Broker Guide: Securing adverse credit bridging

Broker Guide: Securing adverse credit bridging



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This week’s Broker Guide is discussing a very sensitive topic that many would rather not talk about – adverse credit bridging. 

It is ever the cause of debate and, as is likely with contentious subjects, some like it some don’t and some will keep an open mind.
 
We have found a couple of people that are willing to speak about it and we first asked them about what their attitudes towards things like CCJs, defaults and repossessions and how they can affect LTV rates.
 
Gavin Diamond, Finance Director of Cheval Bridging Finance, said: “Each case would be considered on its own merits. There are no limits per se but we would require any outstanding/unsettled CCJs and defaults to be settled prior to or on drawdown of our loan.
 
“The loan would need to make sense for the needs and circumstances of borrower, and naturally a clear takeout/exit route would be particularly important.
 
“LTVs would be determined by the specifics of each case - but would come down to affordability and exit route.”
 
Richard Deacon is Sales and Marketing Director at Masthaven Bridging Finance: “There are no limits we will go to on state of credit, we have done CCJ’s, defaults, arrears, repossessions, IVA’s, bankruptcy etc.
 
“Generally our LTV’s are lower on the more severe adverse cases, but typically we can go to 60% with adverse bridging on a first charge basis.”
 
The exit route in a bridging loan is obviously highly important but it becomes even more essential when the borrower has adverse credit.
 
Rob Derry, Managing Director at Brunel Mortgages and Loans, told of what he looks for in an exit route for a person with adverse credit: “The main things we do look for are the willingness and ability of the customer to demonstrate that their issues are behind them.
 
“In the main, the exit route needs to fit them now as it is dangerous to assume that criteria is going to improve in 6-9 months time to enable them to re-finance. We do have access to some longer term bridges that may enable customers to repair their credit history so these are always an option.”
 
Gavin Diamond said: “Naturally the exit route is paramount. We would usually expect the sale of a property to be the exit route, unless they are able to demonstrate a viable alternative.”
 
Richard Deacon said: “Generally we only accept sale of property as the only viable exit route. There are so few lenders who are doing anything with adverse credit at the moment, sale is the only real option. If they insist on refinance as an option once arrears have been cleared, we can look into this, but then the onus is on the borrower to maintain their ‘clean’ record.”
 
Would a broker need to do anything extra when bringing forward an application from a borrower with adverse credit?
 
Richard Deacon said: “Nothing much different from when we take into account a normal application. If they can provide us with an up to date credit search that always comes in handy because if a client says they have adverse credit it is always good to know from day one how bad it really is.”
 
Rob Derry also spoke of the importance of full disclosure when it comes to the details of a full credit rating: “We need brokers and customers to be honest about the extent of their credit history. They must realise that they can't hide their history and the more they tell us up front, the quicker we can find them the right product from our lender panel.
 
“In the commercial arena, again, most lenders would prefer that issues are behind them or the loan is going to consign the issues to the history books. There must also be a plausible explanation for any significant adverse credit.
 
“One other thing we do find is that what brokers perceive to be "adverse" varies massively. Some get very concerned about a couple of missed mobile phone payments while others will wonder why lenders are declining applications on the back of a couple of CCJs and 3 missed mortgage payments. If we can be told the extent of the issues up front we can source the right product.”
 
So, adverse credit bridging can be a difficult product to secure but it is possible. Only a certain number of lenders will be willing to do it and these lenders are looking for all the specifics up front.

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