Tuesday, 23 October 2018

Does Brexit Spell the Exit for Firms on Lender Panels?



The Bank of England's governor has recently warned the cabinet that a chaotic no-deal Brexit could crash house prices.

His worst-case scenario was that house prices could fall as much as 35% over three years.

If such a prediction comes to pass it will be destructive for conveyancing firms.

Lenders will not swallow their losses happily. For conveyancers, that means a tsunami of file reviews because lawyers are an easy target for a lender looking to offset a loss – or pass it on altogether. Any failure by the lawyer to comply with the letter of their mortgage instructions – typically based on the lenders’ handbook – will be pounced upon.

Many firms will be removed from lender panels or fail to find a PI insurer, which amounts to the same thing. There will be fewer conveyancing law firms. Strong risk assurance embedded in your firm’s everyday practice can put those worries to rest.

Ask yourself whether you have ever considered a pre-lender compliance audit. Many firms make enormous efforts to ensure their client Ts and Cs and website copy are compliant, but don’t take the trouble to check on lender compliance. Yet the consequences for a firm tripping up on lender Handbook requirements can be fatal to a law firm.

It’s not just about peace of mind. A lender compliance audit can bring real value to your firm. A third-party firm acting in the same way a lender would can uncover issues and knowledge gaps that you can address to make your conveyancing processes more rigorous.

In this day and age of increased accountability and regulatory requirements, audits should be welcomed, not feared. If you’d like to find out more about how Lexsure’s lender compliance audit can assist your firm please contact support@lexure.com

Monday, 17 September 2018

Proving Conveyancing Quality to PI Insurers

In the lead-up to PI insurance renewals, Lexsure are offering firms the ability to commission a lender compliance audit which can be used to evidence to professional indemnity insurers the quality of their conveyancing. The independent assessment reviews files based on the UKF Handbook Requirements as of the date of the mortgage offer on file.

Until now, Lexsure restricted the availability of their audit facility to lenders and insurers but are now making the facility available directly to firms.

Everyone knows that conveyancing is the highest-risk area of legal practice with lenders dominating the instigation of claims. Firms that are confident of their quality and compliance with lender requirements should be able to evidence to their PI insurers that they are managing risk properly.

In carrying out an audit, the assessor (non-practicing solicitors with over 20 years conveyancing experience) utilise Lexsure’s proprietary technologies which incorporate the relevant UKF Part 2 requirements based on the date of the COT.  

With PII renewal season in full swing SRO’s, COLPs and Heads of Department would be well advised to take advantage of an external audit so that they can prove the quality of their lender compliance to assist in obtaining insurance. Firms should not shy away from ‘lifting up the carpet’. If there are areas for improvement then it is well worth finding out and dealing with it sooner rather than later.

Thursday, 13 September 2018

Lexsure offer conveyancers a version of the ‘Pepsi Challenge’

The Pepsi Challenge signaled a major shift in the cola landscape. In 1975, Coke dominated the cola market having held the number 1 position for decades. 

Pepsi was the underdog looking to prove something. They were hungry and willing to mix it up. Pepsi came up with a bold revolutionary strategy to do just that.

That idea was the Pepsi Challenge. Pepsi went inside malls around the USA and invited people to do a blind taste test between Coke and Pepsi. The challenge was designed to be a direct response to critics who allege that Coca Cola and Pepsi Cola are identical drinks, with no meaningful differences. The results were remarkable; people picked Pepsi over Coke by a significant margin.

Leading law tech company Lexsure are offering up to 50 firms to conduct, free of charge, their own version of the Pepsi challenge. Will Lexsure’s ENQUIRYgenerator technology outperform a firm’s conventional method of raising additional enquiries?

There are the two options as to how the challenge should operate: 

Single-Lawyer: Without any advance warning, the COLP or head of department should select a file where a conveyancer has recently reviewed a full set of documents and raised additional enquiries in the normal fashion. Then ask that fee earner to run through the same set of papers using Lexsure’s ENQUIRYgenerator. Compare and contrast. 

Two-Lawyer: Take a live purchase file where all the paperwork is in ready to be reviewed with the intention of raising enquiries. Make a copy of the file. Identify two conveyancers within the firm of equal experience and competence. One fee earner will review the file as per normal and the second will use ENQUIRYgenerator. So that this is a true test, neither lawyer should know that the file is being reviewed by another. Once again compare and contrast side-by-side. 

David Myers of Lexsure recently said at a webinar. “Law firms are understandably skeptical when it comes to adopting new risk management technologies. Frankly, it would be hubris to expect lawyers to accept, at face value, the assertion that technology can offer significant additional protection. It’s for us to prove that new processes are worth the financial cost and cultural change. Firms should have the opportunity to assess the output of new technologies on its intrinsic merits based on results.” 

ENQUIRYgenerator enables conveyancers to efficiently build case specific, targeted conveyancing enquiries based on a file review. The intelligence of the system grows daily due to the collaborative nature of the software whereby lawyers add novel enquiries into the database to be utilised in future cases with similar characteristics. These new questions can be inspired by recent case law or legislation (Dreamvar being a good example).Lender-specific and location-specific questions can also be added and indexed. 

Law firms wanting to take up the challenge by way of a free trial should contact support@lexsure.com 





Sunday, 9 September 2018

No Summer Slowdown When it Comes to Lender Handbook Changes

The three month period between June and September 2018 witnessed significant activity when it came to lenders changing their Handbook instructions. Conveyancers may have taken a well earned break during the summer but lenders did not rest when it came to altering their requirements for panel firms.

Here are some of the facts and figures:
Lender
Sections Changed
Separate Change Events
Barclays Bank UK PLC
3
2
Halifax
8
4
HSBC Bank plc
11
5
Nationwide Building Society
9
6
Santander UK plc
12
5
Skipton Building Society
4
3
Virgin Money plc
1
1

A full list can be found here:

The total number of sections varied in the summer period was 253 with 47 lenders making changes.

Email notifications via the LENDERmonitor Notification Service was sent to over 650 lawyers.

The highest open rates were by top-200 law firms who, in this regard, display a healthy appetite towards lender compliance.

60% of LM04 pre-COT date range searches in the said period revealed lender changes. The most searched lender was Nationwide Building Society.

Some of the more significant changes related to crucial issues such as :
  • Ground rent escalation clauses 
  • Minimum unexpired lease terms 
  • Gifted deposits 
  • Redemption statements 
  • Reporting incentives 
  • Flying Freeholds 


If you are yet to sign up to the Notification Service you should give it serious consideration. Click here to find out more.

As we approach the Autumn period don't ‘fall’ down when it comes to following your lender client’s requirements. It’s easy to get tripped up and miss a change. Surely you don't want to cause serious and irreparable damage to your firm in failing to follow instructions?   

Sunday, 29 July 2018

Lender File Requests: Do you feel lucky?

Receiving a letter from a lender requesting a number of your firm's conveyancing files is like playing out the "Do You Feel Lucky" scene from the movie Dirty Harry. 

One day things feel great in the conveyancing department and the next day the pesky lender - a ‘so called’ client - is on your case. Problem is that the conveyancing department or indeed the whole firm can be shot to pieces by that darned list-wielding and trigger-happy client. 

Maverick cops aside, compliance with lender handbook requirements is more critical than ever, especially given the likely increase in interest rates and repossessions. There are two types of firm: 

Organizations with a culture of strict lender compliance management who have internal audit mechanisms in place. 

The casual firms who have some idea about lender compliance. They don't do internal audits. Such firms operate on a hope and a prayer that the property prices continue to rise and that their borrower client’s property will not be repossessed resulting in a file review. 

Would the conveyancers in your firm behave differently if they treated every conveyancing file as if you would be audited following completion? 

Of course some firms will play the odds game and bank on never being selected for a file audit by a lender. This can be a great time saver initially, but often will backfire if you’re the one selected. 

I accept that it can be awkward to talk about lender audit risk. But understandably, no matter how sure you are of  the quality of your work, you don’t want to be audited by a lender. Here are a few things to consider when deciding on self-auditing for lender compliance: 

  • Hire an independent third party to do the audit. Asking your lawyers to audit themselves is inviting the fox to guard the henhouse. 
  • Make sure your auditor looks at a random selection of cases over a six year period and has access to the Part 2 Handbook requirements as at the date that the COT was sent to the lender.
  • There’s usually a small cost, but in 85 percent of the audits I’ve seen, the process uncovers significantly more in potential losses and gaps than the initial fee. Even if this isn’t the case, you can sleep better at night knowing your firm’s conveyancing department it well positioned to withstand a lender requesting files for audit. 

Lexsure have observed that firms who make use of our lender compliance audit have a change of attitude to audits moving from initial fear into appreciation. Firms wanting to find out more about Lexsure’s lender compliance audit should email support@lexsure.com


Wednesday, 27 June 2018

Lender Audits and the Prophet of Doom

I’m a specialist in risk, so I can sometimes be accused of being a little conservative in outlook, even for a lawyer. But I suspect that this blog post will have some lawyers reaching for their thesaurus to find stronger words, like “worrier”, “pessimist” or even “doom-monger”.
I’m sticking my neck out today to predict that within the next couple years there will be a dramatic increase in lender file audits. Reaching for my own thesaurus, I’ll go for a “tsunami”. It will be destructive. Many firms will be removed from lender panels or fail to find a PI insurer, which amounts to the same thing. Once the waters recede, there will be fewer conveyancing law firms.
As with the mythical Cassandra of Troy, I’m predicting that I’ll be roundly ignored and then proved right. Although unlike Cassandra, I hope to avoid insanity. And living as a king’s concubine.
There are a number of reasons why lender file audits are on the increase and are set to be more prevalent:
  • In times of economic stability or growth, cases where lender requirements have been breached are usually masked by rising house prices, as mortgage lenders are able to recoup the value of the secured property following repossession. However, when prices fall, lenders will turn to professional negligence claims to make up their losses. 
  • We are already witnessing a correction in the market and rates have begun to rise. However small the changes are, some borrowers will quickly find themselves in dire straits. Bear in mind, a 1% rate rise for many borrowers means their mortgage repayments double.
  • Lenders will definitely not, it won’t surprise you, swallow their losses without a care in the world. For conveyancers, that means file reviews because lawyers are an “easy target” for a lender looking to offset a loss – or pass it on altogether.
So, let’s say I’ve not yet convinced you that doom is-a-coming? What’s the downside to taking some action now to ensure your conveyancing practice is as rigorous as you’d like a lender’s lawyers to think it is?

And if I have convinced you… what actions can you take?

Strong risk assurance embedded in your firm’s everyday practice can nullify those worries. The best way of checking that you risk management is robust is to use an independent third party to run a lender compliance audit.
If you’d like to find out more about how Lexsure’s lender compliance audit can assist your firm please contact support@lexure.com and hear it straight from the [Trojan] horse’s mouth.


Monday, 30 April 2018

Search Insurance : What The Mortgage Lender Says

In the last 18 months 12 lenders have changed their Part 2 Handbook instructions relating to 5.4.6. That particular section addresses the question ‘ Does the lender accept search insurance and, if yes, what are the lender's specific requirements?

Even though some lenders dictate a blanket refusal of search insurance many lenders will accept depending on whether the case is a remortgage or purchase. Some lay down specific requirements relating to buy-to-let transactions. A significant proportion of lenders make it clear that where a lawyer takes out a policy they do so their own risk and must give an unqualified COT. 

Occasionally, a lender clarifies what is policy must cover. Skipton, for example state ‘Any policy must cover our successors in title or be readily assignable (with no onerous conditions)’ 

The Mortgage Lender (TML) who launched in 2016 is the latest lender to make significant changes to section 5.4.6 of their handbook instructions. What makes their change particularly notable is the detailed list of what a search policy should cover. 

Part of their new wording at 5.4.6 reads: 

Any search insurance policy should cover the following:

1 any issues that would be discovered from a search in Form LLC1 of the Register of Local Land Charges with a full set of enquiries of the appropriate local authority in Form Con 29 or any official forms in substitution thereof; 


2 any issues that would be discovered from an enquiry to the relevant sewerage or water undertaker in respect of sewerage or water matters contained in Form Con 29DW or any official form in substitution thereof;


3 any issues that would be discovered from an enquiry of the Coal Authority in respect coal mining matters contained in Form Con 29M or any official form in substitution thereof;


4 any issues that would be discovered from a commons registration, Environment Agency, Cheshire brine, tin, limestone or other mining search; and


5 any matter that would be discovered from a chancel search.


Let’s leave to one side whether there exists any search policies that cover 3,4 and 5 as there is broader question that comes to mind. 

In explaining what a policy should include is this particular lender reflecting the expectation of other lenders?

Surely, now that this definition exists, the prudent conveyancer should ensure that any search policies to be put on risk should cover the areas that TML set out.

Many lenders in their answer to 5.4.6 require that the lawyer be satisfied that the insurance policy ‘adequately protects’ them. Whilst there is no definition of what ‘adequately protects’ means The Mortgage Lender may have just given a clue. 

Some of the most significant recent changes to lenders’ Part 2 requirements are being covered in Lexsure’s series of free ‘In-house’ one hour training sessions. More information can be found at http://insideconveyancing.co.uk/in-house-training/