The discussion started from a LinkedIn discussion

Bridging industry debates whether gambling should influence lending decisions




Last week, a discussion on LinkedIn about whether borrowers’ gambling habits should impact a lender’s decision to provide a mortgage sparked a curious debate with over 100 comments.

In a LinkedIn post, Joe Childes at brokerage Right Choices Mortgages shared a story of how a client had a joint residential loan application turned down due to having gambling transactions on their bank statements.

According to Joe, his client was turned down twice by the same lender due to football bets found on one of the three statements.

He went on to describe how the client — who required a below-50% LTV loan — had over £5,000 in their current account and no forms of credit in the background.

“I’ll be honest, I’m baffled by this decision,” Joe stated in his post. “This is a joint application, the clients have no forms of credit in the background, and it’s less than 50% LTV.”

He continued: “Are we being over the top with this? Do we penalise clients for excessive smoking or drinking which can also be seen as an addiction? Do we penalise clients who go to their local bookies and use cash for these transactions?

“If the client can afford the spending, is it right to dictate how they use their hard-earned money?”

Members of the specialist finance industry have had their say on whether they think gambling should impact a lender’s decision to provide bridging and specialist loans to applicants.

“There are a few factors at play here, a) is the gambling in control and b) how does it affect affordability,” said Joshua Field, head of credit at Albatross Lending Group.

“If the gambling is excessive, held across multiple accounts (not just one or two), and for substantial sums of money relative to income (not savings, as they’re not sustainable) then there would be concerns raised under borrower conduct,” he explained.

Joshua added that this may indicate signs that the problem could be increasing, with gambling then moving towards being an issue rather than a hobby.

“While you could say this about any gambling, or even someone who doesn’t gamble yet, these signs all increase probability of an issue down the line, and it’s up to each and every lender to decide where their risk sits,” stated Joshua.

“The [other element] is affordability, which obviously matters if they’re servicing the debt and will absolutely matter for a regulated mortgage, but less so for any loan with retained interest.

“The question then turns to exit strategy and whether the borrower will need to be able to pass another lender’s affordability calculations in order to repay our loan.

“As with anything, if someone comes to Albatross with a plan of action and a clear way to repay our loan, then the likelihood is we will get comfortable.”

Jonathan Samuels, CEO at Octane Capital, commented: “Gambling transactions would not be an affordability issue for Octane, as we look to the rent from the property to pay the interest, or we roll the interest.”

However, Jonathan stipulated that this could change if it came to high-level gambling, which could result in the borrower being viewed as a ‘professional gambler’, and may be taken into account for ‘source of wealth’ analysis.

“Naturally, any suspicious transactions of large amounts would be a red flag, as would a pattern of spending that does not fit at all with the profile of client.

“Very rarely we have seen applications where the borrower claims to have a multi-million-pound net asset value (NAV) but the bank statements tell a very different story — it is all about getting the full picture of what is going on, rather than relying on one aspect.”

Jim Baker, sales director of bridging at Spring Finance, added: “Gambling is an indicator of vulnerability, but we must still ensure these customers are treated fairly.

“From the example given, it appears some lenders have a strict policy with gambling that means a decline.

“To treat these customers fairly, our approach is to look at these scenarios on a case-by-case basis.”

 

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