View more on these topics

Property giants set aside £22.8m to tackle claims

Countrywide and LSL Property Services have set aside a combined £22.8m to deal with an increase in claims from mortgage lenders that are alleging inflated valuations.

Lenders make claims on repossessions if they believe the original valuation was wrong and have subsequently lost money from a lower priced sale.

LSL increased its provision from £7.5m in 2009 to £10.9m in 2010 to cater for future claims. Countrywide had an £11.9m provision in 2010 but did not set aside funds in 2009, which it estimates would have been £3m.

In its 2010 financial results Countrywide says the volume of claims received last year, particularly from sub-prime lenders, has led it to reassess its potential liability from future claims.

But it says: “The group robustly defends each and every claim but reserves have been set, where appropriate for these claims taking into account the information available at the balance sheet date.”

Richard Sexton, business development director at e.surv, part of LSL, says the increase in claims is an issue for the industry and a consequence of the economic cycle.

He says: “We are hopefully at the peak of the cycle but claims strongly track repossessions so if they go up then the number of claims could increase.

“Even though our experience shows we won’t need to use all the money we need to set aside the amount as a prudent business.”

Simon White, director at London Surveyors, says he is surprised at the amounts but adds that firms are wise to set reserves aside considering the huge volumes of transactions done before the crisis.

He says: “Countrywide and LSL are taking a realistic view and are accepting the fact that claims will inevitably come to the fore as they can go back by up to six years.”

He says the surveyors with the biggest liabilities dealt in sub-prime and adverse before the crisis.

The rise in claims has pushed up the cost of professional indemnity insurance for surveyors and could force smaller firms out of business.

Spinnaka entered into administration before Christmas last year after failing to secure PI cover.

Sexton adds that these claims are putting smaller firms out of business and lenders must be prudent in the number of claims they make.
Countrywide did not want to comment further.

Recommended

European court has just ignored risk assessment factors

Last week’s ruling from the European Court of Justice on discrimination when calculating insurance premiums is yet another ridiculous ruling that flies in the face of common sense. It has nothing to do with sex discrimination, but with risk assessment. What next? Will the premiums need to be the same regardless of your age so […]

Leader: Talking up equity release

It was great news for the equity release industry last week that Stonehaven has resumed lending. The lender has been tight-lipped about how much it is looking to lend. The equity release market was worth just £804m in 2010, down 15% from a paltry £946m in 2009. If Stonehaven could provide even an additional £80m […]

Super-complaint by CAB against rogue loan firms

The Citizens Advice Bureau has lodged a super-complaint with the Office of Fair Trading and is calling for an investigation into rogue loan finders, debt management firms and a ban on certain practices.

Newsletter

News and expert analysis straight to your inbox

Sign up
Close

Why register with Mortgage Strategy?

Mortgage Strategy continues to be the market-leading B2B mortgage publication in the UK, and provides trusted, independent insight with the aim of helping, promoting and analysing the latest developments for mortgage professionals.

News & analysis delivered directly to your inbox
Register today to receive our range of news alerts including daily and weekly briefings

Mortgage Strategy Events
Be the first to hear about our industry leading conferences, awards, webinars and more.

Research and insight
Take part in and see the results of Mortgage Strategy's flagship investigations into industry trends.

Have your say
Only registered users can post comments. As the voice of the adviser community, our content generates robust debate. Sign up today and make your voice heard.

Register now