Last week we heard from a medium sized firm of solicitors conducting about 70 transactions per month that was removed from a large lenders panel and they had no idea why. The letter told the conveyancer that they had no right of appeal and that the decision was final. This lender represented over 25% of that conveyancers work.
That firm immediately fired back a very solicitor like letter to the lender that did no good at all and probably made the situation worse. They didn’t pause for thought as to why the lender may have taken the actions that they had taken. They just fired back a litigation style response. It didn’t occur to them that they may have completely failed to spot that they are party to a crime or negligence or even to look to their own processes before responding.
We think the firm is unlikely to have a conveyancing department of any meaningful size by Spring.
Every month we see firms that were reasonably high in the Land Registry stats quickly drop and nearly vanish from the conveyancing volume league tables, often this is due to removal from a key lender panel.
For many conveyancers the immediate response is to blame the lender. Often conveyancers hold inaccurate perceptions of the lenders own errors and misdemeanours, but in reality whilst lenders do make mistakes some conveyancers are awful or complicit in managing risk.
Most conveyancers are completely unaware of the issues facing lenders and the level of the losses that they have suffered. Most conveyancers think like conveyancers. Most conveyancers will at some point face a risk to their membership of key lender panels if they do not control and manage their risk.
The fact is once a lender has removed you from their panel it is probably too late. You should have been considering the risk your firm presents to lenders in advance. If you think your firm is not a risk think again, think like a lender. You receive and distribute hundreds of thousands of pounds on behalf of lenders to other professionals and if you commit fraud they face virtually no opportunity to recover the loss because the solicitors’ indemnity fund is a discretionary fund that pays out on hardship and which rarely pays out to lenders.
Even if it is negligence rather than fraud the lender faces months if not years of hard battle with your insurer to recover a massive amount of money that they trusted to you in the first place.
Fraud or negligence the sheer number of potential claims is considerable. Walking through a lenders fraud management team last week I was flabbergasted to count about 10 rows of 10 people just working on fraud and to be told this was only one such team of a number within that lender.
The conveyancing sector has broken its bond of trust with lenders and needs to get it house in order and that includes every conveyancer in the jurisdiction looking to their own risk now before they blame others.
So what should you do?
- Realistically assess the work that you conduct. When a lender risk profiles the work that you are doing for all your clients how will they consider you? Some work types are considered as much more prone to fraud as other types of work. In this climate there are some work types and introducers you shouldn’t touch if you want to stay on lenders panels even where there is no lender involved.
- Assess the work that you have conducted historically, will the solicitors that are trawling files spot patterns of introduction or work type that they will consider to be high risk? If so you should make plans to leave the conveyancing market and be strategically prepared to stop this line of work.
- Are your registration and title checking procedures absolutely in line with the CML Handbook and your common law obligations?
- Are your internal checks and balances on staff appropriate? It wasn’t that long ago where I came across a firm where a minimum wage cashier had both the set up and send passwords on a client account when the whole purpose of dual authorisation is to help avoid fraud.
- What is your claims record like? Realistically would you send mortgage advances to you?
- If you aren’t CQS don’t be deceived that it will save you. We are already aware of lenders that have removed CQS firms from their panels. That said being CQS will for some lenders be considered to be a positive factor in their overall scoring of your risk position.
Sometimes when a firm is removed from a panel there is some hope and appropriate mitigation might get you back on the lenders panel. Often no amount of mitigation will save you and you should have a “plan b” ready in the event the worst happens. Plan B is critical and shouldn’t just be that you will act for the client and your mate up the road will act for the lender.
Conveyancers should also recognise lenders who may think you are colluding with criminals are under an obligation not to tip you off after they have reported you to SOCA, so don’t expect to be told reasons why you have been thrown off.
Don’t just assume that you understand the risk that you present to lenders. It is time do a proper and thorough review with an open mind of your risk to lenders before it’s too late.
Chris Harris the owner of Today’s Conveyancer and Practical Vision offers advice to firms in considering the risk they present to lenders and also the options that are available to firms if they are removed from lenders panels.