Whether it’s a breakdown in communication, a lack of due diligence or a failure to recognise fraudulent applications, there are numerous reasons why bridging cases can experience difficulties. Bridging & Commercial spoke to a couple of senior underwriters within the industry who gave us some examples about typical problematic cases...

Bob Sturges, Head of Communications at Omni Capital, commented: “The bespoke nature of bridging requires both lenders and intermediaries always to be precise and thoughtful when preparing, packaging or underwriting cases.

“With this in mind, it’s fair and accurate to say that the vast majority of deals that pass through our underwriters do so without serious difficulty or undue delay. This is testament to the skills and experience of our brokers and distributors and, I hope, to the clarity of our terms and processes.”

However, Bob told us that problems can occur. “Most can be attributed to a failure in communication – either between us and the intermediary or the intermediary and their client. This is most likely to involve a specific issue that can be resolved quickly. But instances of systemic problems can prove more troublesome,” he said.

“Two such recent issues spring to mind. In the first case, we were introduced by a broker to an attractive second-charge bridge. As part of our Indicative Terms, we clearly specified the need to obtain consent from the first mortgagee to our proposed charge. We took it for granted that the broker – an experienced introducer – would action this requirement. But as completion approached, it had not happened.

“When queried, it became clear that the broker neither understood nor appreciated why consent was needed. Between us, we eventually resolved the problem but at a tangible cost in time. More importantly, it taught us – and the broker – not to take anything for granted and to ensure our communications were spot-on at every step of the application process.”

Helen Farmer, Senior Underwriter at Tiuta, explained that many problems or delays stem from not receiving the full or correct information upfront. She said: “A case in point we dealt with occurred when the broker advised us that the property in question was being gifted to a family member at a discount plus gifted deposit.

“After we queried the situation it turned out that the father has a right to purchase the security at a discount and the ‘right’ can be passed on to a family member. This changed the deal so we had to look at it differently with regard to both an underwriting and a legal perspective. Questions that were originally asked – such as if it’s a family purchase why is the security not currently owned by the father – were no longer relevant.”

Other issues which affect the underwriting and legal standpoints sometimes only come to light upon valuation. Helen said, “We may be advised that the property is a three bedroom house so we begin the process on this basis, but then when valuation is received it’s actually a house divided into three flats. Another time, what we thought was one flat was actually two flats, both under the same title. These types of issues will change the underwriting and legal requirements.”

Bob stressed how important it is to ensure due diligence is always done. “The second case involved a lack of simple, but costly, due care and attention on the part of the introducing broker.

“Our underwriters raised a concern regarding the legitimacy of payslips provided in support of an application. They were necessary to verify proof of earnings as the client had elected to service the interest element of the proposed loan on a monthly basis. But on examination, it was patently obvious that all was not right, perhaps something the broker should have noticed?

“In response, we requested recent bank statements to confirm monthly salary. On receipt, simple inspection revealed the amounts to be considerably less than those claimed by the payslips, a fact that caused considerable delay to efficient processing of the case and on that could easily have been avoided.”

Helen told us that last minute issues can significantly affect the speed of deals being underwritten: “There are occasions when the broker is adamant there are no restrictions on properties – often with holiday lets. We continually ask whether there are any restrictions and sometimes last minute legals can come up establishing there are restrictions on the properties which, unfortunately, can mean we are unable to lend.”

Bob said, “On the rare occasions issues arise, we seek to work with the intermediary to find a swift solution, either to the specific problem or to the gap in their understanding. We know too that lenders are not blameless, but our intention is, wherever possible, to get it right first time, every time.”

By Jason McGee-Abe