“Cradle-to-grave” digital conveyancing round the corner as PEXA and LMS successfully launch new digital remortgaging products
Last week was nothing short of momentous for the remortgage market, with two key market players announcing pioneering developments that, with time, are set to shift the tectonic plates of the conveyancing industry.
The current remortgage process is complicated and strenuous, and it is typically a wait of weeks – sometimes months – before the process completes.
PEXA and LMS – two giants of the property sector – are looking to change this, and by some accounts we are well on the way to achieving a digital, “cradle-to-grave” conveyancing system – something the Land Registry suggested could be “the norm” within three years as part of its recent Strategy 2022+ document.
Yet, these changes are complex and many concepts may be brand-new. Here is an in-depth look at what was achieved and introduced by both PEXA and LMS last week, as well as what the future holds in light of such developments.
Who are PEXA?
PEXA is an Australian-founded fintech that created the world’s first fully digitised property settlement process. They have launched in the UK this year following significant progress in testing its platform with mortgage lenders and the Bank of England, and are aiming to somewhat revolutionise the conveyancing process in the UK.
Their first foray into the market comes with a focus on remortgaging, with their aims being twofold. First, the delays involved in the process leads to as many as one in five consumers dropping out of the process; in Australia, average timeframes have fallen from 42 days to 15 days, with some remortgages even completing in one day.
This ties in with their second reason, the cost saving: remortgaging can save a homeowner an average of £824 across a five-year fixed-rate period, say PEXA, yet they miss out due to the delays becoming insurmountable.
PEXA have completed the UK’s “first-ever digitally enabled remortgage transaction”. What does that mean?
Last week, PEXA, along with Hinckley & Rugby and Muve, completed a digitally enabled remortgage in nine days.
PEXA say their “centrally connected platform”, PEXA Pay, reduces the associated time, risk, and costs in the remortgage process for consumers, lenders and conveyancers alike. It is the seventh active payment system in the UK, and has the Bank of England acting as the settlement service provider.
Using the platform, Hinckley & Rugby Building Society and Muve could orchestrate financial settlement directly from the incoming lender’s (RT) account, and could seamlessly collaborate to lodge the application for registration with HM Land Registry.
“We transfer money through PEXA Pay via the central bank, so in essence it’s secure. It’s also expedient, it’s transparent, and you have surety that it goes straight to HMLR,” James Bawa, PEXA UK CEO, told Today’s Conveyancer during an exclusive interview.
Colin Fyfe, CEO of Hinckley & Rugby, commented on the reduced fraud risk involved with PEXA Pay:
“We’ve put an end to pass the parcel whereby the building society gives the money to the bank, gives the money to the conveyancer, then the other conveyancer, then the other bank.
That can fall flat very quickly, and you’ve got fraud risks attached to that, so for us it’s a huge benefit.”
Fyfe also said that there is a huge transparency benefit for all parties involved:
“A big advantage we see is that you spent quite a lot of time getting calls from the customer, from the conveyancer, from the mortgage broker with the same question: ‘How are we getting on?’
That takes up a lot of time on many sides, so we’ve taken a lot of that away. It’s much clearer and more transparent about where the mortgage is in the process.”
As well as this, he suggested the platform will bring a significant reduction in fall-through risk:
“We’ve all been probably in situations where you’re in a mortgage chain. One of the one of the pitfalls is that you that completion happens sequentially. In time with PEXA, everything will be lined up together, and then completion will happen for all.
That’s a big opportunity for the lender to make sure that the mortgage doesn’t just fall away, and also for the consumer to make sure they get that property.”
David Jabbari, CEO of Muve, described PEXA’s approach as a “cradle-to-grave” conveyancing process:
“There is no shortage of people coming forward all the time to talk about digital revolutions in conveyancing, but there’s often a lack of ambition and a lack of grasping the transaction as a whole.
This is what really impresses me about the PEXA approach; it’s a cradle-to-grave process right through to a dedicated payment settlement system. This means that you move from all of that talk about linkage between systems and [minor] improvements to actually proving that you can run the whole thing on a much more scripted basis.”
On what has set PEXA in good stead to make a long-lasting impact in the UK, Jabbari suggested it is because they have “understood the mass market and the transaction process rather than going down blind alleys”. He added:
“This is not just about tech. Tech is obviously key, but it’s also understanding that this is an end-to-end process and that you have got interconnection between all of the relevant parties.”
He also suggested PEXA’s success will ultimately come down to the fact they have “gone out to the lender community and the financial services community”, recruited the right people, and worked with innovators in that space:
“It goes back to my point about what’s going to work here. Because, of course, the lenders are the key to solving the problems in this in this market. At the end of the day, they control the mortgage and remortgage journey, and they have the power to influence change”
One question conveyancers will undoubtedly have is that, should a “cradle-to-grave” digital conveyancing process be introduced, will this change – and perhaps threaten – the role of a traditional conveyancer? On this, Jabbari said:
“As far as conveyancers are concerned, obviously some of them will be threatened by these developments, but actually I think if they reflect on it and they look at the Australian experience where the law firms continue to operate effectively in that market, they understand that actually what’s happening here is that they are giving up parts of the process that we never should have been doing anyway, such as the financial settlement side of it. It’s a nightmare for law firms. They’re not banks, they’re not good at it, and there is so much fraud potential in that area that the prospect of that being taken away and dealt with should be attractive to most law firms. It shouldn’t be regarded as a threat.
Similarly, the interactions with the Land Registry and the automation of that, and then indeed better case management, better progression of milestones and chain organisation. All of that is not in the least threatening to a law firm because our job is about reviewing title, it’s about reviewing enquiries, it’s about using our legal knowledge to contribute to the process. So I think it’s a win really for all of the main players in the in the sector, absolutely.”
What does the future hold for PEXA’s conveyancing technology?
PEXA will soon be onboarding Shawbrook Bank as an additional partner. Further lenders and conveyancers are due to be announced throughout 2023. They also recently acquired specialist property law firm Optima Legal.
Beyond this, following the development and implementation of its remortgage platform, PEXA aims to broaden its focus to deliver a transformed sale and purchase process in 2024. Chronologically, this fits broadly in line with the land registry’s aim to “increase the integration of HM Land Registry’s services with other conveyancing platforms and systems” by 2023-24, and for “secure paperless buying and selling of property [potentially] being the norm” by 2024-25. Of course, there are other elements besides PEXA Pay that come into achieving such a system, but the Australian fintech’s offering is likely to play a big role.
James Bawa concluded:
“Our mission is to transform the property market for consumers, lenders and conveyancers. The completion of the UK’s first digitised remortgage transaction marks a major milestone in this journey, and acts as a tangible proof of concept for the wider industry.
This is just the start. We have invested significantly into the UK to develop and embed our technology to help drastically improve the remortgage process. We know from the Australian experience just how significant and widespread this transformation can be. We will continue to invest and work with industry to roll out our platform more widely, so that we can help bring about better consumer outcomes, making a stressful and delayed remortgage process a thing of the past.”
Who are LMS?
LMS have been providing conveyancing services to mortgage lenders, legal firms, brokers, and home buyers with a range of services for over 25 years, ranging from fees-assisted remortgages to wider transactional panel management. Importantly, they are said to have “taken a leadership position in the development of digital technology for conveyancing”.
LMS last week launched LMS DART – its Decisioning and Automated Remortgage Technology – which they say is designed to “drastically simplify the lender instructed mortgage journey”.
LMS have completed the “first-ever fully automated remortgage”. What does that mean?
DART, which is “complex, purpose-built software”, works with firms to enable the end-to-end automation of simple cases from the point of information being received to post completion workflows, minimising the need for manual intervention.
LMS say that it allows each case to be individually assessed for complexity within seconds of the borrower information being submitted so that all stakeholders are aware of any additional legal work, fees and documents that may be required as part of the transaction. As such, any additional information can be requested immediately rather than later down the line when delays will ensue.
In turn, say LMS, the law firm will be able to set realistic completion dates, with appropriate cases being progressed through automated case processing and more complex cases being assigned to a specialist team.
Subsequently, all cases can progress more quickly with senior staff having more time to focus on cases that need manual intervention, reducing risk and ensuring law firms maintain the appropriate level of oversight on each case.
As remortgage activity is set to increase over the coming months, Nick Chadbourne, CEO at LMS, said the company “wanted to take action to protect all parties – consumer, law firm and lender alike – and completing the first ever automated remortgage is a huge leap forward”. He added:
“The complex software allows cases to be assessed at the outset with a level of accuracy not seen in the industry to date and the automation of simple cases in this way will have a huge positive impact – even cases that cannot be automated will be improved as the decisioning software highlights the legal work required as well as allowing specialists more time to dedicate to them.”
How does this differ from PEXA’s “digitally enabled remortgaging”?
LMS suggested that their system is indeed similar to that of PEXA, though they pointed out numerous areas in which the technology differs.
“LMS DART focuses on the entire end-to-end process including collating all required data, decisioning, identifying fees, reducing errors and case administration activity.
DART not only digitises but supports the automation of key process milestones of the journey from instruction through to completion, cutting out manual stakeholder intervention wherever possible. Our technology covers the whole end-to-end journey, working with the firms within their ecosystem, with which our tech is already heavily integrated.”
They also suggested that the first end-to-end digital remortgage completion went through in “four working days”, adding that it was “set up and ready for the customers’ ERC expiration and preferred completion date”, adding:
“LMS have had digital portals and API integrations for borrowers, law firms and lenders for some time now. We have now made further improvements by automating as much as possible of the collection, processing and usage of data. Our relationship with lenders and involvement with all process stakeholders means that DART can process information at the point of instruction, assessing case complexity and work with firms to ensure the appropriate case path. Automation where appropriate, but also utilising the skills of conveyancing experts.
LMS DART is unique in the way that it operates within the law firms’ existing workflows to drive greater efficiency and collaboration.
DART is already a multi-lender and multi-firm system, with 100s of cases passing through on a daily basis. This will grow over the next two-to-three weeks as we see even more of the UK’s biggest lenders benefiting from its services. We review every case and every day we are working with law firms and learning more ways to improve the process.”
What does the future hold for LMS’ conveyancing technology?
Asked whether the technology used in DART could foreseeably be utilised for sale and purchase, LMS said:
“The LMS DART technology is already tailored both to specific lender needs and different product types and as such, we can very much envision a clear and achievable path to sale and purchase.”
They were also asked how DART might play into the Land Registry’s aim to “enable a world-leading property market” & introduce a system of digital conveyancing. HMLR stated that they want to “increase the integration of their services with other conveyancing platforms and system, using standard data and connection settings”. It suffices to say that LMS see themselves as a big part in this future:
“LMS will certainly play an instrumental role in executing the Land Registry’s vision around introducing a system of digital conveyancing and facilitating a world-leading property market, by increasingly integrating Land Registry services with other conveyancing platforms and systems.
In fact, we are already supporting these aims with many of our resources dedicated to delivering the initial charge registration API improvements. No individual provider can singlehandedly revamp the entire industry but we recognise our role and responsibility in collaborating to achieve this end. There is no room for propriety use and we recognise that these services need be available industry-wide to actually effect change and we are very happy to play our part.
LMS’s current processes already have the ability to pull and push data from the Land Registry, both directly and via our integration partners, allowing the Land Registry, law firms and lenders to access and engage with important information and ultimately complete cases more digitally and efficiently. This illustrates how crucial collaboration is in helping to truly improve the process. The new Land Registry services will bolster our innovations and simplify the process of transacting both through LMS and within the wider industry.”
All of this, LMS say, has been conceived with the sharpening of conveyancers’ toolkit in mind:
“DART was purpose-built in collaboration with our panel of conveyancers and continues to operate in conjunction them. As such, the technology tackles some of the capacity challenges facing conveyancers amid a growing market, allowing them to focus on higher risk activity. We currently have a tremendous group of lenders and firms who are heavily involved and look forward to joining forces with more conveyancers and stakeholders in the future.”
With thanks to PEXA and LMS.
