Digital Mortgage Deeds Hit 1,000: Digital Future Or Harbinger Of Risk?

At the start of October, the 1,000th digital mortgage deed was registered with HM Land Registry (HMLR) with many heralding the accolade as promoting the property sector’s imminent digital future. 

HMLR claim that the digital process, which is currently restricted to remortgaging, is speeding up the process, making it a lot more convenient and efficient for consumers. 

Some customers have boasted 3day turnaround times on their remortgaging completions, shattering the average 18 days it takes to finalise the paper process. 

In part, reduced delays are avoided because paperwork trails are minimised with portal systems able to track the journey, highlighting any outstanding work and reminding key stakeholders of their obligations in the process 

Furthermore, the online process allows for work to be completed at any point in the day and is not slowed by the postal service; offering instantaneous communication for all stakeholders. 

However, some people view this service as dangerous and a potential harbinger of online threats and increased property fraud with some viewing the system as a ‘fraudsters charter,’ offering information to potential criminals. 

In fact, recent data suggests HMLR are becoming a lot more adept at preventing fraudulent applications before they are completing. During the financial year 2017/18, 25 fraudulent applications were stopped, protecting property worth £15,684,000. 

However, between 2018/19, 47 properties were saved from criminal clutches by HMLR, according to recent freedom of information data obtained from HM Land Registry. 

The number of indemnity claims made for fraud and forgery have also declined from 26 in 2017/18 to 18 in 2018/19, with payments also declining from £2.6 million to £0.4 million.  

Others also suggest it could be used to the detriment of vulnerable homeowners or occupiers, citing the Royal Bank of Scotland PLC V Etridge (No. 2) [2002] UKHL 44 case which found eight cases of undue influence between married couples where homeowners mortgaged their properties to secure loans used by the husbands to help support their businesses. 

The court found that lenders are obliged to make sure all parties obtain independent legal advice if the remortgage or loan will only benefit one person and concerns the matrimonial home with some anxious that the digital system could be manipulated to circumvent these laws and recommendations     

As HMLR look to roll out the digital mortgage process to all areas of mortgaging in the near-future, insurances of a robust safeguarding protocol is vital to protect all stakeholders from property fraud.  

Neil Johnson, Senior Communications Officer at HM Land Registry, said:

“To ensure the right person is signing the deed, HM Land Registry uses of GOV.UK Verify, the government identity assurance service.

“Digital Mortgage service has been developed with fraud prevention in mind and we believe the fraud risk should actually reduce. The additional checks that have been introduced as part of this service will help to ensure that the digital service is as (if not more) secure than signing a paper deed. If a fraudulent digital mortgage is ever registered, the same indemnity provisions will apply to it as apply to paper mortgages. These are set out in Schedule 8 to the Land Registration Act 2002.”

Peter Frost, Chief Operating Officer at Coventry Building Society, said: 

We’re delighted that this industry leading initiative to speed up property transactions has reached such a fantastic milestone.  

Feedback from remortgagors has been very positive, with customers finding the process simple, quick and secure.  

We’re proud to have worked with HM Land Registry and Enact Conveyancing on this initiative and are excited about the potential for it to be extended to purchases in the future. 

Is the digital process vital to ensuring a customer-centric, efficient and swift mortgage process? Or, does it present a heightened level of cyber risk? 

Today's Conveyancer