The merger of Britannia building society with Co-operative Financial Services has resulted in 3,600 of the mutuals’ conveyancing panel members being dropped.
Typically, solicitors on a lender’s approved panel act for the buyer and the lender.
However, the system is open to abuse and could facilitate mortgage fraud because the solicitor involved is responsible for ensuring that money reaches the right party and that a charge is registered against the property.
According to the Co-op, its insurers had threatened to withdraw cover for mortgage fraud unless changes are made.
The president of the Law Society, Robert Heslett, says he was “shocked and saddened” at the move, particularly as it has been taken “in the depths of the most severe recession since World War II”.
Last week, Chelsea Building Society revealed that its buy-to-let mortgage book was responsible for a £41 million write down in connection with mortgage fraud.
According to reports, property values were artificially inflated by third-party professionals between 2006 and 2008 and events only came to light during a review of society’s overall mortgage book by external consultants.
This time last year, the UK’s biggest buy-to-let lender, Bradford & Bingley, reported that it been the victim of mortgage fraud that resulted in an impairment charge of £18 million.
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