The Law Society will next month begin sharing information about conveyancing solicitors with a lender as part of moves to discourage lenders from charging a compliance fee for firms that want to be on their panels.
Meanwhile, standard mortgage instructions for solicitors acting just for lenders should be released in the first quarter of 2012, the Council of Mortgage Lenders (CML) has revealed.
The pilot with the unnamed lender will feed information from the Conveyancing Quality Scheme (CQS) and other Law Society databases, chief executive Des Hudson told the Today’s Conveyancer conference in Leicestershire.
The information – which will cover the details lenders are seeking as part of the move to more active panel management – will be free. Santander recently announced a controversial annual compliance check, which will cost firms £99, plus a £199 application fee for firms wanting to join the panel.
Mr Hudson branded Santander’s move “a mistake”, pointing out that the society first offered to provide this information for free two years ago. The cost of a law firm having to undergo similar compliance checks to Santander’s by 20 or 30 lenders would end up being passed on to consumers, he warned.
In time he said he hoped to build a “trusted community” where information flowed both ways, with lenders informing the Solicitors Regulation Authority of misconduct by solicitors.
Speaking earlier at the conference, Jennifer Bourne, senior policy adviser at the CML, said she expected other lenders to follow Santander’s lead but pointed out that some have said they will not. She suggested there might be an “industry solution” that could ameliorate the situation.
Saying “the day of the open panel is at an end”, she described the greater controls lenders are exerting as a good thing because some had not previously conducted enough due diligence on their firms. However, she said lenders also needed to ensure consumers had sufficient choice, and that their panel management is “not too intrusive”.
While understanding lenders’ desire to introduce “prudent controls” of their panels, Mr Hudson said he was “very disappointed” that the CML had turned down the society’s offer to work on objective criteria for panel membership and removal.
Ms Bourne told delegates that the CML expected to see separate representation of lenders and borrowers increase, as panels contract and also as a way to reduce the risk of fraud. But it has proven difficult to develop instructions for acting just for the lender and to make clear the division of responsibilities between the three solicitors involved in the transaction, which is why the original intention to introduce the instructions next month has now slipped to early next year.
She also said that alternative business structures, and particularly external investment in law firms, “does present some risks” to lenders in their fight against mortgage fraud. “It is slightly unclear how the [Solicitors Regulation Authority’s fit and proper person test] will work and how well it will ensure that the wrong person isn’t involved.”