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XML to Digital Signatures—Where Are We Going?

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January/February 2002 - Volume 81 Number 1

by Andy Hand

We have all heard the buzzwords, EDI, XML, and digital signatures. What does it all mean? This article is designed to give a brief introduction to these topics. If you have attended any of the industry technology shows in the past 12 months you have heard these technologies referenced. They are intriguing, but what do they mean to you and your business? I can’t completely get rid of the alphabet soup terminology that dominates the technology industry but I can do my best to make these understandable.

For years people have talked about the "paperless office." With all of the discussions, industries have failed to make significant headway in this area. As a society, we are tied to paper. We tend to crave the tangible which paper gives us. One only needs to participate in a typical home closing in the United States to see the stacks of paper the buyer or seller walk away with. As we move forward in the industry, there are many who are working to change that.

Integration Strategies

In the 1980s, we saw the advent of the personal computer and the push for individual productivity. Local and wide area networks that allowed us to tap into the productivity potential of the organization followed. We have now crossed the bridge to industry productivity. In this phase we share important business data with partners outside our walls. The traditional solutions of fax, mail, and courier are giving way to a new platform of electronic communication.

We know today the title industry is seeing greater competitive pressures. Some published reports have stated title revenues were down 12-13% in 2000. Although the most recent refinance boom has added cash to the coffers, this is a short-term cycle, not a long-term solution. With labor still a major component of the balance sheet, we search for new technologies that provide relief to some of those costs. We are also looking for technologies that augment the work we do in building relationships with our customers. One of the technologies receiving development resources from our industry is XML.

Although newer to our industry, XML is not entirely new. With 14 companies in the original working group, XML was born in 1996. XML (eXstensible Markup Language), is a language designed to make the transmission of data from one party to another straight forward and readable. It separates the data from how that data will be presented. Below in Figure 1 is an example of how XML data is represented. In this simple example we see weather information. Token pairs identify the data and make it readable. By using an agreed-upon format to pass information, we can share our business data with one or more parties.

XML is a derivative of two earlier technologies, (Standard Generalized Markup Language, SGML and Hypertext Markup Language, HTML). HTML, the language used to represent many of the Web sites you view, is simple and good for delivery of documents, but has fixed tag sets and limitations that raise the cost of building sophisticated Web sites. SGML has great power but lacks standardization and style sheets, and is complex to build. Where HTML took traditional text and allowed us to format it turning the Internet into a huge library, XML can take that same page and turn the Internet into a huge database. It is XML’s ability to separate the data from the presentation that makes it so useful in today’s world. Coupled with the use of style sheets, the same business data can now be viewed in different ways by applying these style sheets. One example of its use is to publish order data from your production system to the Internet. It is then viewed on one or more of the many transaction systems such as

Standards Organizations

From the property listing until recording, many different parties touch the order and its data. Through each traditional vertical market —realtors, lending, settlement services—there are organizations looking at the data and business requirements of those using the data. In addition to determining the data that is going to be shared at each stage, these groups are working on how the data is passed throughout the transaction, reducing the error factor, and the redundancy of re-keying the information.

Above is a chart that shows some of the standards organizations and their Web sites. If this topic is of interest, I recommend learning more about what each of these groups is doing and how that might affect you.

You may ask, "haven’t we done this already with EDI?" While it was true that we did not see wide scale implementation of the Electronic Data Interchange (EDI) in the Title Industry, the original work completed years ago is being leveraged in the XML initiative being completed by the Mortgage Industry Standards Maintenance Organization (MISMO). XML, with its lower cost of development and deployment, will see greater use in the title industry.

Digital Signatures — A New Method of Signing

The second technology that is getting some attention is digital signatures. A "digital signature" is one that makes use of Public Key Infrastructure (PKI). This is a technology that uses a key pair, (known as public and private keys), to create a unique and binding signature to a document. This differs from an "electronic signature" which is a digitized handwritten signature. A third-party, known as a Certificate Authority (CA), is then able to use a public key to validate the signature and that the document has not been altered since signing. With federal and local government legislation, the path is being paved for digital signatures. This gives the parties the ability to affix their signature, to an electronic document removing the need for paper. Viewing, signing, and storage of the original document is electronic and can happen online.

In Figure 2 (see next page) is a diagram that shows the flow of the signing process. Once delivered, the document is validated and approved by the Certificate Authority.

When accepting a signature as a legal entity we must know that the document has been intentionally signed and that the signer cannot later claim it is not his/her signature (known as non- repudiation). Digital signatures are based on positive identification of the signatory, a reasonable assurance of his or her intention to apply a legal signature and secure knowledge that the signed document is unchanged since it was signed.

When the parties come to sign their documents, they will read the documents on the computer in the signing room. This computer would either have a smart card reader or USB port to accept the signer’s private key. With the key placed in the computer’s device, the parties could then indicate they wish to sign the document in front of them. When they do so, they will then be prompted for their PIN. After successfully providing the PIN, the mathematical calculation is performed and the legally binding signature is affixed to the document. Any changes after that will invalidate that signature.

The document is now passed on to the county recorder for validation and storage. The recorder, along with the CA, would validate the signature and verify that the document has not been changed since signing. Legislation and business practice increasingly accept that an electronic document with a valid digital signature carries the same legal weight as a hardcopy document with a wet signature. Because the documents have been completed electronically, all of the closing documents can be transferred to CD and given to the parties at the end of closing.

What’s Next?

There are many challenges facing the title industry. XML and digital signatures are two technologies in this industry that will continue to take shape in the next 12-24 months. These are being tackled with many fine initiatives and will continue to be addressed as we create new development centered around practical and cost-saving initiatives. XML will show up in Web sites that look to share information with your current production systems, while digital signatures will eventually become a common part of the real estate landscape and appear with the frequency equivalent to today’s pen and ink signatures.

This article has given just a brief introduction to these two technologies. Software vendors, standards organizations, and many of you will get involved with solutions using these technologies that have the opportunity to bring businesses closer together. It is easy to dismiss these with the failure of Internet businesses, but with the cost savings and reach that the Internet can give us, companies are finding revenue models that mix with the traditional to give us a bright future.

Andy Hand is vice president of development for InfoStream. He is a committee chair for the AARTT Workgroup of REIPA, a national alliance of real estate software organizations seeking to create XML standards for the real estate industry. This article is an excerpt of his presentation at the 2001 ALTA® Annual Convention in Palm Desert. Andy can be reached at:, or 1-800-877-7667.

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