The Council of Mortgage Lenders caused a stir last week when it came out in opposition to the Solicitors Regulation Authority’s stance on solicitor regulation.
In its newsletter, the CML said: “The SRA is campaigning for a principles-based approach to regulation but we do not believe that this will address lenders’ concerns and help restore confidence in the conveyancing services provided by solicitors.
“Instead of pressing ahead with proposals for this kind of reform, the SRA should agree to undertake a comprehensive review of the existing arrangements with the Government and the Legal Services Board.”
A CML spokesman adds: “The main point is it is necessary to reinforce lender confidence in solicitors. The alternative would be that they would
slim down the panels of solicitors that they are prepared to work with and will not accept those who do not have a proven track record.”
Speaking to Money Marketing, the SRA defended its position and countered the CML’s comments about its approach to regulation.
A spokeswoman says: “The new approach will focus on getting the best for consumers. It is not about light-touch regulation but about modern and proportionate regulation. We want to encourage law firms to assess and tackle the risks themselves wherever possible but those who cannot or will not put things right will face tough action.”
Mortgage Promotions director Nick Baxter, who acts as an expert witness in litigation cases, believes the SRA does not police abuse properly and agrees with the CML that lawyers may lose out if nothing is done to combat fraud.
He says: “Sadly, I can see some new lenders saying that they are only going to use one firm of solicitors. The solicitors’ bodies need to listen to the CML, otherwise they might find that local conveyancing firms are cut out of the loop.
“I cannot understand why the SRA does not have a more robust enforcement regime – they need it.”
Baxter adds that it is easy to carry on with unobtrusive regulation but believes a more active strategy would be much more effective in stamping out fraud.
He says: “We have seen that it is easy to get seduced by the cost benefit of light-touch regulation but what is more important is what gets
done. The SRA needs to work with the lenders, undertake risk analysis, help lenders understand the market better and help them undertake
their own due diligence.”
First Action Finance head of communications Jonathan Cornell believes a similar conveyancing package as that used by BM Solutions could allow brokers a certain amount of control in vetting solicitors.
He says: “BM has a sort of conveyancing package, whereby you can search for different solicitors and you can rank solicitors and give them a score. You can see which solicitors have provided a good service.”
Cornell says carrying out due diligence checks would be a more difficult for lenders but a case-bycase approach could be the answer.
He says: “For lenders, it is a little difficult. I think a while ago, Abbey significantly reduced its solicitor panel. They basically told brokers that if they wanted to use a certain solicitor, they would consider it on a case-by-case basis, which is probably a better way of doing it.”
Goldsmith Williams partner Eddie Goldsmith says the SRA has taken a sensible approach to regulation so far and a more intrusive system would come at a cost.
He says: “What I have seen so far from the SRA is a common-sense approach. It is now looking at outcomes rather than the technical rules.
“I understand where the CML is coming from – it is saying, can’t the SRA do something more to catch those lawyers who are the bad bunch?
“The SRA should be taking more preventive action, not just reacting after an event. But it is going to cost more money to have a more intrusive
regulatory framework. It is a difficult balancing act.”
Goldsmith also says that lenders need to play their part and become more stringent when allowing solicitor firms on their panels.
He says: “Lenders need to be brave and they need to decide to have more of a restricted panel working with them. They can then be sure of the quality of the solicitors with them.”
The National Fraud Authority, which has recently set-up up the Mortgage Fraud Forum in conjunction with the Metropolitan Police, says it is willing to assist in discussions between members of the forum if it is needed.
NFA intervention manager Des Fitzpatrick says: “The NFA has formed the mortgage fraud forum with partners involved in the battle against mortgage fraud to provide an environment within which partners can raise issues and concerns and work together to address these. The Council of Mortgage Lenders, the Solicitors Regulation Authority and Law Society are all members of the forum.
“The NFA is willing to intervene to facilitate discussions between individual members of the forum if such assistance is requested.”
Legal Services Board chief executive Chris Kenny says:”We welcome the SRA’s move towards proportionate outcome based regulation. We
believe that, combined with effective enforcement, this can improve outcomes for consumers by making firms focus on the intent behind regulation rather than adopting a tick-box mentality.”