The Government has finally announced that electronic signatures will be legally binding as part of its Electronic Communications Act.
While some believe electronic signatures will revolutionise the way mortgages are transacted, others remain unconvinced.
Simon Nixon, chief executive at Mortgage 2000, said lenders may be cautious of acting on the new legislation.
He said that increasing concerns over internet fraud means lenders may not rush to accept online applications without a paper-based signature, despite new legislation.
“Lenders are worried about fraud. At the moment lenders can accept applications electronically, but they print it out and post it to the customer, who then signs and returns it. If lenders accept electronic signatures, they will not have to use the postal system at all which proves the customer lives where they say they do,” he said.
Mike Davies, data protection officer at Bristol and West, disagreed and said that electronic signatures could potentially offer the lender more security than conventional signatures. He said: “They will enable borrowers to send secure mortgage applications online and this is a much better proposition for the customer. We will be able to put much slicker processes in place and as there is less intervention it will be more cost-effective and allow us to offer cheaper products online.”
He added: “There will be minimum risk as security will be built in. But manual signatures also have risks such as forgery and so with encryption processes in place electronic signatures should be more secure.”
However, Andy Young, director of the ZIFA mortgage network, said that lenders, intermediaries and consumers will be cautious of electronic trading. “Lenders are cautious of investing significant sums until it is confirmed that their key distribution lines are ready for it.”