Lenders: ignoring guidance on pursuing clients direct


Pressure is growing on the Council of Mortgage Lenders (CML) to ensure that its members comply with guidance on incorrect redemption statements amid Law Society concerns that conveyancers are being placed at financial risk.



Under guidance issued jointly in 1992 by the CML and Law Society, lenders who give inaccurate statements - meaning the solicitor sends insufficient funds to redeem the mortgage - are meant to redeem it anyway and then pursue the clients directly for the money.



However, there is growing evidence that lenders are increasingly refusing to do so, leaving the seller's solicitor to meet the shortfall and pursue the client themselves. Lenders are also inserting disclaimers in their statements so that solicitors cannot rely on them.



The difficulty is leading the Society to consider advising against providing undertakings to buyers' solicitors that the mortgage will be paid off, which it warns would significantly hinder the conveyancing process.



The Society has issued an online survey so that solicitors can give examples of how the problem affects them. A poll last year highlighted this as one of the key issues solicitors want Chancery Lane to campaign on.



The CML has no regulatory powers to enforce the guidance but has agreed to talk about the issue. The Society has also contacted the Financial Services Authority, which has confirmed that it has the power to act, but said it would prefer that 'a non-regulatory solution to this matter can be found through discussions with the CML'.



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Neil Rose