Alan Dring, Sales Director at eConveyancer,
Hardly a day goes by without a technology story of one sort or another hitting the headlines in the financial trade press. As I wrote this article, the big news was the rush among lenders to be the first to make instant offers. It isn’t a matter of ‘if’, it is simply a case of ‘when’ and I suspect the answer is within the next few months.
The pace at which automation is speeding-up the mortgage process is almost frightening, but it is a roller-coaster ride that most in the mortgage industry are quite happy to endure. The benefits are clear for all to see; for borrowers, brokers and lenders. Faster application-to-offer times, fewer mistakes being made, happier customers and cheaper processing costs.
One aspect of the mortgage application process, which is outside lenders’ control, is the whole issue of conveyancing and, despite everything lenders are doing to automate the mortgage process, conveyancing has been lagging behind. However, I emphasise the words ‘has been’ because the world of conveyancing is itself undergoing something of a revolution and the days of Dickensian lawyers processing vast piles of paper will soon be consigned to history. In its place will be lawyers working online as part of a conveyancing process which is integrated, efficient and fully transparent.
A time for reform
Look at the conveyancing process as it is today and it’s easy to see why problems occur. Numerous individuals representing various organisations all have different priorities and time scales attached to what they do. It only takes one cog in the machinery to get out of sync and the whole process comes to a grinding halt.
Which is one of the reasons the Land Registry is on a mission to reform the whole conveyancing process. The Land Registry website states that it wants to transform the conveyancing service in England and Wales and to improve the house buying and selling process for the public. Its vision is to ‘deliver a world class conveyancing service, where the worry and risk of the conveyancing process are significantly reduced’ and where ‘authorised parties involved in a conveyancing transaction can exchange information quickly, securely and reliably with each other’.
The move to reform the conveyancing system started in 1998 when the Law Commission and Land Registry presented their preliminary ideas in a report entitled ‘Land Legislation for the 21st Century’. A period of consultation then followed involving lenders, estate agents and conveyancers and in 2002 the Land Registration Act was passed, which came into force in October 2003. This Act contained the legislative provisions for the introduction of e-conveyancing. The Finance Act of 2003 also introduced Stamp Duty land tax (SDLT) which, among other things, enabled Stamp Duty to be processed at the same time as land registration. The full package of reform was delivered in December 2003.
Perfect timing
The timing couldn’t be better, as it will dovetail with the introduction of Home Information Packs (HIPs) in June 2007, when the integration of work undertaken by lawyers, estate agents, financial advisers and lenders will become so much more important than it is today.
In reality, the production of a HIP is simply the undertaking of a number of elements of the conveyancing process on behalf of the seller rather than the purchaser, before a formal offer has been made. HIPs aren’t really introducing anything new; what they are doing is ensuring the paperwork is completed upfront by one party, rather than at the back-end by a number of individuals who make an offer on a specific property.
The introduction of HIPs will therefore act as an important catalyst to the process of updating and automating the conveyancing process. Having information available in an electronic format which is useable by everyone involved with HIPs will be essential.
When you read the sometimes heated debates currently raging about HIPs, it is important to view HIPs within the context of the entire housing transaction process. HIPs, like the e-conveyancing automation project, are all about making information transparent, easily available and instantly at hand to those people who need it. HIPs are but one cog in a larger automation project and it is worth keeping the ultimate vision in mind – to have a fast and efficient house buying process for all, rather than the current system which is still based on Dickensian principles.
What HIPs will also do, by default, is to make the HIP provider far more pivotal in the whole house sale process – which is why mortgage intermediaries need to ensure they include HIPs as part of the service they provide for their clients.
The major changes to the conveyancing reform process don’t end with HIPs, however. The Land Registry intends to develop an integrated e-conveyancing service which will comprise three main elements:
- a central ‘chain matrix’ service;
- an electronic funds transfer (EFT) service; and
- a channel access service.
An EFT service will be linked to the central service. The central service will be responsible for processing and accounting for all monies involved in a transaction and in a chain of transactions, required to effect legal exchange and completion and to settle associated costs. It will enable payments to be made simultaneously with greater efficiency and certainty than at present. It will also enable buyers to know not only the day of completion of their purchase but also the time when the keys to their new property will be released.
A channel access service is also being developed to enable users to access these services.
The project is ambitious and will take several years to complete. The Land Registry’s IT infrastructure needs to be enhanced to support these developments and a range of e-signature solutions are also being tested in conjunction with IBM. Further consultation meetings with interested bodies are planned to take place before the project moves forward but the Land Registry is hopeful it will be able to deliver a fully functioning electronic e-conveyancing system by 2009.
Tackling transparency issues
The first phase of this project is the testing of a prototype chain matrix in Portsmouth, Fareham and Bristol for six months between Autumn 2006 and Summer 2007. The LandRegistry views the chain matrix as the backbone of its new approach, as it will tackle one of the key issues of the current system – a lack of transparency.
Conveyancers and their clients (and other authorised parties such as lenders) will be able to log-on to a private website and track the progress of all transactions in a housing chain, identifying progress against key milestones. The chain matrix project will be implemented in various stages and the Land Registry hopes it will be fully operational in 2009.
There is much to do before then, but there is also plenty of evidence that progress is already being made on a number of different fronts. At the moment, it takes on average 13 weeks to progress from offer to completion, a timeframe which most people in the industry agree can be shortened dramatically.
However, faster turn around times are not the only benefit that the new e-conveyancing system will bring. It should also help reduce errors and the scope for fraud. At the moment 50 per cent of applications to the Land Registry have something wrong with them. It may be a simple spelling mistake or more significant issues, such as incorrect information. The system is also vulnerable to fraud, particularly impersonation. The new system, when fully implemented, will be both more accurate and more secure.
Whether the developments taking place in the world of conveyancing will ever end in a truly paperless housing transaction process I don’t know, but somehow doubt. However, eliminating paper is not the objective of the exercise. Eliminating cost, hassle, wasted time and frustration most certainly are key priorities.
There is no doubt that within a few short years we will be a lot closer to the Holy Grail of a fully automated mortgage process, from beginning to end. The sooner, the better.
