Lender File Requests: Is Your Conveyancing Firm Ready?

A mortgage lender’s request for completed conveyancing files can expose weaknesses that remained unnoticed during the transaction. The firm needs to establish what instructions applied, what work was undertaken and whether the file records the enquiries, reporting and approvals required.

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

What a lender file request can reveal

The casual firms who have some idea about dealing with lender compliance 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. 

Identify gaps before the lender asks

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. Reviewing an older file requires the lender instructions applicable to the transaction, rather than today’s wording. The Lexsure Lender Archive provides historical lender-specific records where coverage is available. These should be considered alongside the applicable general instructions, mortgage offer and case-specific correspondence.
• There’s usually a small cost, but in many 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.