Separate representation: not the preferred approach of lenders
The Council of Mortgage Lenders (CML) has launched an investigation into the impact of more borrowers and lenders having separate legal representation as lenders continue to restrict their panels, it has emerged.
It has also given a cautious welcome to the Law Society’s new conveyancing quality scheme (CQS) and sounded a warning over suggestionsthat the requirements of solicitors’ professional indemnity insurance (PII) will be relaxed.
The CML is to tell the Law Society and Solicitors Regulation Authority that separate representation is “not the preferred approach of lenders”, but recognises that it will increase if lenders move to more limited panels of firms that have the CQS accreditation and “adequate” PII.
Where it does happen, “we believe it would be helpful to provide guidance to the profession through a set of standardised instructions, building on the CML Lenders’ Handbook”. The CML has set up a working group to look at the issue of separate representation, and its “practical implications” for the conveyancing process.
The CML said that if the CQS is seen as robust by lenders, “many are likely to require CQS accreditation as a minimum condition for panel membership”. It continued: “We are continuing to emphasise that the Law Society needs to ensure the scheme has sufficient resources and rigour to ensure it is credible to lenders. It is not simply a matter of ensuring records are up-to-date, but also of acting to prevent entry to the CQS to uphold standards and to ensure removal of accreditation when problems are identified in future.”
The CQS has a multi-million pound budget, much of which will be spent of monitoring and enforcement of the standards (see story).
A report to the SRA as part of its review of PII recommended removing the minimum terms and conditions of insurance for commercial clients (see story). The CML said: “We would expect lenders to require effective PII if they are to keep a conveyancing firm on their panel. Lenders will therefore demand greater transparency about firms’ insurance arrangements and will be more active in supervising and monitoring their activity to ensure PII will be sufficient to cover lenders’ risks.”
The CML also said it was looking at an alternative method of transferring funds between banks to reduce their exposure to “unscrupulous” lawyers who collect mortgage monies but do not pass them on.
The perceived problem with the new Law Society CQS is that everyone will get it, so it does little to raise standards – save for some post-membership training.
It also smacks Lexcel in the face as not being enough.