Bradford & Bingley is pursuing negligence claims against law firms over advice received on same-day remortgage buy-to-let deals.
The state-owned building society alleges that firms breached anti-fraud guidelines on hundreds of loans now facing losses.
The Financial Times recently reported that the action is focused on cases of same-day remortgaging, where bridging loans are used to acquire property at a knockdown price from distressed owners.
The property is then remort-gaged immediately on the open market value, making remortgagors a considerable profit.
Bob Young, managing director at Capital Home Loans, says: “This practice is common and CHL has actions against law firms pending. I thoughtMortgage Express accepted same-day remortgage deals but obviously not.
“This is one of the reasons why lenders are looking closely at their solicitor panels.”
B&B alleges some solicitors failed to disclose crucial information about deals to its Mortgage Express arm, which is renowned for its buy-to-let deals. It says that an internal review highlighted a number of same-day remortgage applications which had been unknowingly acc-epted when they otherwise might have been rejected.
B&B claims solicitors have a duty to supply specific information when lodging mortgage applications. The lender says it is pursuing claims against solicitors where there has been a breach of the Council of Mortgage Lenders Handbook.
David Lawrenson, a landlord and property writer whose blog and website LettingFocus.com was the source of the FT’s story, says that while lenders are saying they didn’t have a clue about the same-day remortgaging, brokers he has spoken to don’t believe this.
He says: “Brokers say that lenders surely must have known. All lenders needed to have done is to visit property shows and seen advisers in action, promoting next-day remortgages and bridging loans as a way to get wealthy fast with none of the punters’ own money put down.”