Conveyancers are feeling the force of the lending community, explains Harpal Singh, managing director of Conveyancing Alliance Ltd
There may not be too many brokers out there willing to admit it but when it comes to working from a position of strength, it is lenders who drive the market. Lenders ultimately shape much of the way the rest of the chain has to operate, even more so since the Credit Crunch when their need to be in full control of all aspects of the process has never been clearer. Lenders are not willing to countenance things going wrong on their watch and they are seeking to push their agenda to ensure they are not the ones up effluent creek without a paddle, should the worst happen.
Within conveyancing there are two areas where we see lenders asserting their wants and needs as the market evolves. Firstly, there is a clear push and drive from lenders to only deal with the large conveyancing specialists the culling of their solicitor panels continues unabated and one suspects it will not stop until only the specialists remain. The days of the local solicitor firm being able to carry out conveyancing for clients are numbered as lenders do not want to leave themselves open to working with firms where, a) it is not a priority, b) it is not a specialism, and c) where the chances of errors and, potentially fraud, are that much higher.
I attended a recent National Conveyancers’ Conference and a surprising stat revealed itself from Steve Ray of Windsor Partners Ltd. Apparently, half of solicitors’ PI claims are to do with conveyancing work and, with PI premiums only going one way, it seems obvious that fewer and fewer solicitor firms are set up to complete conveyancing work. This is drawn sharply into focus when we consider any attempts they make to compete with the specialists on price.
Therefore, with lenders only wanting to use specialists, and the market working against the smaller, local practitioners, for example, in terms of economies of scale and market forces at the specialists’ disposal, we are able to see the new environment. Indeed, with the lending market as it is, were one firm to be taken off the panel of one of the big lenders, then they are effectively looking at 20% of that market being taken away from them. Continue with this and it won’t take long before they will be unable to conduct that business anyway. The lenders will certainly have got what they wanted.
Another area where we can see the power of lenders comes with the establishment of the Conveyancing Quality Scheme (CQS) by the Law Society. Much has been made of the new scheme and what it means for firms to achieve this quality mark. I certainly applaud any initiative that raises the bar and has a kite mark for quality. However, I’m not sure the solicitors are getting what they bargained for. It’s my understanding that CQS was set up to be a common standard that all conveyancers would meet in order to help them stay on lender panels. The problem comes with the fact that lenders have their own standards, and their own individual criteria, and these certainly do not apply to any perception of a common standard.
Therefore, how do we assess conveyancers? We are supposed to use CQS but with lenders working to different standards, this is not enough. In reality, CQS has become the first level of judging a firm. In addition lenders will judge them against vastly differing criteria. So CQS does appear to fall short. Perhaps with more of a focus qualifying what lenders wanted there could have been more of a commonality approach, facilitating a more complete outcome. The rub is that firms who attain CQS cannot be assured of staying on a lender’s panel anyway and therefore this Scheme might not achieve its aims.
We must also question whether lenders will accept a standard put together be a self-regulating body like the Law Society in the first place. Lenders are hell-bent on stamping out fraud, but does the CQS do this? It’s doubtful especially when it is only likely to be a starting point for lenders to assess firms and not the absolute measure by which firms are judged. Essentially, lenders make the standards and, regardless of the CQS, they will continue to do this. Which means even with a CQS firms should not consider themselves assured of any on-going panel position.
In these two very real circumstances, we can see lenders reasserting their power and guarding themselves. This comes following a ‘boom period’ when, I’m sure by their own admission, many lenders lost sight of their compliance and oversight functions. There has been an aggressive push by lenders to dominate the mortgage and house purchase functions and to ensure that no part of the process is beyond their control. This is likely to continue for some time which might make uncomfortable business viewing for all other stakeholders.