Lenders crack down on mortgage fraud
Following warnings from the National Fraud Authority about the level of mortgage fraud in this country, lenders are attempting to protect themselves by pushing their own solicitors on borrowers.
Mortgage fraud costs the industry around £1 billion a year, leading the Financial Services Authority to instruct lenders to get to know the solicitors they work with.
In response, several lenders, including Santander and Nationwide, are believed to have reduced the number of legal firms they work with on new mortgages. However, HSBC have gone a step further by reducing its panel to just 43 and changing its terms so that customers face a financial penalty if they don't use a HSBC approved solicitor.
Under the new rules that HSBC brought in last month, customers are given the option to use one of the bank's recommended solicitors for their conveyancing when they purchase a new home. If they choose to use their own solicitor, HSBC will still use one of its approved solicitors for its share of the conveyancing work, with customers having to pick up the bill.
"We are very happy for customers to use the solicitor of their choice," says Suman Hughes, spokesperson for HSBC. The change isn't designed to create extra revenue for the bank only to "reduce it's exposure to conveyancing fraud."
Typically, when you buy a house you employ a solicitor who handles both the property and mortgage conveyancing. However, there is no legal requirement for this to be the case. So HSBC is entirely within its rights to pick its own solicitor and bill its customers, but it will result in customers being financially penalised for using their own solicitor due to the extra fee.
HSBC has defended its decision, saying it will benefit customers. "Customers who choose to use a firm on the panel can benefit from agreed conveyancing costs as well as valuable guarantees should the seller pull out," says Peter Dockar, head of mortgages at the bank. "We also believe this will provide additional protection for our customers and HSBC."
However, not everyone agrees. "While such restrictions will adversely affect local solicitors, the biggest loser in the equation is the consumer," says Gary Yantin, managing director of HighStreetLawyer. "Many people would naturally prefer to use a known local firm rather than an industrial-scale call centre, and they are having this choice removed."
So what do you need to consider?
Whether you use a solicitor approved by your mortgage lender or your own choice there are certain things to consider before you commit:
- Are they no sale/no fee? Many solicitors carry out conveyancing on a no sale, no fee basis so that, should the sale fall through, you are not left paying several hundred pounds for nothing.
- Get a full break down of the costs. What is included in the quote the solicitor has given you? Are search fees, bank transfer costs and land registry fees(all compulsory costs) part of the fee or can you expect extra costs?
- If you are buying in a development, is there a solicitor that has handled a lot of the sales? If there is, it is worth using them as they will already know the development so are likely to raise fewer questions over the contracts and lease/freehold speeding up the whole process.
Permanent and absolute ownership and tenure of a property (residential or commercial) and/or land with freedom to dispose of it at will but with no time limit as to how long the property/land can be held (in perpetuity). Freehold is the opposite of leasehold.
The branch of law concerned with the preparation of documents for the buying and selling of property (or remortgaging), always handled by a qualified solicitor. The conveyancing process covers many of the legal aspects of the sale/purchase/remortgage such as land registry, local authority searches, freehold and leasehold status, title deeds and much more.