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p>Where high street banks have failed to deliver, bridging lenders, both regulated and not, face their most lucrative period to date. But with the bridging market’s successes comes the inevitable need for an authoritarian body, self-regulation and mandatory guidelines to ensure best practice.
The recent AOBP Forum brought six of the industry’s most prominent short term lenders together, along with brokers and other sector-specific professionals, to discuss the pressing issues facing bridging finance…
With its membership now standing at 600, the Association of Bridging Professionals’ (AOBP) latest event was popular with lenders and brokers across the UK registering to attend. Over 100 intermediaries, lenders and associates, all itching to interrogate the panel of six carefully chosen short term lenders, filled the Soho Hotel’s private screening room to capacity. Association Chairman Jonathan Newman, overseeing proceedings, opened the Forum by bringing attendees up to speed on the AOBP’s progress to date and introducing the participating lenders.
A cross-section of bridgers made up the panel: Andrew Bloom, Managing Director at Masthaven, Jonathan Samuels, CEO of Dragonfly Finance, Alan Cleary, Managing Director of Precise Mortgages, Laurence Goodman, Managing Director of Bridgebank Capital, Marc Goldberg, Board Director of Lancashire Mortgage Corporation and Keith Aldridge, Managing Director of Capital Bridging.
Arguably the biggest debate of the night was whether there is an underlying lack of transparency in lenders’ processes, preferences and lending models, and, subsequently, who should be policing the industry?
Alan Cleary immediately outlined what he called a “fundamental” problem with transparency in the industry. He cited previous failures within the mainstream regulatory market that centred on a voluntary scheme, the Mortgage Code of Compliance Board. Drawing a parallel with the bridging market, he added: “The only way transparency in this market is going to be dealt with, is by statute… making individuals at the top of these organisations criminally responsible if they flout the rules.”
Five out of the six lenders on the panel are FSA-authorised and Jonathan Samuels encouraged the audience to heed the fact that “regulation is coming, for this whole market”.
Andrew Bloom reinforced the importance of the role of the Association of Short Term Lenders (astl), the short term lender trade body, and its disciplinary system: “I can guarantee you, being a director of the astl, that all complaints are taken seriously and it would have very serious reputational effects on a lender if they were asked to leave the astl”, he claimed.
There were, however, those that believed regulation is simply a poor substitute for best practice measures. Audience member James Bloom, CEO of Regentsmead, an unregulated development lender, suggested that “good practice”, rather than having to wait for a mandatory paternal body to watch over the market.
Earlier in the debate, Alan Cleary petitioned the possible use of APRs within bridging which would effectively convert the total amount payable into an annual percentage rate, and therefore present a clearer cost of borrowing. This proved contentious amongst the panel; with the average term length of a bridging loan being six to eight months, Mark Posniak of Dragonfly Finance questioned its relevance as an annual calculation.
Keith Aldridge divulged that Capital Bridging had previously made use of an APR in their documentation; however, a lack of accuracy led them to do away from this approach. He went on to implore brokers to take responsibility for their role at the “point of sale”.
A topic which was very present throughout most of 2012 is dual legal representation within bridging. With Precise Mortgages the sole lender on the panel offering this option to consumers, with the view to speeding up the legal process, attendees and lenders alike were eager to find out more about the benefits and possible risks involved in such a choice.
Edward Goldsmith, an acting conveyancer for Precise, claimed that two out of five Precise deals are eligible for the dual representation. In answer to the issue of risk of conflict, Alan Cleary was keen to allay concerns by saying: “Lawyers are conflicted all of the time, as lenders are; it’s how you manage that conflict that’s important… If we’ve got it wrong, we’ll pay the price”.
Laurence Goodman maintained that if and when a problem arises when utilising dual representation “the courts will side every time in favour of the borrower”.
Marc Goldberg, while appreciative of the niche that Precise are fulfilling, stated: “Personally, I wouldn’t let my lawyer act for a customer.”
When discussing whether fierce competition in the industry was benefitting both the lender and the borrower, Andrew Bloom was of the view that increased competition was having a healthy effect on rates and LTVs. Jonathan Samuels, however, speaking of the property market collapse in 2008: “In general, it is a good thing, but we have to heed the warnings of the past – there is a price for risk.”
In response to the question of the apparent ‘rate war’ underway, Marc Goldberg considers the presence of a good exit strategy and lenders’ respective areas of expertise at the heart of it: “A lot of bridging is down to speed, flexibility, service… Everyone’s got their niche”, he said.
The event was a considered a huge success; it provided an informative reference point for an ever-growing membership and a platform for a frank, open debate amongst lenders who are all too often a tough bunch of nuts to crack.
Where high street banks have failed to deliver, bridging lenders, both regulated and not, face their most lucrative period to date. But with the bridging market's successes comes the inevitable.
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