B&C feature

Almost 80% of brokers call for more clarity from bridging lenders about loan completion timescales



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The majority of brokers (79%) feel that bridging lenders need to be clearer on loan completion timescales in order to manage clients’ expectations, according to a recent poll by B&C of over 100 respondents.

There are many parties involved in a bridging loan transaction and it is imperative that all are aware of the expectations that need to be met from the start. But, with most brokers of the opinion that this is not happening to the required standard, where is it going wrong?

“There is certainly a need for more clarity,” urged James Mole, Director at London Belgravia Specialist Finance. “It’s understandable that, during the early parts of Covid, some service levels may have slipped — [but] 10 months on, lenders need to make more of an effort and be clear with their timings/SLAs.”

Steve Burns, director at Adapt Finance, feels that many lenders consider turnaround times as the most important factor in winning business when, at the moment, it’s actually their ability to complete. “A simple, ‘This or that is taking a little longer currently, but we will endeavour to do this or that within X working days,’ is the best approach. It’s not as if we don’t know why!”

With the stamp duty holiday deadline causing a rush of buyer activity and the high street lenders still operating with restricted criteria, there are more brokers which have never written a bridging loan before endeavouring to operate in the space. This means that transparency regarding timeframes is even more important, given the inexperience entering the market.

In addition, the current lockdown means that it is likely that third parties are taking a bit more time to report and, with slower administrative processes all round, the speed of completions can easily suffer. However, it’s imperative that everyone in the transaction understands this as early as possible.

“While the majority of lenders have mastered the art of working from home, there is still a delay as you are unable to simply walk a deal to a desk to be underwritten,” said Michelle Dean, senior relationship manager at Peritus Corporate Finance. “A good adviser will always ensure delivery timescales are set realistically from the outset, taking into account current restrictions, and appointed professionals should also be made fully aware of the [these].”

It takes two

 

Clearly, SLAs should be ascertained at the start of a transaction, but where does the obligation lie when it comes to adhering to them? “To invoke the old adage, it takes two to tango,” said LDNfinance director, Chris Oatway. “While I agree with the argument that bridging lenders could be more communicative with timescales, much more onus needs to be placed on the adviser in working out each lender’s process and requisitions. It’s the role of the broker to do their due diligence in every area of the deal — [including] homework on the lenders they do business with.”

While brokers are more likely to have higher expectations of the lenders that repeatedly win awards for service, they are not all expected to have a rapid underwriting, processing, support and legal process — especially on more multifaceted deals or ones that require higher leverage. 

“So much of this process is limited by the speed of the surveyor and the quality of the client’s solicitor that fingers should not be automatically pointed at the lender and their appointed solicitor straight away,” Chris states.

“I have some cases where I know the minimum turnaround time will be four weeks to completion; this appears far too high for a bridging loan but this lender takes on some of the quirkier deals and the [associated] complexity takes time to digest and assess. I would prefer this lender to continue to make the right [judgements] and have some longevity in the industry rather than disappear because they have rushed crucial decisions.” 

Lenders will need to explain early what areas they think could slow down the transaction — such as searches or valuation peak times.

Lucy Barrett, managing director at Vantage Finance, agrees that managing expectations is the responsibility of both the lender and broker. “There are many lenders out there that advertise timescales, but it’s rare that two transactions are similar enough to compare.”

For example, one may have a property in an area where valuation delays are longer than another part of the country due to surveyor shortages — or one property may have a complex planning history or title. 

Lenders can only be clear on what is in their control. The broker may also depend on their own knowledge of how to estimate timescales, rather than rely on what a lender provides in the way of SLAs. 

Paul Elliot, managing director at PROPP, believes that managing expectations is high on everyone’s agendas. “It’s probably the first question we ask of a lender if we’ve not used them for a while and, in some cases, our lender contacts are asking us, ‘How quickly do you need to complete?’ When we’re presenting options to our customers, we’re highlighting any service issues so that they can make an informed decision from the outset.” 

Paul revealed that most of these issues seem to be with local authorities issuing searches for purchase transactions, and some third-party law firms. “Most panel firms are working well, but there are some that just don’t have the capacity, and this is causing conveyancing bottlenecks,” he added. 

How can ambiguous timescales negatively impact a deal?

Failed completions, chain complications, interest penalties, delayed payment to third party providers, and deferred start dates for building contractors are some of the many knock-on effects of indefinite completion schedules. 

“In the short term, the client may question the lender's overall deliverability,” said Tom Berry, asset finance adviser at Arc & Co. “If they begin to think that certain timeframes are not achievable, they may start to consider other options. In the long term, the client may be left with a negative impression of the lender and be apprehensive about using them again, especially if they have not dealt with them before.”

“The client can ultimately lose confidence in their debt adviser, so it is pivotal for us to establish clarity of timescales from deal inception,” added Craig Hardiman-Scott, senior associate at Sirius Property Finance.

Therefore, it is essential that the lenders which claim they can complete a deal within a matter of days are 100% certain of this given the current restrictions — otherwise clients may face adverse financial consequences, especially when it comes to timely exchange dates or if funds are required to meet a liability elsewhere.

“We would never want our clients to suffer financial difficulties through a failure to deliver, and issues here reflect poorly on us as advisers, losing valuable clients to our competitors in a situation where we may not be the ones at fault,” Michelle discloses. “One pet hate is when a lender requests large amounts of additional information at the last minute, not always because it’s needed, but as a delaying tactic. An honest conversation on timing on day one stops these issues.”

Other shared issues brokers face are solicitors not wanting to exchange contracts until the bridging funds have been released; the solicitor’s checklist not being fully completed; solicitors requiring a full binding mortgage offer to complete the process; and lenders’ solicitors requesting to be given funds to cover their costs before any work is undertaken. “[This] leads to delays, unnecessary hassle and stress for all involved, which can sometimes lead to a deal falling through,” explained Dale Jannels, managing director at impact Specialist Finance.

How can communication be improved?

One broker said they would like to see daily updates from all lenders on cases as a matter of course, and others should take note of those that are already doing this. Technology — which has been utilised throughout the pandemic for various processes — could help execute this through the likes of broker-lender portals. 

Peritus implements an all-parties call to kick off a transaction, on which they define the timescales. “From here, weekly update calls can be undertaken, and this allows us to stay ahead of the curve and solve issues before they come problems,” Michelle highlights.

“When a deal is discussed, via email or phone, it is up to the lender to make the broker aware if they know there are backlogs in their processes. We use a lender who we know is working 14 days behind schedule; it’s not ideal, but we know [about] it and can let the client know from the outset. This gives the client the choice to work with this lender or to look at other options if time is of the essence.”  

Peritus always asks for valuers’ quotes and schedules to undertake inspection and deliver their report. “Often, valuers may have issues in safely accessing a property (due to Covid-19), especially in education or care-based properties.” B&C is told that some valuers are booked up two or three weeks in advance, so knowing this from the outset means the client can choose another or work with the longer timescales. 

Dale suggests there should be a separate section in the Law Society website specifically relating to short-term finance conveyancing to give applicants the reassurance that they are working with a solicitor that specialises in this sector to avoid brokers being “on the back foot before we have even started the process.”

Lucy added: “In my experience, we know the lenders we work with so well that, provided the customer is quick and motivated and they have a good lawyer with the relevant experience, then things can happen quickly. SLAs and averages can be published, but there are many variables and knowing what to look for as a broker will help to manage timescales beyond that.”

Later this afternoon, B&C will be publishing bridging lenders’ reactions to the B&C broker poll.

1 Comments

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    Ian Broadbent

    Whilst it is not the only consideration there are occassions when speed is very much the number one consideration after all, once upon a time, this was the very essence of bridging! The key must clearly be to identify the primary requirement ( is it speed, rate, certainty etc?) and this is where a skilled bridging broker comes into there own. NO lender has the answer for every client I can only speak for ourselves but here at Holme Finance Bridging Solutions (HFBS ) we have specialised in the 'niche' market of smaller loans up to £250,000 and all risk underwriting/most legals can be performed in house. This is because we are privately funded and concentrating efforts where we can utilise that advantage. Working with a well diversified panel of lenders on a regular basis and building relationships is the way forward. For transparencies sake our AVERAGE completion time from the application to completion is 10 days, KNOW YOUR LENDER.

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