SRA: 'strong action' against solicitors taking improper risks


Solicitors are failing to warn mortgage lenders about suspicious features in property transactions, the Gazette learned this week.



Mortgage lenders are reporting three times as many incidents of suspected mortgage fraud to the Solicitors Regulation Authority (SRA) as they were just four years ago, according to statistics.



The SRA Fraud Intelligence Unit received 293 reports of suspicious transactions in 2007, compared with 85 in 2004. According to an internal SRA paper, the increase indicates that some solicitors are failing to warn lenders about suspicious features in transactions.



The report said: 'The SRA is acutely aware of the threat of mortgage fraud and will continue to discipline solicitors who take improper risks. We may need to take particularly strong regulatory action as a warning to those who are tempted to get involved.'



While the paper stresses solicitor involvement in fraud 'can be due to incompetence rather than dishonesty', the SRA is concerned some lawyers are failing to inform lenders of key and obvious anomalies in transactions.



Suspicious features include where the price paid for a property is less than reported, where buyers do not provide the balance of the price from their own resources, and where the loan is for more than the price paid or the property has been sold in previous months for a much lower price.



During the early 1990s recession, lawyers were at the centre of massive losses caused by mortgage fraud. The fallout meant huge payments were taken from the Solicitors Compensation Fund, reaching £29 million in one year. The SRA report stated it was 'vital that this does not re-occur'.



A Law Society spokeswoman said it was doing all it can 'to help the profession avoid the pitfalls'.



Anita Rice