A number of commentators were saying before the report was published that it would clearly indicate fraud associated with conveyancing would be a major risk and that lenders would need to further reduce panel sizes. But the report focuses on other areas indicating:
“Many lenders identified third parties such as solicitors, brokers and valuers as the main source of mortgage fraud risk. In the past few years, there have been substantial improvements in lenders’ oversight of some relationship particularly those with solicitors. However, there is scope for significant improvement how lenders manage relationships with brokers.”
So the focus and pressure to further remove conveyancers from panel firms may happen where specific threats are highlighted or circumstances change rather than requiring root and branch reform of lending panels.
With the National Fraud Authority in January 2011 indicating the cost of mortgage fraud to be £1Bn there is clearly considerable ground to improve and whilst many conveyancers often feel they are singled out as professionals it is clear that lenders, brokers and surveyors also need to be vigilant.
The FSA also sets out in a consultation paper the proposals for good practice in managing relationships with “solicitors, brokers and valuers” to avoid mortgage fraud as:-
– Identifying firms they won’t work with from a range of internal and external information.
– Conducting fresh due diligence when a firm is reinstated onto a panel.
– Checking that firms do register charges in good time.
– When a borrower moves conveyancers mid transaction contacting the new and old conveyancer to find out why.
– Checking your professional indemnity insurance cover.
– Checking that funds are dispersed in line with instructions held.
The FSA cites examples of bad solicitor risk management as:
– Not conducting on-going reviews of the suitability of the firm to the lender
– Panels that are too large to be manageable and where no work is undertaken to manage dormant firms.
– Only relying on the SRA register of solicitors
Eddie Goldsmith, Chairman of The Conveyancing Association comments on the FSA’s report:
“The Conveyancing Association (CA) welcomes and understands the issues raised by the Financial Services Authority’s (FSA) thematic review of mortgage fraud. One of the fundamental reasons for creating the CA was to distinguish ourselves from other conveyancers by being able to reassure lenders and third parties of the probity and quality of our members both solicitors and licensed conveyancers.
We recognise that as a result of this report lenders will need to be looking more carefully at their panels and how to monitor them on an ongoing basis. That is why the CA is actively discussing a series of measures to further enhance our member’s proposition to lenders whilst at the same time helping those lenders in achieving the recommendations in the report.”
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