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


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