Behind the Doors of Omni Capital Underwriting

Behind the Doors of Omni Capital Underwriting



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 In the first of a brand new series of articles giving you a sneak peek behind the door of bridging lenders, B&C spent the afternoon with Omni Capital’s Watford-based underwriting team, to find out a little more about the procedures involved in tailoring a deal, their advice for broker efficiency and some of the key elements that can slow down the underwriting process.

Upon invitation to the Omni realm, B&C met with Ed McAra, Head of Underwriting, who began by emphasising the central mantra in their approach to business - flexibility at every stage of the deal.

Despite being an unregulated lender, Ed tells us that Omni underwrite all their deals with regulation in mind as it is expected to come in the near future. The diligence displayed during the process ensures that every case is up to FSA standards so, once regulation does arrive, it can be incorporated seamlessly.

What’s the procedure?

After an initial enquiry form is submitted to the sales team for review, who act as a ‘buffer’ between the intermediary and underwriter, the underwriting team is able to produce an Indicative Terms document outlining the preliminary offer. This operates in the same way as a Key Facts Illustration (KFI) document produced by regulated lenders.

Before receiving the submission pack to do a full feasibility check, Omni’s Underwriting Case Manager, Jack Broadbridge, will draft cover notes highlighting specific elements that may require further investigation.

If documents are missing from the submission pack, the underwriter will produce a ‘shopping list’ for the intermediary. Ed tells us this this is often the point at which the deal begins to slow – if all requested elements are not included. It is worth taking more time to talk to your client before submitting a deal than to go to a lender without all of the information they require.

Contact between the intermediary and underwriter is generally limited but if numerous changes are made to the initial enquiry, such as a request for a larger sum, extension of the term, a change in interest repayment schedule or the valuation is less than originally estimated, they may directly communicate to speed up the process.

Two months before the end of the term, the client will be contacted to ensure their exit is still viable and they are able to repay the loan on the agreed date. If they require a change in the original terms because their exit hasn’t materialised, a ‘re-underwrite’ will endeavour to  accommodate these changes. Ed tells us that repossession is an absolute last resort and stresses that a watertight exit is just as important as the security.

If the original terms are to alter, Omni require the client to obtain further legal advice before they accept the new terms.

Ed believes it is exactly this flexible approach which has meant Omni has not repossessed any properties to date.

Identity Checks, Asset Disclosure & Liability Statement

Omni underwriters will conduct ID checks on the client and will use an anti-money laundering database ‘Verify’ to satisfy solicitors’ Title Insurance requirements so that they are protected from fraudulent applications. Information requests will also be submitted to the land registry to confirm the client owns the security which will also highlight any other charges on the property.

A comparison of the Land Registry data and Electoral Roll information will be drawn, which can flag whether a property is a commercial asset or primary residence. For example, if a client is registered to vote at the residence and it is therefore their domestic abode, they cannot obtain a first charge on the property.

An important issue Ed raises here is the numerous oversights on the Asset & Liability Statement which often doesn’t get filled in properly. All assets and outgoings, however small, must be listed here so that ability to repay the loan can be appropriately assessed.

For example, if a landlord is looking to expand an already large property portfolio, an intermediary may consider that listing six rather than all eight of properties will provide more than adequate security for the lender.

Whilst this may be the case, once a credit check has been run which subsequently highlights that the landlord is paying for more mortgages than disclosed the form will be returned to the client, thus slowing down the approval process. Full disclosure is essential for a quick turn-around.

The credit report will also signal whether further investigations need to be made. The question often has to be asked, if someone has high value assets and a high income why are they missing payments?

Valuations and Legals

Omni work with external legal and valuation firms; Ed tells us it is the close working relationships with these preferred partners that enable them to complete sound loans.

Ed explains that it is not uncommon for valuers to provide ‘off the record’ comments about the condition of the property as they work as the eyes and ears of the underwriter. This additional insight will enable the underwriters to make a common-sense decision, so intermediaries must be aware that each deal is assessed on a case-by-case basis and subject to the lender’s discretion.

It is for this reason that Omni tend to avoid basic valuations provided by the client from a firm they are unfamiliar with. They will often not accept a basic ‘retype’.

The valuation report will provide two different figures that Omni term the ‘current market’ value (180 day sale) and a ‘forced sale’ value (90 day sale), which determine how much the property would be worth should foreclosure processes begin.

These figures will largely remain similar with prime location property. However, Ed gave us an example where these figures may fluctuate dramatically; if a large country house is only on the market for 90 days, it will not gain enough exposure to the niche buyer. But, if on the market for 180 days, the property will attract the right buyer who will pay a considerable sum for the desired location. 

With regard to conveyancing, Ed tells us that they will only accept legal guidance from firms on the Law Society Register who operate with two or more solicitors. The reason for this, Ed explains, is the decreased exposure to fraud as there is less possibility of overlooking important elements of the deal.

If there are any concerns of fraud raised whilst sense checking the application, it is the responsibility of any diligent lender to report this. Similarly, if there are any suspicions of money laundering, Ed is bound to report this to the Serious Organised Crime Agency (SOCA).

When asked if he has ever had to report any suspicions, Ed tells us that if there is no reason to decline a deal but more questions need to be asked, the potentially fraudulent client is likely to pull out of the deal before it is uncovered.

And so, the extensive underwriting processes at Omni Capital provide us with a salient reminder; short-term lenders are exposed to much more immediate risk than longer term lenders so whilst speed may underpin every deal, diligence cannot be compromised.  

Fluidity in this process is maximised by intermediary channels which are never bypassed, described by Ed as the “lifeblood” of Omni. With the continual dialogue between sales, underwriting and the intermediary community, Ed can take comfort in knowing that a number of experienced eyes have seen the case before the deal is done. 

 

By Alexandra Jones

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