With lending rates currently at half the pre-crash average, firms are already competing fiercely over low levels of work, but regulatory pressures are also taking their toll, and administrative demands are likely to force thousands of solicitors out of the conveyancing market. Alternative business structures are the least of their worries.
In addition to cutting off the supply of credit to first-time buyers, the crash also exposed the extent of mortgage fraud and the role that a small minority of conveyancers had played in enabling it.
With the National Fraud Authority estimating the cost of mortgage fraud at £1bn, mortgage lenders have become a lot more selective about which conveyancers they will allow to act for them.
Having responsibility for transfers of property rights and large amounts of money, conveyancers can play a considerable role – complicit or unwitting – in an act of fraud. As part of efforts to eliminate the risk of this, lenders are entitled to ensure that the professionals they entrust their cash to are above-board and meticulous.
As a result, lenders have cut their conveyancing panels over the past few years. Initially, this process was seen as draconian and arbitrary and led to even specialist conveyancing firms being dropped from some panels with limited chance to appeal.
But this was a catalyst for the launch in 2010 of the Conveyancing Association, which aims to represent the interests of those law firms and licensed conveyancers that are serious about the discipline.
While the continuation of dabblers and dormant firms on panels is untenable, anti-fraud measures need to be fair, avoid burdensome administration for conveyancers, and recognise the expertise and value that conveyancers can bring to the fight against fraud.
At around the same time as the CA’s launch, the Law Society launched its Conveyancing Quality Scheme to ensure that all firms with the kitemark meet certain professional standards.
Since then, lenders’ diligence processes have continued to tighten, with Santander introducing a validation fee for members of its panel, and HSBC slashing the number of firms it will work with down to 43.
Although HSBC was within its rights to make such a dramatic move, the response of consumers, conveyancers and other lenders indicated that the bank’s actions were a step too far and as a result they are now accepting any firm with CQS accreditation.
CQS is an important step in the battle against mortgage fraud and a serious conveyancer needs to have a good reason not to be accredited.
However, the scheme only goes so far; information about a firm’s staff and processes changes and there is still a risk that a firm with CQS accreditation could become a participant in fraud.
This is why the Conveyancing Association and the lender community support industry efforts to collect live data to ensure that conveyancers are who they say they are and funds end up where they’re supposed to.
Members of the CA have been working with Lloyds Banking Group and other players in the mortgage industry on ways to collect data during transactions, and share it where appropriate to help identify firms that are at risk of being involved in fraud.
This work is helping to underpin high-level talks within the mortgage industry to develop a collective repository for data on information they gather from conveyancers. The Council of Mortgage Lenders, which is facilitating this process, recognises the need to minimise administration at the same time as minimising risk.
The changes to the conveyancing industry are far from over, but the message is clear that to prosper in the new climate firms need to get serious about conveyancing.
Eddie Goldsmith is chairman of the Conveyancing Association
