Wednesday, 3 June 2020

Why even a prophet of doom can be comforting

[From two years ago, even more relevant right now]

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 few 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. However small the changes are, some borrowers will quickly find themselves in dire straits. Payment holidays eventually come to an end. 
  • 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? Any reason not to run an LM04 policy search before you submit any COT?

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.

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