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28 | Short term finance
Sort the wheat
from the chaff
Guy Garrard, head of business development at
Tiuta, considers what 2010 could being for
lenders, and the impact of regulation
W
hen looking at short term finance encourage people to buy into a deal. If clients can longer term lending as well as our core bridging
it’s important to maintain some secure a genuine discount then we do not business. On the back of the successful launch of
kind of perspective with respect penalise them, we work to support them, obvi- our first buy-to-let product we are continuing to
to other sectors involved in the ously provided sufficient safeguards have been look at a variety of structures to get alternative
mortgage market. Without implemented. products to the market and I expect other short
dwelling too much on the wholesale funding Having said all this, the deals we are seeing at term lenders to be doing the same, again provid-
problems experienced over the past couple of the moment are for relatively low risk, low level ed funding is in place and available.
years it’s apparent that the impact of these eco- LTVs and these levels show no signs of fading.
nomic issues have been massive, particularly in The obstacles being faced by a variety of lending Mortgage Market Review
the specialist lending arena. However, in its institutions has, and will continue, to lead more In terms of regulatory changes and implications
defence the one area that has arguably been and more good quality, low risk borrowers down for 2010 it was interesting to read a comment
affected the least from the credit crunch and as the short term finance route and that is why from the Council of Mortgage Lenders saying
such has remained relatively prominent through- firms such as ourselves are continuing to experi- that it is “agnostic” about the government’s plans
out is the short term finance market. ence record levels of demand. This class of bor- to extend the FSA’s remit to buy-to-let mort-
A careful mix of caution, innovation and rower incorporates an ever-growing number of gages.
diversification are key factors in the continued those badged up as non-conforming. Indeed The recent revelation from the government –
success of the market in the year ahead. Short 2010 will potentially see higher unemployment on the back of the well publicised Mortgage
term finance specialists operating from a strong levels but with choice for such borrowers already Market Review - that is was backing plans for the
financial and regulatory base will be in a prime at a premium the question remains where they expansion of the FSA’s remit to include buy-to-
position to take full advantage of any opportuni- can actually go to get a mortgage? let and second charge mortgages was no real sur-
ties that arise. We have recently seen reports of It’s currently a very difficult question to prise. But the CML says it is unclear whether the
somewhere in the region of up to 30 lenders answer especially in light of the recent Mortgage Treasury’s main rationale for the proposed exten-
waiting for the FSA to grant the necessary bank- Market Review but the first step must be for the sion to scope relates to market risk or consumer
ing licences. However, with an average time-span FSA to work closely with lenders to find an protection.
of six to 12 months for a licence to be approved, answer to support the needs of those with non
then 2010, or at least the first half of the year, will standard borrowing requirements. The trade body argues that if the aim is to
see a number of potential lenders still kicking protect amateur property investors from poor
their heels on the sidelines. With entry barriers, Mainstream market property investment decisions, then regulating
quite rightly in some instances, being raised I I don’t imagine that the mainstream markets will the mortgage process - as opposed to the sale
doubt that the FSA is in any hurry to grant these experience any radical changes in 2010 and I sug- process - will not necessarily address this. I tend
licenses which further illustrates the position of gest that it will be a case of more of the same, to agree with these sentiments and as I’ve com-
strength for existing proactive lenders provided which will only serve to further enhance the ben- mented on a few occasions it is vital that regula-
that the necessary finding is firmly in place. efits of a good short term lending solution. tion of these markets includes the
Inevitably this will also make bridging finance an implementation of rules that are clear and make
Requirements even more valuable tool in any broker’s offering. sense for the whole of the market and not work
A good short term finance proposition has the There are still some negative perceptions to over- to its detriment. However, this does raise the
opportunity to assess individual scenarios and come and whilst it is certainly not a product for question of how many short term lenders that
be cautiously flexible in how they can meet a everyone, bridging continues to offer choice and are not currently regulated will either have the
potential borrower’s requirements. Of course flexibility in order to meet the needs of appli- desire to become or be capable of achieving the
this all filters back down to the word prudence cants where more mainstream lending institu- necessary regulatory status. At least regulation
but LTV levels are not the be all and end all for tions cannot or will not lend. will work to help sort the wheat from the chaff
short term lending. As a bridging lender we In terms of our future plans we have made no and this is certainly another area to keep an eye
lend against open market valuation but we do secret of the fact that we looking at areas of on in the year ahead.
January 2010  Mortgage Introducer www.mortgageintroducer.com
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