Following the decision to move to 43 conveyancing firms representing HSBC on all their conveyancing cases Today’s Conveyancer has had the opportunity to put a set of detailed questions to HSBC.
We asked what was the background to the decision and why did they do it.
Pete Dockar, Head of Mortgages at HSBC explained
“HSBC Bank has not previously had a conveyancing panel. Until 2009, we would ask the solicitor/conveyancer that the customer instructed to also act on its behalf. Essentially, the customer would choose the bank’s legal representative.
By 2009, in light of the growth of conveyancing fraud, HSBC introduced a screening process for customers’ appointed solicitor/conveyancer. Where the solicitor/conveyancer met our criteria, HSBC would instruct the same firm. If they did not, we would instruct our own firm at a cost to the customer.
The National Fraud Authority estimated in January 2011 that the amount of mortgage fraud committed each year may be in excess of £1bn. In January 2012, in order to further mitigate the risk of fraud, we introduced a conveyancing panel which we consider will provide better protection and provide HSBC with greater control over the third party conveyancers that it instructs to act on its behalf.”
We went on to ask what the customer service benefits were that HSBC mentioned in the first press release.
Mr Dockar stated
“As one of the leading mortgage providers over the last three years, particularly to first time buyers, we have identified an opportunity to assist customers by providing an additional option for which HSBC has been able to agree service levels and fixed fees”
Given the implication that fraud was so high we asked what losses HSBC had suffered and whether this was all being blown a little out of proportion.
Whilst not directly answering the question HSBC stated
“The National Fraud Authority estimated in January 2011 that the amount of mortgage fraud committed each year may be in excess of £1bn.
In 2011, the CML estimated 600,000 mortgages were approved for house purchase. £1billion would equate to more than £1666 per mortgage.”
We had previously understood that direct conveyancer fraud was estimated at £300M and this could be on either side of the transaction so we estimate the cost at £300M divided by 1.2M transactions still leaving fraud associated with conveyancers or purported conveyancers at £250 per case. In this context it is easy to understand why HSBC felt they needed to take dramatic actions.
We also put to HSBC that separate representation was burdensome and made the whole chain buying process more complex.
Mr Dockar suggested that “We do not believe separate representation adds any additional complexity to the conveyancing process. Wherever possible, the panel firm will assess some of the work undertaken by the customer’s conveyancer to satisfy itself as to the security that will be taken by HSBC. In this way, we anticipate the benefit of a second pair of eyes”
It will be interesting to see over the coming months whether HSBC and Countrywide, the panel manager, have implemented processes that are slick enough not to delay exchange or completion in chains.
Many conveyancers have put to Today’s Conveyancer that branch staff are guiding borrowers away from separate representation and towards the conveyancer who is acting on a joint representation basis and have asked where the financial motive lies for HSBC in this model.
HSBC responded saying
“HSBC is very happy for customers to use the solicitor/conveyancer of their choice to act for them and all branch staff are instructed to give the options to the customer to enable them to make an informed decision that best suits their circumstances. At present we do not have data on the proportion of our customers that have chosen separate representation.
HSBC will not receive a referral fee or any other financial remuneration as a result of the customer choosing to use the panel firm. Our employees are also not incentivised to make referrals. The benefit to HSBC is in the reduction in it’s exposure to conveyancing fraud”
We also asked how HSBC concluded that only 43 firms were the right number of firms to use in total.
“There are initially 43 firms on the panel and we have sought to provide appropriate geographic representation. This includes 4 in Scotland and 2 in Northern Ireland; 39 are solicitors and 4 are licensed conveyancers. We consider that a panel of this size is manageable and enables HSBC to carry out appropriate checks and due diligence on its suppliers.
The FSA recently conducted a thematic review of lenders’ systems and controls to detect and prevent mortgage fraud. It commented specifically on the need for lenders to know their suppliers and HSBC considers that the introduction of a limited panel enables us to better comply with the guidance issued by the FSA.”
In responding to concerns about whether the panel is open and whether any new firms had been appointed since launch
“We will be reviewing the panel on an ongoing basis. The panel is not closed and firms are invited to register their interest so that they can be contacted as and when opportunities arise.
We have, since launch, invited another firm to join the panel and are reviewing applications from others with a view to appointment in some areas
We will not be publishing the names of the panel firms. This removes any difficulty should a firm be removed from the panel at their or our request. In addition, we recognise that there are a significant number of high quality firms who are not on the panel and would not want this to be misinterpreted.”
We explained that in cases of separate representation the undertakings that are required to be given by the firms acting for the borrower seem to vary depending on which of your panel firms are asking. Is it your intention that different members of your panel ask different questions of the borrower’s conveyancer and have different positions on the use of personal searches?
The Head of Mortgages explained that “Following feedback from independent firms we have been able to add greater consistency to the questionnaire and we are taking steps to ensure that consistent documentation is used.”
“As per the CML handbook, HSBC do accept personal searches but this does not apply to separate representation cases. In these cases the solicitor acting for the customer should refer to the instructions from the solicitor acting for HSBC”
We said that many firms are refusing to sign the undertaking because some of the issues are out of their control and they fear their professional indemnity insurer will not cover them for such undertakings e.g. undertaking that the assumptions made by the surveyor are accurate. Are you aware of this issue and are you likely to review the undertaking?
HSBC indicated “We are aware of this issue and our aim is to ensure that our panel firms use documentation that is acceptable to all parties involved.”
We said many firms are considering moving their account from you, starting press campaigns and encouraging their clients not to use HSBC for mortgages (see recent letters in The Gazette) is this likely to have any impact on your decision to go down this route?
HSBC said “We do not comment on speculation but we would naturally be sorry to see a solicitor customer decide to change their banker.
It is for homebuyers to make their own decision regarding the choice of mortgage lender and we would naturally be disappointed if customers chose a different lender. We offer highly competitive mortgages and we have specifically sought to make it as easy as we can for the homebuyer to use the solicitor or licensed conveyancer of their choice, while also managing our risks. “
Finally we noted that you have joined the CML Handbook, does your operational method fit in with the awaited new part 3 to the handbook?
We believe that it does.
Clearly HSBC are listening to the concerns of conveyancers and we are very grateful for the opportunity to put some challenging questions to them. Whilst the answers aren’t going to resolve the concerns of every conveyancer there are supporters of what HSBC are doing.
Today’s Conveyancer informing your business decisions.