The Council of Mortgage Lenders (CML) has called for closer scrutiny of law firms to crack down on mortgage fraud committed by solicitors, and a comprehensive review of the way solicitors are regulated.
The CML said the principles-based approach of the Solicitors Regulation Authority is not adequate to help restore lender confidence, and out of touch with the more intrusive style of regulation being championed by the Financial Services Authority.
CML director general Michael Coogan said: ‘Lenders and homebuyers rely on solicitors to provide conveyancing services as an essential part of the process of buying a property. But we are concerned about the amount of fraud involving solicitors and the scale of professional negligence that has emerged in recent years.’
Coogan conceded that most solicitors provide a ‘competent, honest and reliable service’, but the reputation of the industry as a whole has been ‘tarnished by a minority of firms that do not uphold the same standards’, he alleged.
Coogan said ‘more intrusive regulation’ and ‘closer scrutiny’ is particularly important given the way the legal profession is changing in light of the Legal Services Act and the increased competition that new entrants to the market will bring.
‘Lenders must be confident that firms have adequate professional indemnity insurance and that there is a reliable compensation fund for commercial clients who suffer loss as a result of fraudulent behaviour,’ he said.
He warned that if lender confidence in the regulation of solicitors is not restored, lenders are likely to scale down their existing panel arrangements and not accept new firms on panels until they have a proven track record.
An SRA spokeswoman said the regulator’s approach was not about ‘light-touch’ regulation, but modern and proportionate regulation that focused on getting the best for consumers.
‘We want to encourage law firms to assess and tackle the risks themselves wherever possible, but those who can't, or won't, put things right will face tough action,’ she said.
She said the SRA has already made significant progress in tackling mortgage fraud and that its investigations have saved lenders between £15m-£20m in the last year.
She added: ‘We have put extra resources in place and are working closely with other agencies, including major lenders, the police and other regulators.’
In a separate development, the National Fraud Authority (NFA) has published its second report into measures taken to combat mortgage fraud. It says there has been ‘significant progress’ in tackling the problem over the past 12 months, with corrupt mortgage intermediaries, solicitors, licensed conveyancers and surveyors all targeted. The NFA estimates the annual value of mortgage fraud to be £1bn.
No comments yet