60 legal firms are being investigated for negligence
Solicitors’ professional indemnity (PI) premiums are set to rise amid growing incidences of mortage fraud, with the Solicitors Regulation Authority (SRA) investigating 60 legal firms for possible involvement or negligence.
The SRA has also received an increase in complaints about solicitors linked to mortgage fraud, with 293 reports of concern in 2007 versus 85 in 2004.
An SRA spokesman said: “This was also a big issue in the 1990s. When property prices are stagnant or falling, then mortgage fraud becomes more evident.
“If a property is deliberately over-estimated and the lender lends too much money, it’s OK if the property value goes up. But it’s noticeable if the price plummets.”
Richard Wynn, director of Howden Insurance Brokers, said the insurance industry has been hit with a significant increase in claims notifications that suggest mortgage fraud as the housing market has cooled. He added that this could result in increased premiums or insurers scrapping their PI products.
“Lenders sue lawyers for their part in the fraud,” he said. “It doesn’t necessarily mean the lawyer is a crook, but if fraud has occurred then the lawyer has been negligent in his job, so he still gets sued for negligence.”
Frank Maher, a solicitor at Legal Risk, is representing two law firms that are under investigation for their involvement with mortgage brokers. Maher said the firms had over 260 cases of concern between them.