News Review: Sale and Rent Back


Now is the time to take sale and rent back seriously What isn’t up for debate is by Daniel


Lowerson, partner,


DFB Housing Solutions


The last 18 months have been a time of major change for the sale and rent back industry. It was back in October 2008 that the OFT released its market study of the SRB market. The study estimated there


were 1,000-3,000 operatives who had conducted in excess of 50,000 transactions. Interim regulation, which came into force in June 2009, saw this number reduce to as few as 80 firms. Two weeks into the full regime, which began on June 30 this year, fewer than 10 firms have been granted full authorisation. There are different ways to


look at this: were there really just a few good firms among a rotten bunch? Or was the mar- ket so segmented and made up of tiny firms that only a few se- rious businesses made the cut?


the need for SRB. SRB pro- vides homeowners with an option to raise capital when remortgaging is not an op- tion. SRB provides older cli- ents with an option to release more than 15-50% of the eq- uity in their property without moving. It is often the only


“What isn’t up for debate is the need for SRB. SRB provides


homeowners with an option to raise capital when remortgaging is not an option… SRB is a serious solution to a serious problem”


Selling SRB benefits


Everyone is told to look at the bigger picture and for some clients that can sometimes be difficult, especially when they are faced with tough decisions. For mortgage brokers and financial advisers it is essential that you look at a client’s complete circumstances before giving any advice. Few brokers or advisers will hold permission to advise on SRB but that doesn’t mean that you shouldn’t take the time to understand the product and recognise where and when it could be an option for a client - and it will be in more circumstances than you may imagine. You may have started with a debt management plan and have solved a family’s unsecured debt crisis. But now look at


resolving the secured loan arrears or mortgage arrears and SRB could be the answer. SRB can change an unaffordable mortgage payment into an affordable rental payment, meaning no more default interest and charges for your client. Then there’s protection too. Insurances are a priority payment when arranging a DMP, so the client could take out some cover without increasing their total outgoings. They could use ASU to cover the rental payment and DMP while life and critical illness could cover the buy-back option provided by some SRB providers. Linking up these different products and product providers benefits your clients who are getting a complete solution while at the same time maximises sales opportunities for advisers.


option available to homeown- ers trapped in a spiral of debt and mortgage arrears - an option which allows them to stay in their family home and avoid the trauma of reposses- sion.


SRB is a serious solution to


a serious problem. The firms which have received full au- thorisation have had to dem- onstrate a sound business plan with capital adequacy re- quirements in line with other home finance providers. They have had to demonstrate that TCF is a core principle that is prevalent throughout the business and that they have transparent customer focused sales and after sale proce- dures. The controllers and approved persons within the firms have had to show that they act with integrity, due skill, care and diligence. SRB has a lot to offer all


sectors of financial services. SRB can benefit banks by converting their toxic debts and non performing assets into good assets, thus improv-


ing their balance sheets. Debt management and IVA firms have found their products work hand in hand with SRB. Even insurance and protec- tion form an important part of a client’s financial make over when they enter a SRB agreement.


SUPPORT SRB REGULATION The full FSA regime should bring even greater confidence to those financial and debt professionals who see SRB as an invaluable solution to homeowners looking to raise cash. The fact SRB is now fully regulated, along with mortgages and equity release schemes, needs to be taken on board by housing charities and voluntary organisations who deal with families in need of a SRB solution. Make sure your clients don’t fall victim to those illegal operators who continue to advertise online and in the back of newspapers. The first step is to ensure that you become an introducer to a SRB provider or your network has a SRB provider on their panel. Second, take advantage of the training and information provided by some companies to ensure that you and your staff are knowledgeable about the solutions SRB offers to your clients. Thirdly, make sure your clients know that SRB is available to them and that you are someone they can turn to if they are considering SRB.


mORTgAgE InTRODuCER AUGUST 2010 15


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