B&C poll feature

Bridging lenders react to call for clarity on timescales

Earlier this morning, B&C reported that 79% of brokers feel that bridging lenders need to be clearer on loan completion timescales in order to manage expectations with their clients, according to our latest poll.

The findings showed that it is likely that some finance providers are over-promising and under-delivering in their efforts to meet demand. 

We asked bridging lenders to respond to the poll results.

“Loan completion timescales can often be unclear because of the lender’s desire to win that deal,” said Nick Russell, sales director at TAB. “Bridging lenders will agree with brokers and borrowers on inaccurate timescales . . . [making it] harder than if you were upfront and realistic from the beginning. The consensus from lenders is that if they cannot complete a deal in the required time, then this jeopardises potential [business] down the line, which is just not true. 

“If you communicate what is achievable and it doesn’t suit the client’s requirements, this isn’t held against you.”

Gareth Lewis, commercial director at MT Finance, added that some lenders say that they can offer a particular rate or complete on a set date, or even that they have the funding when it isn’t the case. He believes that a number of them are trying to get money out of the door and then “changing the goalposts at the last minute”.  

James Bloom, director at Alternative Bridging Corporation, concurs. If a lender is desperate to win the business, it may make promises it can’t deliver on — but that is ultimately short-sighted. “Lenders that take a long-term view and aim to build ongoing working relationships with brokers will have an open dialogue from the start, set reasonable expectations, and deliver on [them].”

Michael Grant, head of sales of bridging and development finance at West One, agreed that transparency in this area is a common problem, but is surprised that as many as 79% of brokers consider it in need of addressing. “Really, it is down to everyone who has a role to play in a bridging deal to be realistic about timescales and appreciate the dependencies in the process that might cause a delay,” he said. “Just working to a deadline of ‘ASAP’ can sometimes distort the actual deadline.”

It is important to remember that it is sometimes difficult for lenders to guarantee a set completion date if the borrower, their solicitor, or a valuer does not deliver their reports and responses on a timely basis — or in sufficient detail. “We tend to give a minimum likely timeframe, provided there are no complex issues arising and fast response times,” explained David Higson, investment director at Blackfinch Property. “We mention the risks that would cause completion to take longer upfront so that the broker can assist us in managing these, and often give a range so the borrower is aware of all potential scenarios and can plan accordingly.”

Michael added: “We can start the underwriting within a few hours of receiving the application pack from the broker, however, the pack needs to be complete and correct. Errors such as the wrong details for the client’s solicitors or missing supporting documents will cause a hold up.”

What are the main causes?

There are a large number of reasons why schedules become stretched. This includes an initial lack of management from all those involved; lenders over-promising; delays in completing tasks; not having searches available; failure to make payments to third parties promptly; working from home (making quick conversations slower); not having the ability to visit sites; backlogs of standard mortgages; increasing workload/availability of surveyors; delay in the instruction of the borrower’s solicitor (or the solicitor responding); valuation considerations which may alter the commercial terms of the transaction; ‘piecemeal information’ and the emergence of material that should have been disclosed earlier (including unexpected legal issues); slow borrower response times (or from their advisers), last-minute drafting changes suggested to the loan agreement; and any unforeseen issues with the title of the property. 

Everyone in the transaction should be aware of all eventualities and in sync from day one. If these challenges were outlined from the start, timescales could be managed better. 

Asim Shirwani, chief commercial officer at Lendhub, professed it was “imperative” that brokers are not only made aware at an early stage of the ‘typical’ timelines for a particular type of transaction, but also of any likely or possible delays so they can manage borrowers’ expectations. “Prudent lenders like ourselves who undertake necessary checks and ask pre-emptive questions at the outset find that their deals run through to completions with minimum delays.”

One lender conceded that getting valuations done is now more problematic, with the period between instruction and visit now often around 10 days, compared with seven (at worst) pre-pandemic. It is claimed that some larger valuers take as long as a month to produce a Red Book valuation after the site visit. The current housing boom and the surge in transaction levels are likely to be causing this backlog. But, it’s not just valuations. Another lender told B&C that a typical bridging loan was taking 10 working days in legals. 

Other potential causes of slowdowns arise from lawyers working remotely; interaction with the Land Registry being difficult; borrowers being somewhat hesitant as lockdowns loom and are enforced, particularly for those seeking development loans; and, of course, lenders having too much work to handle. 

“As a consequence of less lenders in the market post-first lockdown, we have seen a very significant uptick in volumes,” said Ian Wilson, CEO at Acre Lane Capital. “While we have the capacity to deal with the flow, I think the sales team have spent more time quoting new [business] due to the sheer quantity of enquiries, and less time shepherding loans through the legal process when [they] stall due to a problem.” The lender has seen a 50-75% surge in business that has got to legal stage compared to its previous average pre-first lockdown.

To cater for this, Acre Lane has been adding two to three weeks to its expected completion date. “To be frank, we have not always even hit the extended target date in certain cases,” he admitted. “In order to address this issue, and to do what we can, we have launched a legal process portal.” This communicates the state of the legal process on all of its loans between the underwriter, sales, lender, lawyer, borrower’s lawyer, broker and borrower, in a bid to reduce the time to complete deals. 

It is a source of frustration for everyone. Colin Sanders, CEO at Tuscan Capital, explained that, in order to complete all the pieces of the transaction jigsaw, a borrower must provide, in an efficient and accurate manner, the information and numerous documents necessary to satisfy both credit and KYC requirements. “For customers, this process can be both confusing and arduous. This is where skilled and experienced brokers can make the biggest difference by helping their clients navigate their way through in the shortest possible timeframes.” 

However, brokers won’t be able to influence everything. “Completing these processes in a timely manner relies entirely upon the skills of professionals [such as] surveyors and lawyers etc, not to mention official government portals and/or registries,” Colin said. “Put all this into the mix, and even the most proficient broker can find getting deals across the line a frustratingly long process.”

Jordan Fearnley Brown, co-founder and principal at Albatross Capital, divulged that a lot of borrowers are taking the risk of running the valuation alongside the legal due diligence in an attempt to achieve deadlines. In addition, where a refinance is taking place, redemption statements from existing lenders are taking longer than usual. “We’re seeing a lot of second-charge loan enquiries at the moment; gaining consent from the first-charge lender has gone from a week to over 10 days, on average.” 

Albatross’s ‘advance date estimates’, which it includes on its term sheets, are averaging three working weeks from enquiry. “This way, we’re accounting for delays and potential hurdles, but if funds are advanced sooner, the broker and their client’s expectations have been met,” he said. “We’ve found that issues during legal due diligence are the main cause for [setbacks]; borrowers who have longstanding relationships with their solicitors have fewer unforeseen delays due to past work on the [type of] assets in question.”

Bridging loans shouldn’t all be treated the same

The differing nature of bridging deals also means that while some can be paid out in days, others may take several weeks. This is because transactions range from straightforward upsizes/downsizes and light refurbishment work, to portfolio refinancing and developer exits.  

“Ownership structures can also be simple or extremely complex,” said Gavin Diamond, commercial director of bridging at United Trust Bank. “Each loan will therefore have a different combination of factors affecting the assessment, underwriting and legal processing times.” Wherever possible, UTB uses a combination of AVMs, dual legal representation and title insurance to minimise the time from enquiry to drawdown.

However, Gavin believes that even the most complex transactions can be completed quickly if all parties involved work together. “Communication is absolutely key. The devil is often in the detail, meaning that the quality of the information provided as part of the application is crucial to enable lenders being able to advance quickly and deliver on indicated timescales.”

Ross Laurie, credit analyst at Bridge Invest, agrees that every bridging case has its own unique timescale. “Valuation reports generally have a three- to five-day turnaround but, in some more complex cases, such as residual valuations, [it] can sometimes take up to 10 days or more due to the amount of work that must go into the report by the valuer (such as establishing a GDV value and estimating the costs to deduct to get a residual value). Commercial property valuations can be more complex, too, as factors such as rental income and business revenue must be considered.”

The amount of legal work also varies on a case-by-case basis. For example, there may be a restrictive covenant against a property that requires written permission from one or two parties for a loan to proceed. “If the property is a leasehold, our solicitor needs to ensure service charges and rent payments are up to date and will seek written confirmation from the landlord that there are no breaches of the lease,” Ross detailed. 

Lenders also need to fully understand the complexity of the property sales chain. “With an auction purchase, there are just three sets of solicitors to liaise with: the seller's, the buyer's and our own,” explained Matt Gillion, director of credit at Catalyst Property Finance. “But, with some loans, the chain can be long and more complex than originally thought. For example, if a client was refinancing property ‘A’ to purchase another BTL investment, property ‘B', and [this] has a long chain beneath it, it can cause time delays due to amount of people involved. The more the lender knows in advance, the better prepared [it] can be.” 

The headline completions timescales that we often see advertised or written about in the press does not mean that this is standard, or the industry average. Neither does the frequently referred to 50-day period (the data can only be wholly representative of the industry if everyone contributed to it). B&C is also looking deeper into how we utilise the data that is available so that when we publish statistics we can ensure they are a true reflection of the market. 

Matt describes some websites promoting ‘bridging in three days’ without stipulating the obvious caveats to this as “misleading”. “While Catalyst has closed loans within five days, this is not our norm.” 

Mark Posniak, managing director at Octane Capital, pointed out that the fastest transactions are usually when a bridging lender steps in at the last minute to save a deal that has fallen over. “The reason these can [be done] quickly is that there is typically already a valuation and a full legal pack in place and ready to be sent to the lender’s solicitor,” he said.

How improvements can be made

Lenders should advise brokers about any challenges or potential delays it expects right from the beginning and give them full access to the underwriting team. “Honesty and trust are always essential to the successful completion of any case,” imparted Nick Jones, commercial director at Roma Finance. 

Alan Margolis, director of bridging at Masthaven Bank, said that overcoming the problem around clarity of timings is fundamentally about doing the basics well. “Lenders should be talking regularly and directly with their brokers and ensuring that their conversations are clear and leave no room for assumptions, because that is how misunderstandings can arise.” He added that there was “no substitute” to picking up the phone to a broker. “Emails are of course useful, but a conversation provides so much more and, importantly, facilitates the building of a good working relationship between the underwriter and the broker. It is also good practice to follow every phone call with an email so there is a clear record of what was discussed or agreed.” 

Amit Majithia, principal at Avamore Capital, said that sensible timescales, clear processes, preparation, technology, human infrastructure, consistent communication, and a sense of urgency are generally the elements needed to avoid disappointment by brokers and clients alike. “Bridging deals that come to Avamore are not thrown into a standardised process; we start each deal with ascertaining from the broker or borrower what its timescale for completion is. This may be fairly relaxed, or it could be that the borrower is in its notice period after a contractual completion date, or anywhere in between. This is followed by an internal assessment about which resources are needed and even influences which valuer we use.” 

Andy Gray, senior business development manager at Ascot Bridging Finance, said that it was ultimately down to the lender to stay proactive with presenting real-time feedback to the broker on any factors that are impacting the schedule. “We state our own expected timescales for the deal completing on the heads of terms issued, prior to any fees being paid to progress. From a process perspective, we can have a case underwritten within 24 hours if the broker has been able to collect the handful of documents we require.”

For each of Hope Capital’s cases, it has a dedicated underwriter who also conducts a video call with the client at the outset to ensure they fully understand the process. “Often the delay is as a result [of] the client not understanding what is required from them and the broker waiting on information from the client,” its CEO, Jonathan Sealey, explained. “Communication is vital between all parties, so if there is anything that needs flagging from a legal perspective then this is done earlier on in the process so there are no delays.This could be down to gaining consent from another charge holder, redemption statements from other lenders, tying matters up with vendors, signing legal paperwork, and deposit monies landing on time — the list is endless, but sometimes all parties need to get a realistic perspective on how long a particular task may take, as a lender can often be ready to send funds to complete yet they are still waiting for something to be received from a third party which is out of their control.”

Questions don’t need to be limited to completion times, either. Paresh Raja, CEO at Market Financial Solutions, advises any broker considering a lender to ask the following: does the lender have strong and established relationships with solicitors and valuers? Does the lender have access to in-house credit lines or funding that is ready to be deployed? What does the lender’s track record look like? “By answering these questions, brokers will be in a better position to understand whether certain timescales are realistic and attainable.”  

Emily Machin, head of specialist finance at Precise Mortgages, thinks that all lenders — not just bridging lenders — should be clearer. Precise, for example, updates its SLAs daily on its website so they can be viewed at any time.

Shawbrook Bank also publishes its SLAs for new applications and keeps brokers and clients up to date with regular communication from its relationship team and underwriters. “If there are delays in the process — be it third-party issues or missing information/documentation — you must be honest and give clear timescales that you will deliver on,” said Gavin Seaholme, head of sales at Shawbrook’s property finance division. The bank’s broker portal also allows brokers to monitor their cases to help give a clear picture of the journey for each transaction. 

So, are published SLAs the future?

Emily believes that lenders that manage their service and processing effectively will always make these public. “Perhaps the answer is to make this a basic industry standard requirement . . . so that brokers are able to successfully manage client expectations.” 

While an industry-wide requirement for SLAs would be a step in the right direction to get real data for the average bridging loan timescales, it will only be just that. SLAs, unfortunately, will not give a broker the certainty they need on individual cases that often differ in complexity. We can only hope that the ongoing improvements and investment in technology could help offer up new solutions to this difficulty in the near future. 

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