Separate representation
The days of solicitor panels could well be numbered but is separate representation a viable option, asks Ian Floyed of myhomemove?
Let’s start with a sobering statistic: last year, the National Fraud Authority estimated that mortgage fraud cost the UK £1 billion. Further analysis by Experian shows that this amounts to 32 fraud attempts in every 10,000 mortgage applications.
Faced with such frightening figures is it really any wonder that lenders are starting to take action to address these issues and, consequently, bringing the contentious issue of separate representation to the fore once again?
The days of lender’s open panels have passed, as the Council of Mortgage Lenders pointed out during the recent summer reception for the Conveyancing Association. Indeed, it is hard to argue with this conclusion when several major lenders, including Lloyds Banking Group and Nationwide, have already started to drastically reduce the number of conveyancing firms on their panels, with others set to follow in their footsteps.
Solicitor panels
Cutting the size of a panel runs the risk of attracting the ire of consumer choice groups who could see the reduced choice of lawyer as the banks just looking out for their own.
Another option open to lenders, if they wish to exert more control over conveyancing, could be to create a “super panel” of selected large scale conveyancing firms. Again, this raises issues of consumer choice, with panels containing thousands of firms potentially being slashed dramatically.
Whilst it is impossible to deny that this approach means some clients will be unable to use a conveyancer local to their area. However, it is more likely that the larger specialist firms will have more stringent measures in place to not just protect against fraud but also to enhance the conveyancing experience for clients, meaning quicker, cheaper and more efficient home moves.
Separate representation
And so we come to the issue of separate representation. An alternative to cutting panels is ‘simply’ to ensure that legal work on behalf of lenders is done by lawyers they trust.
In the past, this suggestion was met with much cynicism within the conveyancing industry, with many lawyers seeing it as adding time and cost to an already costly and time consuming process.
Historically, figures have shown that separate representation can be anything between 20 and 50 per cent slower than if there was just one conveyancer appointed to oversee both lender and client interest. Coupled with the fact that this could add up to £500 onto conveyancing fees and you begin to see why separate representation is met with such resistance.
If the current trend for mortgage fraud continues, however, separate representation could begin to feature more in the minds of lenders. After all, it appears to be the perfect compromise: clients maintain their freedom to appoint a lawyer of their choice, whilst the interests of the lender are similarly protected.
Some of the more recent technological advances in conveyancing practice could certainly have a big impact on the separate representation argument. With the increase in the number of firms adopting email, text message updates and online case tracking it’s easy to see how separate representation could work. However, do these things go far enough? There are some conveyancers in the current market taking full advantage of purpose built systems that have the potential to completely radicalise the separate representation process.
No matter how you dress it up though, the fact still remains that many lawyers will resent separate representation on principle, as it effectively amounts to having a more “trusted” firm looking over their shoulder to make sure they’re not making any mistakes.
CQS
Of course, responsibility for overcoming mortgage fraud also rests on the shoulders of conveyancers themselves, and the Conveyancing Quality Scheme is one response to lenders reducing their panels.
On the face of it, the CQS has had some success. Over 200 firms have now signed up, promising to adhere to strict guidelines designed to not only improve the conveyancing process for consumers, but also to limit the risk of mortgage fraud.
However, this is merely a drop in the ocean – the 200 or so firms currently boasting CQS accreditation represent less than 6.5 per cent of the conveyancing market. Even if all of the firms currently applying for CQS are granted it (currently c.1000) this will still only account for under 25 per cent of the current market.
One curious outcome of this may well be the Law Society inadvertently cutting down lenders’ panels for them. Lenders endorsing the CQS would still get a much smaller panel of conveyancers, just without all the negative reaction from the Law Society. After all, it’s the Law Society scheme they would be endorsing.
Despite claims that the scheme is gathering momentum, questions have also been raised over its value, with accusations that it is nothing more than a rubber stamp exercise and a marketing gimmick from the Law Society.
Only time will tell, although it would be interesting to know how many firms have been unsuccessful in their applications for the CQS mark.
Ian Floyed is the CEO of myhomemove, the largest independent provider of mover conveyancing services in the UK
