The Council of Mortgage Lenders (CML) says it is working on a number of initiatives to improve the confidence of lenders in conveyancing services provided by solicitors.
It says a leading priority for the FSA and mortgage lenders is to bring about reforms to beat fraud. Measures include the introduction by the Law Society of a conveyancing quality scheme, which seeks to lift standards in the profession and provide a criterion for membership of lenders’ conveyancing panels.
There is also a review under way by the Solicitors Regulation Authority (SRA) of arrangements for professional indemnity insurance and compensation, which the CML says could reduce the size of lenders’ panels if one outcome of the review is reduced cover for commercial clients in future.
Other measure include ways of streamlining requirements for separate legal representation of lenders and borrowers and improved management of conveyancing panels by lenders to deliver more complete and timely information about conveyancing firms in England and Wales.
Last month, the Law Society of England and Wales announced the launch in January of a conveyancing quality scheme (CQS) that will accredit individual firms. The aim is to demonstrate high-quality standards among conveyancers, and improve the confidence of lenders and consumers in the integrity of services provided by the profession. Firms qualifying for the scheme will need to comply with higher standards covering the competence and probity of staff, the financial standing of the firm, supervision of staff, and administrative processes.
The CML says it expects lenders to require effective professional indemnity insurance if they are to keep a conveyancing firm on their panel. Lenders will therefore demand greater transparency about firms’ insurance arrangements and will be more active in supervising and monitoring their activity to ensure professional indemnity insurance will be sufficient to cover lenders’ risks.
The SRA is planning to publish a paper in December, with a three-month consultation exercise. This has the potential to re-structure fundamentally conveyancing arrangements in England and Wales.
If lenders move to more limited panels of firms with CQS accreditation and adequate professional indemnity cover, a number of conveyancing firms are unlikely to meet future entry requirements. They will still want to offer their services to borrowers, however, so in an increasing number of cases the lender and borrower may be separately represented. The CML says there are positives and negatives for consumers and says it will tell the Law Society and the SRA is that this is not the preferred approach of lenders.
However, where separate representation may happen, the CML believes it would be helpful to provide guidance to the profession through a set of standardised instructions, building on the CML Lenders’ Handbook. It has therefore set up a working group to look at the issue of separate representation for lenders and borrowers, and its practical implications for the conveyancing process.
The dual responsibilities of solicitors for registering the charge and for holding, releasing and transferring funds leaves lenders exposed to the risk of fraud by unscrupulous practitioners who collect the mortgage monies but do not pass them on, the CML says.
Introducing an alternative method of transferring funds between banks could reduce exposure to this risk and safeguard firms from losses. But it would require fundamental changes to the conveyancing process. Lenders are investigating the possibility for greater use of electronic transfers between financial institutions.
