The Mortgage Works Conveyancing Panel Information

This is known as the ‘Borrower/Lender Exception’ which states “In the case of a loan to be secured over heritable property, the terms of the loan have been agreed between the parties before the Solicitor has been instructed to act for the Lender, and the granting of the Security is only to give effect to such agreement.”

At the center of this exception is the reference to the prior agreement of the parties on the terms of the loan and that the Security is in effect “execution only”. Thus if one Solicitor acts for the purchaser who is also a Borrower and the Lender then there is no duplication of work nor of expense.

However the requirements of Lenders in 1986 when the exception was introduced were quite different from current requirements. Requirement after requirement has been heaped on to the Borrower/Lender Solicitor (BLS) and it appears commonplace to expect utmost good faith from the BLS and knowledge by the BLS must be passed on to the Lender if it would affect the decision to lend.

This causes issues of confidentiality to arise. The BLS has a duty of confidentiality to the Borrower and is being put under a duty to the Lender that requires disclosure. This is undesirable. If a separate Solicitor is acting for the Lender he will only know what the Lender has told him and will report anything untoward that comes up during the transaction but he will not know the confidential information of the Borrower and be under a duty to disclose it. The effect of this exception in practice is to erode client confidentiality and put the BLS in a conflict of interest situation with regard to that issue.

A good reason for retaining the exception is that the BLS can do everything necessary to meet the date of entry and control things much better than if he has to run everything he has decided passed a separate Lender Solicitor. An effect of removing the exception may be a slowing of conclusion of missives while a Solicitor for a Borrower wants to know that the Lender’s Solicitors will accept the title or other related issue position.

The Council of Mortgage Lenders are not a regulator and therefore do not investigate complaints against lenders. You can contact Lexsure to see if we can assist. Please see our contact details below.

The CML Part II requirements of The Mortgage Works are silent on this issue. Most mortgage companies deal with the issue of file retention via their Terms and Conditions where they generally provide that, for evidential purposes, the firm must keep the file for a minimum six years from the date of the mortgage. Data imagining is normally suitable compliance with this requirement. Many lenders point out in that some fraudsters demand the conveyancing file on completion in order to destroy evidence that may later be used against them. It is therefore important to retain these documents to protect The Mortgage Works’s interest. To be absolutely sure of The Mortgage Works requirements in this regard, please check the Terms and Conditions of The Mortgage Works’s conveyancing panel acceptance.

In operating open conveyancing panels, lenders such as The Mortgage Works face a number of fraud and negligence risks. While there is no authoritative source of data on lender exposure to solicitor-led mortgage fraud, anecdotal evidence from lenders indicates exposure on individual cases are often in the millions of pounds. The National Fraud Authority estimates that £1bn per year is lost in mortgage -related frauds in total, which is seen as a conservative estimate.

These risks are exacerbated by the lack of a comprehensive set of data on all conveyancing firms (which, for the avoidance of doubt, would include solicitors and conveyancers across the UK), in a readily accessible format. Currently, lenders vet the suitability of their panel firms against a variety of disparate, incomplete and potentially inaccurate sets of information. One out of the top five lenders pointed out to us that it is almost impossible to track individual fraudsters who move from firm to firm, especially where they are no longer registered or no longer hold a valid practicing certificate.

The Mortgage Works and other lenders are in varying stages of reviewing their approach to vetting firms on their conveyancing panels, in order to ensure that their ongoing exposure to unsuitable firms is reduced. There is also regulatory pressure on lenders to ensure that they have satisfactory oversight of their third party panels, including a due-diligence process.

We can't comment specifically on The Mortgage Works. Many major lenders are now introducing ‘file auditing’ as standard practice in relation to completed matters. This raises questions of confidentiality in relation to the borrower and the purpose to which the results of such audits will be put. The starting point is to remember that the file does not belong to your firm, it belongs to the ‘client’. But, of course, we will normally have two clients--the buyer and the lender--and you will owe a duty of confidentiality to each. So basically, you have to separate the file and only send the lender the parts solely relating to the lender. But, of course, this should be correspondence pertaining to the lender, mortgage instructions etc.

The emerging convention is that lenders include authority to disclose in loan application forms to counter this problem. Mortgage Express v Sawali, [2010] EWHC 3054 (Ch) indicates that such provisions are valid. Please click here for more information about that case.