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Nik Carle, partner at law firm Browne Jacobson's Nottingham office says that it looks increasingly likely that 2008 will mark a renewed period of recrimination and claims-making in the secured lending sector. This will demand the use of experts to advise courts and litigants on the prudence, or otherwise, of past lending criteria.

“Come January, those post-party blues will be biting harder than they have for many years. The Council of Mortgage Lenders will have published its latest figures on repossessions by then and the outlook is bleak, to say the least,” Carle adds.

Browne Jacobson is predicting that lending practice advisers will be particularly sought after in the New Year, as the pool of available expertise in that discipline is quite small.

Professional  negligence 

According to the firm, it will be the sub-prime and impaired credit markets that will yield the greatest number of claims over the next 12 months. As more and more borrowers default on these loans, so the pressures will mount on lenders to maximise recoveries against their security.

Those recovery actions, whether they take the form of professional negligence or other claims, are bound to require some ‘opening up’ of lenders’ internal procedures for challenge.

“One of the key features surrounding the next claims phase is the newness of the type of lending we have seen in recent years. Once that ‘opening up’ process begins, it will become apparent that there is no real guide available for what amounts to appropriate sub-prime lending practice and what does not,” Carle continues.

“In the 1990s, when we had the last flood of lender litigation, nobody was lending in quite the same ‘easy’ manner and accordingly, there is not much of a directly comparable track record to work from today,” he adds.

Private adviser

Carle explains that this is where the demand for good lending practice experts really comes in. He says that lawyers, judges, arbitrators, ombudsmen and mediators are all going to be looking to experts for a steer on whether particular cases fall above or below the line of acceptability.

He also advises lenders to use an expert as a ‘private adviser’ in the first instance, for an early ‘warts and all’ view about the merits of a case. The adviser will still be acting independently, but will owe his or her primary duties to the lender, not the court. It is always possible for an organisation’s status to be converted to a full expert witness role later on, under Part 35 of the Civil Procedure Rules.

With so many lending transactions predicted to falter, well-positioned experts could be in for a busy and lucrative time over the next year, concludes Carle. Lenders need to be acting now to ensure they are taking informed advice early and forging links with experts who can actively support them through the inevitable challenges of 2008 and beyond.

Related links

• Browne Jacobson