There is considerable confusion amongst mortgage lenders about the PEXA world. In this report we try to simply describe the way forward.
Do I have to do anything?
Yes, e-conveyancing cannot be ignored. From 3 April 2017, standalone mortgages in South Australia must be lodged using PEXA. Progressively other states will also require compulsory use of PEXA.
Do I have to become a Subscriber?
The term ‘Subscriber’ describes somebody who is authorised by PEXA to lodge dealings through PEXA.
There is no point in becoming a Subscriber unless you plan to lodge your own mortgages or discharges of mortgage through PEXA. The insurance requirements for Subscribers are a significant barrier to non-ADIs becoming a Subscriber.
If you don’t become a Subscriber, you can continue to use lawyers to lodge mortgages on your behalf and you won’t see much change except for the requirement that mortgagees must register or arrange for registration of ‘stand-alone’ discharges. A stand-alone discharge is one which is not part of a refinance or sale. As a result, instead of preparing a discharge and sending it to the mortgagor to register, mortgagees must instead arrange for the registration of the discharge. You may need to amend your loan agreements (both for new loans and for existing loans) to provide that you are entitled to charge the cost of arranging this registration.
What is a Non-Transacting Panel Master?
A Non-Transacting Panel Master (NTPM) is a mortgagee that has elected not to become a Subscriber and will continue to lodge through panel lawyers. By registering as a NTPM, mortgagees will appear in the PEXA system so that mortgagors and other mortgagees wanting to deal with them can invite them to join transaction workspaces and send them messages via the PEXA system. NTPM mortgagees will need an arrangement under which they promptly deal with these invitations and messages and forward them on to the relevant panel lawyer. There are no insurance requirements for NTPM mortgagees.
Do I need to register a template mortgage in PEXA?
Each mortgagee that becomes a Subscriber, and each NTPM, is required to establish a template mortgage with PEXA. This may just be the standard PEXA template. Only Subscribers who are authorised to act for that mortgagee can access that template.
Do I have to change my mortgage form?
The mortgage which is signed by the mortgagor (which can either be a paper mortgage or an electronic mortgage) must be on substantially the same terms as a template mortgage appearing in the PEXA system. Mortgagees need to make sure that this condition is satisfied otherwise the mortgage might be void.
From 10 June 2017 in Victoria and from 22 July 2017 in NSW, Queensland, SA, and WA, a new uniform national mortgage form (NMF) will be available. Mortgages signed after 31 December 2017 must be on the new form for both paper and PEXA dealings. This will mean that mortgagees will be required to stop using their existing form and use a form which is on substantially the same terms as the NMF.
Mortgagees will still be able to add additional covenants to the NMF. However, increasingly mortgagees are abandoning additional covenants attached to the mortgage document itself and are instead incorporating all relevant terms in their mortgage common provisions.
It is important that the mortgage common provisions contain a promise to repay the secured money because this will no longer normally appear in the NMF.
What happens to the mortgage signed by the mortgagor?
It is important to realise that mortgages registered at the titles office via PEXA are not signed by the mortgagor. Like the PPSR register, the titles register will simply be a record of the fact that a mortgage has been given. In order to enforce mortgages, mortgagees may need to produce the mortgage signed by the mortgagor (which can be an electronic signature). If the mortgagee ceases to hold the mortgage signed by the mortgagor, the mortgage is automatically void in Victoria and SA.
Accordingly, it becomes very important for mortgagees to have strong systems to store mortgage documents. This can be electronic storage.
What is an eCT?
The coming of electronic conveyancing introduces new terms – namely, pCT meaning a paper certificate of title and eCT meaning an electronic certificate of title. All states are progressively moving to issuing only eCTs. Except in NSW, the titles office issues a Certificate of Registration (or Registration Confirmation Statement) after a mortgage is registered, which provides some evidence that the mortgage is registered. We have written to the NSW titles office requesting that they adopt a similar process.
The end result is that there will be limited utility in retaining paper deed packets because all the transaction documents could be stored electronically. Some mortgagees will need to review their obligations under funding documents, such as securitisation arrangements, and amend the requirements about what, and how, documents are stored.