Build a Better Bridge Help clients get ahead of th Each issue Bridging Introducer answers your questions on how to b
by Lucy Hodge, director, Vantage Finance
by Rob Jupp, managing director, Brightstar Financial
consuming process of repossessing the property.
WHAT IS THE SIGNIFICANCE OF DISGUISING A REGULATED BRIDGE AS A NON-REGULATED BRIDGE?
LH Lenders will be wise to this trick and will take measures to ensure that this is not the case on any application they receive, and the Financial Services Authority would be very quick to enforce action against brokers who try to do this. It is considered a serious offence where a broker is transacting regulated business without the relevant level of authorisation. If a loan is not regulated the offer letter will not follow a certain FSA prescribed format and it will be a condition of the offer that the solicitor confirms that they or any immediate members of their family do not live, or intend to live in the property.
RJ In short this is not permissible under very strict FSA guidelines and any parties knowingly entering such a transaction could face very serious repercussions from the regulator that could involve fines, loss of permissions or maybe worse. That said the vast majority of bridging lenders only do so called non-regulated loans i.e not on the clients main residence, so intermediaries need to ensure
20 BRIDGING INTRODUCER MARCH 2012
that they understand who can and cannot assist them. Any suggestion of being economical with the facts should be resisted as the financial gains simply aren’t worth the risk involved.
WHAT HAPPENS IF A CLIENT IS NOT IN A POSITION TO PAY BACK THEIR BRIDGE IN A GIVEN TERM? WILL THEY AUTOMATICALLY GET REPOSSESSED?
LH It would be unusual for a lender to act so aggressively in this situation before exploring the alternative options to repossession, despite being within their rights to do so. A client should always have the risk explained to them on a worst case scenario basis by their adviser but the reality of it is that lenders do not want to repossess properties unless all other avenues have been explored. Obviously short-term funding can only work on the basis that loans are not out for prolonged periods of time and lenders would rather agree a longer term initially to allow them to successfully manage their book. If a loan is not repaid on time, nine times out of 10 there is a good reason and the lender will want to work with the client for a suitable resolution rather than going through the expensive and time
RJ It is occasionally the case that clients’ best laid plans don’t quite go to plan. From experience, short-term lenders are pretty flexible as long as a client gives them some warning that they aren’t going to be in a position to repay within the agreed timescale. That said, it’s not a given that a lender will definitely renew a facility and a client shouldn’t consider bridging if there is a big chance that this may occur. This is the main reason why a lender will be so insistent on understanding, evidencing and keeping tabs on the chosen exits. Really good bridging lenders will start to engage with their client some months before the exit to insure that everything is on track to pay back the loan within the given period.
WHAT ARE THE MOST IMPORTANT CONSIDERATIONS WHEN DECIDING WHICH LENDERS TO DEAL WITH?
LH Despite there being what is believed to be close to 100 lenders in the market it is important that you know enough about who you are dealing with before introducing your valued clients to them. It would be unfair to suggest that you should stick to only dealing with those more prominent names in the industry, although to some this will provide a degree of comfort, it does not mean that lenders which are not quite so much at the forefront with their advertising campaigns are not doing a great job too. Important considerations include: how they
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