The recent announcement of a new ‘Lender Exchange' panel management system will be on interest to both solicitors and buyers.
Homebuyers are usually not aware of the existence of lenders solicitor panels - that is, until they find that their own solicitor won't also be able to act for the lender because he or she is not on the lender's panel. So the arrangements that mortgage lenders have for appointing and retaining panel solicitors may be of some concern to property buyers.
‘Lender Exchange' is being set up to provide a centralised panel management system which will remove the need for conveyancing firms to repeatedly supply the same data to different lenders. The scheme is in the final stages of development and should launch in the first quarter of 2014.
The system has been developed by Decision First, in collaboration with a working group of lenders. It will be open to all lenders who wish to participate.
Three major lenders, Lloyds Banking Group, Santander and Royal Bank of Scotland Group, have already confirmed that they will be adopting "Lender Exchange" when it starts and expressions of interest have also been made by Coventry Building Society, Bank of Ireland, and Paragon Group.
Homebuyers normally assume that their own solicitor will be able to handle the legal work in connection with the mortgage. But lenders generally only instruct firms which are on their panel of approved solicitors.
So if a buyer finds that his or her own solicitor is not on the lender's panel the buyer will either have to instruct a different solicitor or pay additional legal fees for a second firm to act for the lender.
In the past getting onto a lender's panel was not too difficult and firms were rarely removed from a panel once they were on it. If a client was getting a mortgage and the Solicitor was not already on that lender's panel they could usually get appointed straight away without any problem. Indeed some lenders would send mortgage instructions to any firm and did not maintain specific panels.
But with the growth of mortgage fraud lenders have drastically revised their panel arrangements in recent years. Many have cut the numbers of firms on their panels, and have removed firms which do not handle many conveyancing cases or do not have a minimum number of partners.
Firms are often unaware that they have been removed from a lender's panel until a client tells them that the lender won't instruct that firm. And often the removal has nothing to do with the capability or integrity of the firm, but is just a matter of the lender's policy.
Solicitors also find that if they want to apply to join a lender's panel they will have to supply a lot of information about the firm, and perhaps pay a fee. If a new firm wants to be on the panels of several lenders this will create a considerable amount of work - much of it duplicated - as well as expense.
Lenders are also now reviewing panel membership on a regular basis, and some are proposing to require regular fees to be paid by firms which want to remain on that lender's panel to cover the administrative costs.
The Lender Exchange initiative has two main objectives - to minimise the costs and administrative burden on conveyancing firms responding to regular duplicate information requests from multiple lenders and to help lenders minimise fraud and negligence through robust due diligence.
Conveyancing firms will pay a single annual fee, based on the size of the firm. This will simplify the current various fees and processes that firms currently face from multiple lenders. This new centralised system will help to reduce duplication, streamline costs, and improve efficiency.
It is proposed that Solicitors' firms which are already accredited under the Law Society's Conveyancing Quality Scheme will not be required to provide the same amount of information as they will already be continuously vetted under CQS.
Concerns have been raised about Lender Exchange by the Law Society, including:
- Lack of information and transparency about lenders' decision-making processes and the criteria which will be applied
- Whether existing panel firms will need to reapply and pay a fee
- Whether there will be an appeals process at all stages of the application
- Any detriment to consumer choice and cost
- The fact that the system will be operated by a single profit-motivated company will give them a monopoly position
It is understood that the Law Society had previously suggested setting up a similar scheme on a not-for-profit basis, but that was rejected.
Further information on the details of the scheme is awaited. Until then it remains to be seen whether it will be something that benefits conveyancing solicitors and their clients or whether it will be just another headache for solicitors and make conveyancing more expensive.