In the last few years, a number of digital mortgage lenders have entered the market. These lenders have been described as ‘disruptive’ - entering with an aim to simplify and streamline processes, and ultimately, reduce turnaround times.
As new digital lending experiences enter the market, ones that are fully integrated - combining the borrower's experience with an automated lender workflow - we look at how electronic signing plays an important part in the mortgage process.
Mortgages - 1 in 4 households in Europe have one
Mortgages account for a substantial part of the financial services market. So, for tech startups, this is very largely an untapped market for digital disruption, creating a great area of opportunity for lending platforms - an accessible alternative to legacy banks.
As 1 in 4 households have a mortgage, as well as many other services becoming digitized, a surge in digital lending should be expected. Here are some reasons why;
- Online lenders are always at hand. There are no hours that the consumer needs to comply with. Around the clock accessibility is key, resulting in a simplified user experience.
- Unbiased decisions are made by the lender based on data submitted, credit scores and any other important information.
- Faster turnaround. Customers can see the application process from start to finish as information is verified in minutes and not days.
- The potential for lower interest rates. As less human interaction is required and alternative lenders do not need to comply with as many regulations as legacy banks, flexible, competitive rates are likely to be offered.
- No human error.
- For the lender - enriched data that can be analyzed moving forward, giving the lender a competitive edge over legacy banks. Data that details customer decisions, lending habits, geographical data, house price trends and so on… all in one place.
Electronic Signatures & Mortgage Deeds
Once the mortgage has been accepted, the mortgage Deed specifies the loan’s terms and conditions. This legal document includes information about the parties involved, the property, the loan amount, the interest rate, and other important details. It also gives the lender legal rights to the collateralized property.
Electronically signing a deed is a safe and convenient way to conduct business that saves time and money while also reducing paperwork. The deed is stored electronically and cannot be lost or changed once it is signed.
Qualified Electronic Signatures
Depending on the transaction, the eIDAS regulation (Electronic Identification and Trust Services for Electronic Transactions) may require a Simple, Advanced, or Qualified eSignature.
However, conveyancer-certified electronic signatures require a witness to sign in the event of when an electronic signature is used. This means that the electronic signature needs to take place in front of a witness. It necessitates the use of an operating system or a platform that manages the electronic signing process, including the creation of the electronic signature. This also means that if more than one electronic signature is required, dual signing capabilities become a requirement.
However, if and when a document is signed using a qualified electronic signature , the identity of the individual is verified by a ‘qualified trust service provider, which will eventually replace the assurance that is usually provided by the witness, resulting in a more streamlined process of proving digital identity for property transactions. When verifying the identity and creating the signature, the qualified trust service provider must meet a strict set of standards outlined in the eIDAS legislation.
Qualified signatures include built-in security for the signatory's identity as well as encrypted evidence of what, how, and when they are signed. In this instance, a witness to the buyers or seller's signature is not required.
Digital transformation is a priority for businesses within the mortgage space that are looking to differentiate themselves from other mainstream providers. By adopting a fully digital process and using qualified electronic signatures enhances customer experience and security as well as building digital trust.
- Selected articles on eIDAS (2014-today), by Gaurav Sharma, Guillaume Forget, Jan Kjaersgaard, Dawn Illing, Dawn M. Turner, and more
Our practice on electronic signatures (28. March 2022 ), by the UK - HM Land Registry
- eSignature - Create and verify electronic signatures in line with European standards (retrieved April 2022), by the European Commission