Lenders need to solicit better system of trust

One More Thing:The country's lenders are ripping up their floorboards in an effort to discover if they have further exposure on borrowings provided on the foot of solicitors' undertakings.

The collective liabilities of Dublin-based solicitors Michael Lynn and Thomas Byrne - whose legal practices have been shut down and who are at the centre of a multiplicity of legal actions - are likely to be far in excess of €100 million once the financial institutions have counted every cent owing in both cases.

Banks and building societies across the board are carrying out their review of lending procedures and loan portfolios to see if other multimillion-euro borrowings provided to solicitors - and indeed to some big clients - on the back of undertakings are well secured on bricks and mortar.

There is no doubt that the country's lenders could not have enjoyed the boom in lending on residential properties over the last decade had it not been for solicitors' undertakings. These mechanisms allow solicitors to complete a property deal without producing the title deeds and to draw down loans without immediately registering the bank's security. It was a way of fast-tracking the whole process.

However, the system is based entirely on trust and the two court cases have shaken the trust of the country's lenders in the legal professionals who have greased the wheels of their highly lucrative mortgage business. Lynn and Byrne would appear to be in the minority but it has still shaken the system.

No lender would want a return to the old days of a three-way closing with a group of solicitors representing the bank, vendor and purchaser sitting around a table for every deal. It's time-consuming and expensive. It would slow up the whole process and curtail a lender's ability to win new business.

However, one alternative is e-conveyancing, where all the documents - lending agreements, title deeds, the lender's security charges - are processed online in a highly transparent manner. The Irish Banking Federation is working on standardising mortgage deeds so e-conveyancing can happen and Taoiseach Bertie Ahern said as far back as 2005 he was in favour, so the will is there.

Once the bankers have assessed their liabilities in the Lynn and Byrne cases, they will have to put their heads together to devise a fast and foolproof system that is not as easily open to abuse.