Rockstead is uniquely placed in the mortgage review market since we have business relationships with lawyers requiring expert witness services and holders of mortgage assets requiring servicer audits. Responsible partners often ask us to predict the next mortgage market issue so they can take a proactive role in the management of such issues. One such issue we feel will come under scrutiny by regulators will be the appointment and behaviour of LPA receivers.
With the increase in buy to let lending over the last decade there has been a substantial increase in the use of LPA receivers by lenders and holders of mortgage assets. Although a mortgage may be in default there is often a lawful tenant occupying the property which can make property repossession inappropriate. The good quality LPA receivers carefully balance their responsibilities and obligations, managing the conflict that often arises where they are appointed by the lender, but acting as an agent of the borrower. Clearly they have a responsibility to protect the interests of the lender, while making sure tenants are treated fairly and helping the defaulting borrower find the most appropriate solution for their individual situation.
Many will be surprised to learn that LPA receivers are not subject to statutory regulation and there are no specific qualifications that an LPA receiver is required to hold before setting up. In our experience, this situation has led to a wide range in the quality of LPA receivers and the decisions they make. Although they are not regulated, lenders and servicers are. We believe the FSA will show no mercy to an approved company that does not take reasonable steps to ensure that their third party suppliers, including LPA receivers have good processes and practices, particularly with regard to TCF. Maybe it is not surprising then that more of our expert witness work requires us to consider the actions of a LPA receiver and that we are being asked to audit the activities of LPA receivers on a more regular basis.