Free legals, the perk offered to remortgage borrowers to make switching to a new deal cheap and easy, are giving mortgage brokers a service headache and causing them reputational damage.
Just over 40 per cent of intermediaries responding to Mortgage Solutions’ latest poll said the change they wanted lenders to implement next year that would have the biggest impact on their clients was better management of the service given by free-legal conveyancers.
Brokers say the term ‘free-legals’ is a misnomer because the process takes so long it costs their client money when their mortgage deal expires and then ends up on a more expensive standard variable rate (SVR) until the remortgage completes. It also costs them more in man power than if the conveyancing work had been paid for.
Colin Chapman, director of Genesis Financial Services, said: “Are free legals really free? Technically yes, but not if you add up the time we spend chasing cases and trying to almost reinvent the wheel to get them over the line to avoid deadlines being missed.”
Chapman describe the free legals package as ‘shocking’. He said there was a lack of communication from the conveyancer, emails and calls went unanswered and firms denied receiving documents that had been securely sent to them but when challenged would ‘miraculously appear’.
He added: “Deadlines have been missed and clients revert to a standard variable rate for reasons that are totally avoidable. The most recent example is where a mortgage deed was rejected the day before completion after sitting in the conveyancer’s office for over six weeks, signed and ready to go.
“The package has to either change so that lenders offer cash back instead of free legals or solicitors need to staff their operations appropriately for the volume of cases they are telling the lender they can handle.”
Back of the queue
Richard Campo, managing director of Rose Capital Partners, has experienced free legal problems with his clients and his own mortgage.
Campo said that some of his cases have taken so long to complete that the lender had since dropped their rates. He added that requesting a new mortgage offer with a cheaper product then put the client at the back of the conveyancer’s queue again.
“This very same thing happened to me on my own remortgage last month,” said Campo.
“My mortgage offer was produced at the end of September. A new offer was needed, and produced on the same day of the change by Halifax, so we pushed for completion at the end of November.
“I had no update or even a response to calls, emails or secure messages from me and my team for over a week. That cost me nearly £1,000 as I hit the standard variable rate prompting a very embarrassing conversation with my wife to explain why the ‘expert’ got it wrong. The latter was more painful.”
Campo said he is calling his remortgage clients to warn them of the issues and begin the switching process earlier.
‘Unprecedented and unexpected volumes’
The lenders and legal firms picked out by brokers for offering poor service through free legal packages were NatWest, Virgin Money, Enact and Involegal.
NatWest admitted it had free legal service issues at The Mortgage and Protection Event in Manchester at the beginning of November.
A NatWest spokesperson said: “In recent weeks we have seen a high demand from customers, and are working with all of our partners to ensure that service levels are strong throughout the home buying process.”
Involegal said the contracts that conveyancers had with high street banks were based on the bank’s anticipated work volumes and were not based on a fixed number of cases which made it difficult to anticipate the level of staff that would be needed.
Matthew Tossell, chief executive of Involegal, said: “Like many other firms in the remortgage and conveyancing sector at the moment, we have received case volumes far in excess of a particular lender’s anticipated work volumes in a short space of time. This has put considerable strain on our ability to answer phone calls and emails within our normal service level standards.
“We took the proactive step of pausing instructions from our client over a month ago to ensure we could prioritise the processing of existing cases. However, this has inevitably impacted on our ability to communicate as effectively as we would like with the bank’s customers in the short term and we are sorry for any frustration this has caused.”
Tossell said the firm was “working around the clock” with the lender to deal with the “unprecedented and unexpected volumes” of remortgages in the market. It is also having discussions with banks around managing work volumes in the future.
A spokesperson for Virgin Money said: “We are always looking to improve service levels for customers and we work closely with partners to address any issues which occur. We’ll ensure the issues raised here form part of those discussions.”
Enact did not respond to requests for comment.