44% believe bridging underwriters issue correct loan terms

44% believe bridging underwriters issue correct loan terms




Lenders may not be able to restore confidence in their underwriting once it has been lost, a lender has warned.

A poll conducted by Bridging & Commercial found that just 44% of respondents believe bridging underwriters are issuing the correct loan terms for borrowers.

Responding to these figures, Matt Smith, head of risk at Dragonfly Property Finance, claimed that lenders who have delivered any form of incorrect underwriting would struggle to rebuild their reputation.

"If people, and above all investors, have lost confidence in your underwriting, it’s very hard to restore. In fact, it’s probably impossible to restore.

“As a lender, you don’t want to be in a position where you have to seek to regain confidence in your underwriting.

“If that’s the case, you shouldn’t be in the lending business full stop."

Last week, a lender was forced to refund the interest on a loan after the Financial Ombudsman Service ruled that it had not carried out adequate affordability checks.

Matt suggested that besides exposing lenders to additional risk, poor underwriting could cause serious commercial damage by undermining its reputation with both introducers and funding lines.

“As an investor, whether private or institutional, you need to know that the lender you are funding has a forensic underwriting process with an exceptionally low level of capital loss,” Matt added.

“Anything less is unacceptable.”

Nevertheless, Scott Marshall, director at Roma Finance, explained that lenders could avoid incorrect underwriting through regular communication.

“Many underwriting issues can be resolved by lenders having good processes and managing the customer journey from start to finish.

“For example, if a deal or a lender is too big, the situation can occur where no one 'owns the customer' to check the process at each stage.”

Scott warned that speed was important as both lenders and borrowers could suffer if a property devalued during the underwriting process, leaving the customer on a higher rate than necessary.

On the other hand, Paul Wertheim, operations director at Mint Bridging, argued that many people do not realise the complexity of underwriting.

“This can be a massive, complicated and in-depth process which, unless you are in the knitting, the majority of those in the bridging arena do not understand.

“In some instances, a case can take several days to underwrite correctly if it is an intricate deal.

“Not everything is a two-up, two-down in a nice street in Manchester [or] ‘chocolate box pretty’, with great borrowers and extra security.”

Paul insisted that receiving quality information from brokers was key to efficient underwriting. 

“If given the full accurate information, from brokers and borrowers from day one, companies … will not find any skeletons in the closet, which makes it easier to quote on the majority of loans.

“If we are aware (warts and all), we can quote accurately, [and] luckily the majority of our brokers understand and assist us in the process.”

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