Mortgage lending restrictions hit small law firms
19 October, 2015
Small firms who offer conveyancing service face additional pressure after mortgage lenders adopt new criteria to control the membership of their conveyancing panels.
The Law Society Gazette has reported that Metro Bank and Newcastle Building Society are among a number of mortgage providers to introduce new restrictions, which require firms to have at least 120 purchase completions registered with Land Registry during the past 12 months.
The change to the restrictions is part of a new relationship between several lenders and the conveyancing outsourcer Legal Marketing Services (LMS).
Jonathan Smithers, president of the Law Society, said: “The number of transactions a firm has completed, particularly for smaller firms, does not necessarily indicate the quality of that firm’s work.
“We would urge lenders to look at qualitative indicators such as membership of the Conveyancing Quality Scheme when selecting firms.”
Andrew Knee, chief executive of LMS, told the Gazette that whilst his firm advises lenders selecting panels, it is ultimately the lenders who make the final decision.
He said: “It is difficult, because if a firm falls below the cut-off point they think it should be lowered. But if lenders don’t have some sort of method, then they will go back towards having 5,000 firms on their panels.
“A number of the lenders we work for, although by no means all, have decided that an average of 10 cases per month for a firm will give [the lender] the optimum result in terms of having a sufficient number of experienced firms within a manageable panel.”
Charles Morley, head of mortgage distribution at Metro Bank, confirmed that the bank uses LMS-recommended criteria to determine the firms on its panel.
However, he said that the 120 completions was only a guide and that other criteria were also considered, including whether a firm has two or more partners, has an A-rated insurer and is a member of the Law Society’s Conveyancing Quality Scheme.
Many small firms may fear that these new restrictions may make them ineligible for the majority of conveyancing work. For some this very well may be the case, but for the majority it shouldn’t affect their conveyancing services.
However, should you lose such a core service as conveyancing it is important that you seek professional advice immediately to ensure that your cashflow is unaffected by the loss of revenue. If you would like to know more about our cashflow services at Watson Buckle, please contact us.