A few weeks ago, I participated in an interesting discussion on separation representation in a LinkedIn group. That exchange of views highlighted the pain that legal firms are still facing in maintaining membership of mortgage lenders’ conveyancing panels. I therefore thought that it might be helpful to share from my experience some thoughts on how legal firms can implement a successful and sustainable panel admission and retention strategy particularly in the continuing challenging economic conditions.
Maintaining lenders’ panels that support supplier diversity, adequate consumer choice and appropriate competition in the conveyancing market is critical in order to protect and promote the best interests of individual consumers. Lenders play a significant role in the conveyancing market because they effectively wear two important hats. Lenders are co-consumers with purchasers in the conveyancing process as well as the ratifier of the individual purchaser’s choice of a legal firm. Lenders therefore have an important responsibility to ensure that their panel management policies do not inadvertently limit or distort competition in the conveyancing market.
Be realistic
Achieving membership of all lenders’ panels is a desirable and achievable goal but I am not sure that it is realistic for all firms in the current climate particularly as the trust between lenders and legal firms is slowly being rebuilt.
Adopting a pragmatic approach is not being defeatist but rather ensures that the inability to obtain or retain membership of a particular panel does not lead to crippling frustration and avoids the possibility of corroding the goodwill in existing relationships with lenders. A primary strategic objective is to aim to achieve panel membership for the majority of the top mainstream lenders by market share as outlined in the relevant reports by Council of Mortgage Lenders (CML) and the Building Societies Association (BSA). The benefit of this approach is that it helps to focus firms on what they currently have rather than what they do not have and thereby take proactive steps armed with a positive mindset to retain what they have as suggested later in this article.
Take ownership
Over the last few years, positive steps have been taken by the Law Society and the CLC to ensure that solicitors and licensed conveyancers continue to retain membership on as many panels as possible and their achievement to date is commendable in view of the more draconian actions that lenders may otherwise have taken. Whilst further work by the relevant professional bodies and regulators is desirable and ongoing to maximise the number of conveyancing lawyers on lenders panels. It is important to accept that the ultimate responsibility for retaining membership on lenders’ panels lies with each firm. Although this may appear like ‘passing the buck’, on the contrary it seems to me that taking ownership as suggested is empowering and an encouragement to firms that they still have a degree of control to shape their desired futures.
I used to find it quite interesting and encouraging during my time at the CLC, that some firms were able to obtain membership to panels even though there was a stated public policy by the respective lenders to refuse panel membership to firms with certain profiles or characteristics. Such achievements, which were primarily because of the firms’ proactive steps demonstrated that lenders could be persuaded to make exceptions if there was sufficient evidence to reassure them that they were ‘low risk’ providers of conveyancing services.
The reality is that although regulation by the CLC or CQS membership makes firms eligible for some panels, the relevant lenders still have the discretion to refuse individual firms taking into account their specific risk profile and the lenders’ risk appetite. I am aware that some take the view that the selective admission of firms to panels even though they are members of ‘trusted communities’ devalues their brands. However, I take a contrary view because lenders have different drivers and objectives and it is therefore impossible to create a silver bullet solution that address all the diverse needs of lenders.
Understand key drivers
Mortgage fraud was a key driver in the rationalisation of panels a few years ago and whilst there are differing views about the extent of solicitor involvement in some of that fraud. The reality is that mortgage fraud was a catalyst for the necessary focus on the management of lenders’ panels and weaknesses were identified that needed to be addressed. One of the issues highlighted was the adequacy of the existing mechanisms for recovery of losses incurred following mortgage fraud through either the compensation fund and/or professional indemnity insurance of the relevant regulatory bodies. The ongoing challenges arising from unrecoverable financial loss resulting from ownership/security issues is likely to continue to influence the approach adopted by lenders with regard to their panels unless more effective loss recovery options are identified.
Although the incidence of mortgage fraud has reduced which is largely due to the collaborative efforts across the industry, the ongoing attention on the effective management of lenders panels will continue particularly against a backdrop of a changing legal services supplier landscape. There is likely to be a shift from a risk avoidance approach to panel membership to a more positive focus on retaining ‘safer’ legal services providers that deliver good customer service. This approach is likely to also aim to protect the brand reputation of lenders by minimising the exposure of consumers to high-risk legal firms.
In Part 2 of this article we will outline the remaining steps to developing an effective strategy for retaining membership on lenders’ panels. Read it here.