Problem cases - The underwriter perspective

Problem cases - The underwriter perspective


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. B&C spoke to two senior underwriters within the industry who each gave us an example of a recent problematic case…

Claire Wasbrough, Underwriting and Operations Manager at Masthaven Bridging Finance, told us that the most interesting cases are the ones that present a challenge, where, despite several setbacks, you still get a good result at the end of the day. 

Describing one recent case which involved many ups and downs, Claire said: “The broker approached Masthaven looking for a loan to assist a client in paying off a business debt. The security on offer was a second charge over the borrower’s home and a second charge over an investment property. The first hurdle came with the valuations being lower than expected, as tends to be a common theme. Positive comments from the valuers helped to stretch the LTVs in order to proceed at the level required. 

“The next setback came when the first charge lender for the investment property declined our request to take a second charge. There were various anomalies with the reasons they gave but with time being of the essence an alternative solution had to be found. 

“The borrower and his brokers were trying to negotiate the amount of business debt to be cleared so that we could proceed taking only one security. We had thought it was going to be agreed but at the last minute it was rejected. 

“The borrower's father was able to step in and offered to add an investment property he owned and was selling in to the mix. A valuation was carried out which again came back lower than expected, but we were able to agree an amount that worked for all parties. 

“The final hurdle came in the form of a right to buy restriction on the investment property. Whereas this would normally cause a problem, after obtaining the necessary confirmations from the council of the amounts involved and after ascertaining that the restriction would be removed on sale, we were able to proceed. 

“Needless to say this loan wasn't the quickest one I have worked on, but I am pleased we were able to get the funds out to the borrower in the end.”

Helen Farmer, Head of Underwriting at Tiuta, recalled one case in particular which surrounded the issue of planning permission in its application.

Helen explained: “Tiuta received a case for a loan on a large property to assist with the purchase and development. The property had previously been used on a commercial basis and had planning to convert to a residential property.

“However, in order to comply with the planning permission and conditions it was necessary for a neighbouring property, which had been built partially across the boundaries of the subject property, to be demolished. This property was not being sold with the subject property so our client would be reliant on the owners of this building not only being willing but also carrying out the demolishment. If this did not occur then the planning would be in breach and subject to an enforcement notice.”

On this basis, Tiuta was not willing to proceed, suggesting the following options as a way forward:

1) The building is demolished before purchase of the subject property;

2) The client simultaneously purchases the additional building, therefore giving him (and the lender in the event of a repossession) full control over the demolishment;

3) Planning is amended to remove the requirement of the demolishment of the building.

Helen told us that Tiuta has been informed that the planning office has verbally agreed to amend the planning permission but has not yet seen confirmation of this.

By Jason McGee-Abe

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