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A new sign of the times

In the future, digital signatures are likely to play a significant part in how mortgage advisers conduct business. However, the arrival of this new technology has not, and will not, happen overnight.

The Electronic Communications Bill includes key developments for e-commerce, for example, the introduction of electronic conveyancing which could dramatically reduce the time needed to buy a house from months to a couple of weeks. How ever, it is digital signatures that have generated a large amount of interest in the mortgage market.

It is clear that the Government has a very positive view of the impact of digital signatures but there is still a great misunderstanding as to what they are.

A digital signature, contrary to its name, is not a signature at all. It is, in fact, a Pin code, much like the one for a cash machine card, that performs a unique function. Rather than sign a document in the traditional way, an individual would enter their Pin code (or Viacode), a number known only to themselves, in the electronic document.

The Viacode locks the information that is being transmitted electronically by scrambling the data. The way in which the data is scrambled is individual to each person. This scrambled data, because of its uniqueness, becomes the electronic signature.

This data can then be unlocked by the recipient who uses what is known as a public key. Once again, this is a unique number, which will be available to a number of organisations – think of it as similar to a National Insurance number.

If the two numbers are not correct, the data cannot be unlocked or unscrambled and the signature will not be verified. If they are correct, the data will be unscrambled and this will be proof that the public and private key (the Viacode) represent the same person.

The new act enables consumers to apply at the Post Office for a Viacode. A digital or electronic signature, with the passing of the bill, is now as binding as a signature with pen and paper. Electronic signatures are admissible as evidence in court, enabling contracts of any sort to be concluded over the internet and will be accepted by some providers and the Government. Customers will be provided with a smart card or a Pin code which can be used to confirm their identity over the internet.

As with any technology, there are always concerns about security and no one can ever say that anything is 100 per cent secure. There is a perception that the internet and other e-developments are more prone to fraud than other areas of business.

Lenders will need to ensure that they have the systems and procedures in place to ensure privacy remains paramount. As well as those involved in the industry having confidence in this new technology, it is vital that consumers have confidence in electronic signatures, or they simply will not use them.

For mortgage advisers, digital signatures will initially have very little impact on the way that they conduct business at present. Although digital signatures have been recognised in the eyes of the law, no mortgage lenders yet have the systems capability to accept them.

It is likely that these systems will not be in place for at least another year. There have been some who have expressed concern that mortgage adviser&#39s will be threatened by the introduction of electronic signatures.

Some industry specialists have predicted that a mortgage advisers&#39 business may be cut by anything up to 15 per cent in the next five years. However, there is little evidence to support this and many indeed predict the opposite, saying that digital signatures will have many benefits to the adviser willing to embrace e-commerce.

When lenders do begin to accept digital signatures the speed with which borrowers can apply for mortgages will significantly increase. This in turn will enhance the service that brokers can give to their customers.

A good example of this improvement in service will be for those brokers who use online sourcing systems. Already, these systems are helping brokers to give best advice to their clients.

It is also possible for them to submit applications electronically when the system has in place a generic application form that is accepted by a number of lenders.

When the lender also has a system that can accept digital signatures, the application form will be sent direct to the lender.

The lender&#39s system will instantly be able to credit score the information, therefore ensuring a decision is reached far quicker for the borrower and response times all round are reduced dramatically.

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