-operation with the Savings Banks (SB). The service is fast, free and efficient, available to anyone buying a home in Iceland.
Policy Context
HFF has been a leading actor in home financing, but is now faced with competition from the Icelandic banks. Iceland boasts of very high quality housing and an exceptionally high rate of home ownership, about 80%. HFF was established on January 1st 1999, taking over all assets and obligations of its predecessor. HFF is the largest issuer of inflation linked bonds in Iceland. The history of public lending for residential housing dates back to 1955 when the law on housing control, mortgage lending for housing construction, and the elimination of unhealthy housing was confirmed. The Icelandic government has laid out the strategy to take a worldwide lead through the use of information technology as a means to increase prosperity and improve living conditions in Iceland. The legal frame, regulations and the working methods of the government have been reviewed in terms of information technology in order to stimulate technological progress and make the information accessible to the public regardless of economic situation and residency. OCE-OLA clearly identifies with this strategy. The educational level in Iceland is very high and businesses compete to improve their procedures and increase the effectiveness and efficiency of their approach using the best technology available. OCE-OLA goes further in the credit evaluation and borrowing process than anyone else has ever done in Iceland before, providing significant benefits to the inhabitants of Iceland. HFF’s main stakeholders are its customers, the government, the Ministry of Social Affairs, real estate brokers, lending institutions, local authorities, the construction industry, co-operative partners SB and the Association of Real Estate Brokers. Contributions from every stakeholder are integrated in OCE-OLA on-line to benefit the customer. This unique invention could make a fine example in Europe. Figure 3: The integration of main stakeholders
Description of target users and groups
HFF is owned by the state and has been a leading actor in home financing in Iceland. Its main role is to provide affordable loans to individuals on the best non-discriminating terms available at any given time and location. The target group of OCE-OLA is everyone buying a home of a modest size in Iceland. The population of Iceland is approximately 300.000. Home ownership is very high, about 80%, and the average homebuyer moves to a new home several times in a lifetime. HFF is accessible to all home buyers in Iceland, but its main customer groups are home buyers in rural areas, young people, immigrants, senior citizens. HFF mainly provides loans in three different categories, for individuals to purchase pre-owned housing, purchase or build new housing, repair or improve currently owned housing HFF also provides loans to individuals who need to renew or improve their housing due to their limited physical capabilities. The rural area of Iceland is very large. About 70% of real estate is placed in active marketplaces, mostly in the capital area. The banks only run branches in active marketplaces. About 90% of the population use the internet, therefore eGovernment is vital for HFF. Figure 2: Distribution of the Icelandic population. HFF funds its activities on the free market by issuing bonds. The larger the bond issue, the more affordable terms come out of the bidding. Therefore, the larger the group of borrowers at HFF, the better the terms on the bonds. In order to perform its social duties on affordable terms, it is vital for the fund to issue bonds to fund loans to a large number of home buyers in Iceland. OCE-OLA helps achieving that goal.
Description of the way to implement the initiative
HFF, a leading actor on the housing loan market, was faced with competition from the banks, starting in 2004. The banks invaded the market by offering low interest mortgage loans, used by clients for consumption as well as refinancing. This lead to significant prepayments and payoffs of HFF mortgages. HFF had prepared the web services and co-operation with some of the stakeholders before the sudden emergence of the banks to the market. HFF managed to quickly offer web services that opened up the channel of distribution, keeping its market share despite the banks’ low rate loans and marketing campaigns. The result was a better combined loan product for home buying in Iceland, offered across Iceland. The product was launched on a special site through a co-operative project of HFF and SB in December 2004. The website offers on-line credit evaluation calculated in seconds, effective calculators and a loan application procedure that can be handled by the client or the real estate broker. A quality credit evaluation and borrowing process emerged for the first time on-line in Iceland. HFF moved from a massive paper-based system to a highly modern on-line web service for housing loans, hence providing the best loan service. Multi-channel issues: HFF’s and SB’s outstanding on-line web services depend on successful co-operation and integration of internal and external procedures. Internal integration enables HFF’s staff in a small village in Northern Iceland to offer customers the best service and information based on on-line messenger service and closed data-lines. The elements of the HFF’s web service system are a loan arranging system, One CRM (Contact and Relationship Management system), e-mail, closed data-line, HFF’s instant messenger and telephone. External HFF’s web services take input from five State agencies; the Land Registry, the Notary Public, the National Registry, Statistics Iceland, HFF’s collection agency, in addition to the Association of Real Estate Brokers and Creditinfo Group. Loans through HFF´s all-inclusive on-line system can be processed anywhere in Iceland. A customer located e.g. in Western Iceland can apply via the internet and collect the loan papers at any branch of HFF or SB in Iceland. The loan papers must be issued and documented by the Notary Public. On-line personal assistance is also available at the Sauðárkrókur branch through on-line messenger service, e-mail or telephone. Figure 8: -OLA; On-line Loan Application As OCE-OLA deals with personal and private financial information, the security standard is very high. OCE- grants two passwords, one with detailed information for the customer and another with a summary for the broker. The broker can submit a copy of the bid or sales contract and scanned documents, as attachments with the application. HFF ensures security on the internet by running web forms on SSL (Structured Safety Language). Figure 9: OCE-OLA; Internal and external processes OCE-OLA improved administrative efficiency and effectiveness and reduced administrative burden. OCE-OLA uses the latest technology available. It is flexible and can adapt rapidly to changes in the business environment, it is designed to receive input from the various stakeholders.
Main results, benefits and impacts
HFF introduced revolutionary changes in processes in December 2004. The result was OCE-OLA, the best on-line loan web service in Iceland. Before the instant On-line Credit Evaluation system (OCE-) was launched, average lead time was about one week. The process of OCE’s predecessor also required some manual handling of papers, such as a summary of applicants’ salaries, buying contracts, tax reports, mortgage certificates, payment reports, etc. The On-line Loan Application (-OLA) process takes about 2-4 days, while the previous process took 7-10 days. Figure 4: OCE-OLA The OCE- is supported by efficient calculation tools and reliable cost information. Applicants receive quality information on home-buying expenses and an evaluation of their home buying capability. Calculations are ready in seconds, an electronic check of Creditinfo Group is performed and the final outcome e-mailed to the borrower instantly. Loans are processed at HFF’s headquarters in ReykjavÃk. HFF employees at Sauðárkrókur, a village in Northern Iceland, handle most of the consulting and communication with the customer via on-line messenger service and telephone. The SB network around Iceland also offers personal and on-line consulting. Closed data-line enables HFF and SB to provide the same information to customers at any branch. The cost of the project www.ibudalan.is (OCE-OLA) totals €413.000. The total cost of renewing HFF’s homepage, www.ils.is, amounts to around € 177.000. OCE-OLA leads to staff reduction of about 1.5 full time-equivalent units or about € 70.000 a year. Applicants are gaining more and better information as well as saving money. Before the innovation of OCE-, applicants had to go to a bank for credit evaluations, paying € 35-80 pr. evaluation. Prior to the change, the total number of users on HFF’s website (www.ils.is) was 30-50.000 pr. month. Since OCE-OLA (www.ibudalan.is) was launched the monthly number of users of www.ils.is and www.ibudalan.is (OCE-OLA) has increased to 90.000. Since a renewed version of www.ils.is was launched in June 2006 the number of users has risen from about 30.000 up to 68.000, equalling almost 25% of Iceland’s population. Accumulated users of www.ibudalan.is and www.ils.is are from 60.000 to 100.000 since the adoption of the co-operation project OCE-OLA. Figure 5: HFF’s websites: Customer use Figure 6 demonstrates that the total number of approved applications in -OLA was more than 6.000, a considerable decrease from the year 2005, when the number was almost 8.000. The total amount of approved applications also diminished from € 799.000 in 2005 to € 539.000 in 2006. The total amount of loans and debtors at HFF decreased in 2004, 2005 and 2006 following a continuous increase over the years before. Figure 6: Number of applications, loans and debtors This is normal, now that HFF is facing competition from the banks due to recent changes in the loan market. Figure 7 shows the number of applicants in –OLA and its predecessor at HFF. In August 2004 the banks entered the mortgage market, offering lower interest rates than HFF was offering in addition to launching huge marketing campaigns. The banks used to arrange credit evaluations for HFF’s customers and served as a distribution line to the customers of HFF but this service was cut off when the banks entered the market. One major step in defending HFF’s existence and equity was to reconstruct its web services. The initiation of the web services resulted in HFF keeping its market share despite the situation on the home funding market. Figure 7: Four moments on the Icelandic home funding market Innovation: This case is exceptional because it has changed a slow and extensive paper-based system into a highly effective modern on-line web system; a system that gives the best available service on the market and breaks down geographical boundaries. An arrangement that co-ordinates internal procedures at HFF and external procedures with HFF’s co-operator SB; the Land Registry of Iceland (LR), the Notary Public of Iceland (NP), the Association of Real Estate Brokers, and HFF’s collection agency. That scheme moved HFF from a threatening market situation to stability, success and growth. This case is excellent because it has accelerated the credit evaluation and loan application process, saved the client time and money, reduced human failures, and administrative burden. Additionally, it has made HFF more independent, not having to rely on the banks´ services in terms of credit evaluations. It offers fast electronic processes as well as outstanding personal assistance through instant messenger and e-mail. The instant messenger service has enabled HFF employees to communicate with the deaf population. The new web service, www.ils.is, offers outstanding calculation tools. The website also offers calculators that compare loan offers e.g. new loan options on the market or existing ones that can be taken over by the new owner, and calculate the optimum loan product on the market for the applicant, possibly a combination of new and existing loans. This is a case of exceptional co-operation of five State agencies, the HFF, the LR, the NP, Statistics Iceland and the National Registry of Iceland. The system collects all information regarding the property from LR‘s and NP‘s databases; the type of property, the name of property and address, the fire insurance value and the registered value. This case includes an electronic credit history check both at HFF and its co-operative parties.
Return on investment
Return on investment: Not applicable / Not availableTrack record of sharing
HFF is willing to provide a lecturer on this system; a system known as the best on-line credit evaluation and loan application system in Iceland. OCE-OLA has obvious potential for diffusion in Europe. The on-line procedures and the coordination of the underlying technical systems can easily be used as a model for other European countries. HFF has placed an emphasis on a user-friendly, customer-oriented web system. The system, its information and calculators are to the point and one click away. Therefore other countries can easily learn from the system by looking at the webpage www.ils.is. HFF collects electronic information from the databases of the Land Registry of Iceland (LR) as a part of the HFF´s system. The LR has sent lectures on its database to other parts of Europe forming a database that has now served as a role model for other European countries. The database plays an important role in modernizing the HFF system. Joint lectures from HFF and LR in Europe could be a good idea. HFF is looking for ways to share its practices and learn from ideal models in neighbouring countries. For example, the head of HFF’s Department of Development spent a year working with the CEO of Husbanken in Norway. The head of HFF’s Finance Department also has brought a wider international financing experience to HFF, being the former CEO of a Kaupthing bank branch in Sweden. In the restructuring process of HFF’s website, the Swedish website www.sbab.se was used, among several others, as an overall example of a user-friendly and concise website. Additionally, governmental housing administrators in the Nordic Countries meet annually to share experiences, providing lectures and debating recent housing issues.
Lessons learnt
Exceptional regional development policy OCE-OLA is a case of exceptional results of regional development policy. The electronic procedures make it possible for the staff at Sauðárkrókur, a small and remote town in Northern Iceland, to handle most of the consulting and communication during the process. Co-operation with stakeholders The success of OCE-OLA is based on extensive co-operation with stakeholders. Primarily, the co-operation with the real estate brokers and their possible involvement in the procedures has been very successful. Secondly, the co-operation of the five State agencies has proven to be flexible and under constant development. Thirdly, the electronic on-line credit history check has made it possible for the credit evaluation results to pop-up instantly. Paper-free and fast The OCE-OLA process is almost totally paper free. The only paper needed in the process is the loan document issued in the end of the process. The predecessor’s process of the OCE- required large amount of papers to be handled manually, such as a summary of applicants’ salaries, buying contracts, tax reports, mortgage registers, payments reports etc. This results in a much shorter process, from 7-10 days down to 2-4 days.
Scope: National